<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
-------------------------------------------------
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 0-8914
---------
UNIVERSITY REAL ESTATE PARTNERSHIP V
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3240567
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 Ross Avenue, Suite 4600, Dallas, Texas 75201
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(214) 740-2200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
200 Crescent Court, Suite 1300, Dallas, Texas 75201
- --------------------------------------------------------------------------------
(Former address, 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 ___
---
1
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information
Item 1 - Consolidated Financial Statements:
(a) Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 3
(b) Consolidated Statements of Operations for the three and
nine months ended September 30, 1995 and 1994 4
(c) Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 5
(d) Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures (pursuant to General Instruction E) 13
</TABLE>
All other items called for by the instructions are omitted as they are
either inapplicable, not required, or the information is included in the
Consolidated Financial Statements or Notes thereto.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
- ------- ---------------------------------
UNIVERSITY REAL ESTATE PARTNERSHIP V
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1995 December 31,
(Unaudited) 1994
-------------- -------------
<S> <C> <C>
ASSETS
- ------
Real estate investments
Land $ 5,255,247 $ 5,255,247
Buildings and improvements 13,709,754 13,579,798
----------- -----------
18,965,001 18,835,045
Less: Accumulated depreciation and
amortization (7,387,739) (7,035,146)
----------- -----------
11,577,262 11,799,899
Note receivable 350,000 750,000
Cash and cash equivalents (including $18,184 and $21,695
for security deposits at September 30, 1995 and
December 31, 1994, respectively) 755,317 197,283
Accounts receivable, net of allowance for doubtful
accounts of $72,740 at December 31, 1994 93,915 84,929
Deferred borrowing costs, net of accumulated amortization
of $75,617 and $65,895 at September 30, 1995 and
December 31, 1994, respectively 270,459 128,547
Prepaid expenses and other assets 573,099 283,287
Repossessed real estate held for resale - 1,422,391
----------- -----------
$13,620,052 $14,666,336
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Mortgage notes payable, net of discounts $10,584,921 $ 9,453,587
Note payable to Southmark affiliate - 1,086,554
Accrued mortgage interest 51,667 253,110
Accrued property taxes 81,192 279,892
Accounts payable and accrued expenses 107,103 85,951
Accounts payable - affiliates - 20,894
Subordinated real estate commissions 549,218 549,218
Security deposits 24,454 36,702
----------- -----------
11,398,555 11,765,908
----------- -----------
Partners' equity (deficit)
Limited Partners - 50,000 units authorized; 34,453 units
issued and outstanding (17,733 Income units and 16,720
Growth/Shelter units) 2,750,586 3,422,728
General Partner (529,089) (522,300)
----------- -----------
2,221,497 2,900,428
----------- -----------
$13,620,052 $14,666,336
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1995 1994 1995 1994
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 539,653 $ 709,090 $1,793,445 $1,861,239
Interest 7,418 49,071 142,782 185,596
Other income 150 - 32,203 -
--------- ---------- ---------- ----------
Total revenues 547,221 758,161 1,968,430 2,046,835
--------- ---------- ---------- ----------
Expenses:
Interest 248,147 358,655 836,448 974,200
Depreciation and amortization 123,005 119,027 362,022 342,023
Property taxes 49,869 73,440 131,307 142,002
Other property operations 283,431 384,528 907,846 903,497
General and administrative 99,832 163,669 363,220 451,474
--------- ---------- ---------- ----------
Total expenses 804,284 1,099,319 2,600,843 2,813,196
--------- ---------- ---------- ----------
Net operating loss (257,063) (341,158) (632,413) (766,361)
Other income (expense):
Loss on sale of repossessed
real estate (121,518) - (121,518) -
--------- ---------- ---------- ----------
Loss before extraordinary item (378,581) (341,158) (753,931) (766,361)
Extraordinary items - gain on
debt forgiveness - - 75,000 -
--------- ---------- ---------- ----------
Net loss $(378,581) $ (341,158) $ (678,931) $ (766,361)
========= ========== ========== ==========
Net loss allocated to general
partners $ (3,786) $ (3,412) $ (6,789) $ (7,664)
Net loss allocated to limited
partners (374,795) (337,746) (672,142) (758,697)
--------- ---------- ---------- ----------
Net loss $(378,581) $ (341,158) $ (678,931) $ (766,361)
========= ========== ========== ==========
Net loss per limited partnership
unit $ (10.88) $ (9.80) $ (19.51) $ (22.02)
========= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from tenants $ 1,786,440 $ 1,704,606
Cash paid to suppliers and affiliates (1,292,917) (1,174,819)
Interest received 142,782 185,596
Interest paid (702,595) (671,972)
Property taxes paid (10,471) (90,394)
Property tax refund 32,203 -
----------- -----------
Net cash used in operating activities (44,558) (46,983)
----------- -----------
Cash flows from investing activities:
Additions to real estate investments (133,401) (55,498)
Sale of Las Oficinas note receivable 750,000 -
Sale of repossessed real estate 291,562 -
Net cash received as a result of repossession of real estate - 58,657
----------- -----------
Net cash provided by investing activities 908,161 3,159
----------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable (150,414) (155,710)
Principal payment on note payable to Southmark affiliate (750,000) -
Advance from line of credit 73,387 -
Cash received on the refinance of the mortgage note
payable for Washington Towne Apartments 604,663 -
Borrowing costs incurred on the refinance of mortgage
note payable (83,205) -
----------- -----------
Net cash used in financing activities (305,569) (155,710)
----------- -----------
Net increase (decrease) in cash and cash equivalents 558,034 (199,534)
Cash and cash equivalents at beginning of period 197,283 474,483
----------- -----------
Cash and cash equivalents at end of period $ 755,317 $ 274,949
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Reconciliation of Net Loss to Net Cash Used in
Operating Activities
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Net loss $(678,931) $(766,361)
--------- ---------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 362,022 342,023
Amortization of discounts on mortgage notes payable - 17,973
Amortization of deferred borrowing costs 9,722 9,722
Interest and fees added to note payable to Southmark affiliate 120,040 227,905
Gain on forgiveness of debt (75,000) -
Loss on sale of repossessed real estate 121,518 -
Changes in assets and liabilities:
Accounts receivable (27,068) (34,503)
Prepaid expenses and other assets (55,391) 93,939
Accounts payable and accrued expenses 54,434 83,494
Accounts payable to affiliates (20,894) (96,412)
Accrued mortgage interest 4,091 46,628
Accrued property taxes 120,836 51,608
Security deposits 20,063 (22,999)
--------- ---------
Total adjustments 634,373 719,378
--------- ---------
Net cash used in operating activities $ (44,558) $ (46,983)
========= =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On March 31, 1995, the Partnership converted $250,000 of accrued liabilities
into a note payable.
On September 13, 1995, the Partnership paid all outstanding principal and
accrued interest as a result of the refinancing of the Washington Towne
Apartments.
On July 20, 1995, the Partnership sold the Bank of San Pedro Office Building for
$1,350,000. The Partnership received, as partial consideration, a note
receivable for $350,000.
See accompanying notes to consolidated financial statements.
6
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES (CONTINUED):
The mortgage payable on the Washington Towne Apartments matured in June 1995.
In September 1995, Washington Towne, L.L.C., obtained a mortgage loan payable in
the amount of $1,750,000 from a new lender. In connection with this
refinancing, the lender included in the mortgage loan principal balance the
payment of borrowing costs, required escrows, property taxes, interest, and the
payoff of two mortgage notes payable secured by the Washington Towne Apartments.
The following table represents the components of this refinancing:
<TABLE>
<S> <C>
Cash $ 604,663
Mortgage notes payable 791,641
Deferred borrowing costs 68,429
Accrued interest and property taxes 53,647
Escrows 231,620
----------
$1,750,000
==========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
UNIVERSITY REAL ESTATE PARTNERSHIP V
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1995
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1995. For further information, refer to the consolidated
financial statements and notes thereto included in the Partnership's annual
report on Form 10-K for the year ended December 31, 1994. The December 31, 1994
consolidated balance sheet was derived from audited numbers.
Certain reclassifications have been made to the 1994 balances to conform to the
1995 presentation.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
- -------------------------------------
The general partner of the Partnership is University Advisory Company ("UAC" or
the "General Partner"), a California general partnership. Southmark Commercial
Management, Inc. ("SCM"), a wholly-owned subsidiary of Southmark Corporation
("Southmark"), and Southmark Investors, Inc. ("SII"), a second-tier subsidiary
of Southmark, are the two general partners of UAC. On March 9, 1993, Southmark
and several of its affiliates (including the General Partner) entered into an
asset purchase agreement with SHL Acquisition Corp. III, a Texas corporation,
and its permitted assigns (collectively "SHL") to acquire various general and
limited partnership interests, among other things, owned by Southmark and its
affiliates. On December 16, 1993, SHL entered into an Assignment of Rights and
Option Agreement with Hampton Realty Partners, L.P. ("Hampton"), a Texas limited
partnership, whereby Hampton acquired the right to purchase the option assets,
among other things, subject to the approval of the Limited Partners. On
December 30, 1994, Hampton entered into an Assignment and Assumption Agreement
with JKD Financial Management, Inc. ("JKD"), a Texas corporation, whereby, among
other things, JKD obtained Hampton's right to acquire the general partner
interest in the Partnership. JKD currently oversees the management of the
Partnership.
On January 29, 1996, SCM and SII entered into a purchase agreement to sell their
partnership interests in UAC to OS Holdings, Inc. ("OS"), a Texas corporation,
and JKD, respectively. The transfer documents were executed January 31, 1996,
and placed into escrow. The transfer will not be effective until certain
conditions precedent are satisfied and, if the conditions precedent are not
satisfied by April 29, 1996, the transfer documents will be returned to SCM and
SII and the transfer will not occur.
NOTE 3 - MODIFICATION OF GLASSHOUSE SQUARE MORTGAGES PAYABLE
- ------------------------------------------------------------
On January 17, 1995, the lender filed a notice of default in San Diego County
related to the Glasshouse Square mortgages payable. On March 27, 1995, the
mortgages were modified and a forbearance agreement was executed whereby the
lender agreed to discontinue foreclosure proceedings. The first lien mortgage
is payable in varying monthly installments of principal and interest, bearing
interest at 9.5% per annum and maturing in December 2000. The second lien
mortgage payable requires monthly interest only payments in the amount of
$6,595, bearing interest at 11% per annum and maturing in December 2000.
Principal balances for the first and second lien mortgages as of September 30,
1995, were $7,342,489 and $1,492,431, respectively. In addition to the mortgage
modifications and forbearance agreement, on March 27, 1995, the lender granted
the Partnership a line of credit for the maximum amount of $400,000 bearing
interest at 9.5% per annum payable in full on December 1, 2000. The line of
credit is restricted to Glasshouse Square for the use of mortgage payment
shortfalls, tenant improvements, leasing commissions, and a monument sign. The
line of credit is secured by a deed of trust. As of September 30, 1995, the
Partnership owed $73,387 against the line of credit. This draw on the line of
credit increased the first lien mortgage principal balance to $7,342,489 as of
September 30, 1995.
8
<PAGE>
NOTE 4 - NOTE PAYABLE
- ---------------------
On March 31, 1995, the Partnership executed a note payable secured by the
Washington Towne Apartments for a principal amount of $250,000, bearing interest
at 11.5% per annum with one payment of principal and interest in the amount of
$2,476 due May 1, 1995 and all remaining outstanding principal and accrued
interest originally due and payable June 1, 1995. The lender subsequently
extended the maturity date and on September 13, 1995, the Partnership paid all
outstanding principal and accrued interest as a result of the refinancing of the
Washington Towne Apartments.
NOTE 5 - SALE OF THE LAS OFICINAS NOTE RECEIVABLE
- -------------------------------------------------
On April 7, 1995, the Las Oficinas note receivable for $1,100,000 was sold to a
third party for $750,000. The valuation loss was recorded as of the
modification date, December 1, 1994.
NOTE 6 - PRINCIPAL PREPAYMENT AND FORGIVENESS OF DEBT - NOTE PAYABLE TO
- -----------------------------------------------------------------------
SOUTHMARK AFFILIATE
- -------------------
On April 11, 1995, the Partnership made a principal prepayment in the amount of
$750,000 on the note payable to a Southmark affiliate, secured by the Bank of
San Pedro Office Building. In consideration for this principal prepayment,
Southmark reduced the remaining unpaid principal balance of the note payable by
$75,000 and extended the maturity date for an additional 90 days. On July 20,
1995, the Partnership sold the Bank of San Pedro Office Building and paid all
remaining principal and accrued interest, totaling $381,593, due on the
promissory note payable to Southmark.
NOTE 7 - GLASSHOUSE SQUARE MAJOR TENANT
- ---------------------------------------
In September 1995, Silo California, a major tenant that provides approximately
20% of the gross rental revenues to Glasshouse Square, defaulted on its lease
and ceased retail operations. On November 20, 1995, a summons was issued to
Silo California by the Partnership notifying them of litigation proceedings in
regards to the default on their lease. The Partnership seeks to collect from
Silo California all Base Rent and Common Area Maintenance charges, $18,689 and
$5,919, respectively, per month, for the periods that they are in default or
until a new tenant has been secured to lease their location; however, the
Partnership can not predict the final recovery amount.
NOTE 8 - SALE OF THE BANK OF SAN PEDRO OFFICE BUILDING
- ------------------------------------------------------
On July 20, 1995, the Partnership sold the Bank of San Pedro Office Building for
$1,350,000. The Partnership received partial consideration from the sale in the
form of a note receivable for $350,000, bearing interest at 9% per annum with
interest only payments due monthly, secured by a second lien deed of trust on
the Bank of San Pedro Office Building, maturing on July 20, 1998 and net cash of
$291,562. On the date of sale, all remaining principal and accrued interest,
totaling $381,593, due on the promissory note payable to Southmark was paid.
NOTE 9 - MATURITY AND REFINANCE OF THE MORTGAGE NOTE PAYABLE FOR WASHINGTON
- ---------------------------------------------------------------------------
TOWNE APARTMENTS
- ----------------
The mortgage payable on the Washington Towne Apartments matured in June 1995.
In September 1995, the Partnership obtained a mortgage loan payable in the
amount of $1,750,000 from a new lender. In order to preserve the Partnership's
ownership interest in the Washington Towne Apartments and in order to satisfy
the new lender's structural requirements with respect to the refinancing of the
mortgage note payable, the Partnership contributed the property on September 13,
1995 to an affiliated entity, Washington Towne Apartments, LLC, a Georgia
limited liability company. The Partnership is the owner of all the capital
stock of Washington Towne, Inc. The Partnership is the 99% member and
Washington Towne, Inc. is the 1% managing member of Washington Towne Apartments,
LLC. Therefore, the Partnership effectively retained a 100% interest in the
property. In connection with the contribution of the property to Washington
Towne Apartments, LLC, the lender provided sufficient funds to satisfy the
matured loan obligation and to provide for certain property improvements.
Property improvements are expected to be completed prior to the end of the first
quarter of 1996 and should significantly enhance the value of the property.
9
<PAGE>
NOTE 10 - SUBSEQUENT EVENTS
- ---------------------------
On January 29, 1996, SCM and SII entered into a purchase agreement to sell their
partnership interests in UAC to OS and JKD, respectively. The transfer
documents were executed January 31, 1996, and placed into escrow. The transfer
will not be effective until certain conditions precedent are satisfied and, if
the conditions precedent are not satisfied by April 29, 1996, the transfer
documents will be returned to SCM and SII and the transfer will not occur.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Partnership's net loss for the nine months ended September 30, 1995 was
$678,931. The net loss for the same period in 1994 was $766,361. Total
revenues for the nine months ended September 30, 1995 were $1,968,430 versus
$2,046,835 for the same period in 1994. The decrease in total revenues in 1995
is primarily attributable to the loss of rental income from the Bank of San
Pedro Office Building which was sold in July 1995.
Total expenses for the nine months ended September 30, 1995 were $2,600,843
versus $2,813,196 for the same period in 1994. The decrease in expenses in 1995
primarily relates to the decrease in interest expense due to the payoff of the
Las Oficinas mortgage payable. Also, legal and refinancing expenses were
incurred on the repossession of the Bank of San Pedro Office Building in June
1994.
During the nine months ended September 30, 1995, the Partnership recorded an
increase in cash and cash equivalents of $558,034 versus a decrease of $199,534
for the same period in 1994. The statement of cash flows included an increase
in cash provided by investing activities of $905,002 due to the sale of the Las
Oficinas note receivable on April 7, 1995 for $750,000 and the sale of the Bank
of San Pedro Office Building in July 1995. The statement of cash flows included
an increase in cash used in financing activities of $149,859, primarily due to a
principal prepayment of $750,000 on the note payable to a Southmark affiliate.
Should operations deteriorate and present resources not be adequate for current
needs, the Partnership has no outside lines of credit on which to draw for its
working capital needs. Neither the General Partner and its affiliates nor JKD
and OS have any obligation to provide financial support to the Partnership.
Accordingly, continued operation of the Partnership is dependent on the
Partnership being able to generate cash from operations or sale of its remaining
operating properties or negotiated reductions in requirements related to
outstanding debt obligations.
Washington Towne Apartments - Atlanta, Georgia
- ----------------------------------------------
Average occupancy for the nine months ended September 30, 1995 was 94% versus
98% for the same period in 1994.
In September 1995, the Partnership obtained a mortgage loan payable in the
amount of $1,750,000 from a new lender. In order to preserve the Partnership's
ownership interest in the Washington Towne Apartments and in order to satisfy
the new lender's structural requirements with respect to the refinancing of the
mortgage note payable, the Partnership contributed the property on September 13,
1995 to an affiliated entity, Washington Towne Apartments, LLC, a Georgia
limited liability company. The Partnership is the owner of all the capital
stock of Washington Towne, Inc. The Partnership is the 99% member and
Washington Towne, Inc. is the 1% managing member of Washington Towne Apartments,
LLC. Therefore, the Partnership effectively retained a 100% interest in the
property. In connection with the contribution of the property to Washington
Towne Apartments, LLC, the lender provided sufficient funds to satisfy the
matured loan obligation and to provide for certain property improvements.
Property improvements are expected to be completed prior to the end of the first
quarter of 1996 and should significantly enhance the value of the property.
Glasshouse Square - San Diego, California
- -----------------------------------------
Average occupancy for the nine months ended September 30, 1995 was 82% versus
67% for the same period in 1994.
Management does not believe that the County of San Diego will take further
action regarding the alleged leaking of petroleum products from underground
storage tanks on the Garcia's Tract and part of Glasshouse Square parking lot.
Therefore, this situation should not have a material effect on the Partnership.
10
<PAGE>
Bank of San Pedro Office Building - Long Beach, California
- ----------------------------------------------------------
On June 20, 1994, the Partnership repossessed the Bank of San Pedro Office
Building in lieu of foreclosure as a result of a Settlement Agreement between
the Partnership and the borrower. The land, buildings, and improvements were
recorded on the Partnership's books at $1,422,391. This is the net note
receivable balance plus the book value of certain assets and liabilities
acquired at the date of repossession, which approximated net realizable value.
The promissory note payable to Southmark on the property dated June 10, 1994 was
due in ninety days and had three ninety-day extensions. After repossession, the
Partnership immediately began the process of selling the property by soliciting
potential buyers. On July 20, 1995, the Bank of San Pedro was sold and all
outstanding principal and accrued interest on the note payable to Southmark was
paid.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <S>
3.1 Limited Partnership Agreement (Incorporated by reference to
Registration Statement No. 2-74914 on Form S-11 filed by
Registrant).
3.2i Articles of Incorporation of Washington Towne, Inc. executed
on August 9, 1995.
3.2ii Washington Towne, Inc. Bylaws
3.3i Articles of Organization of Washington Towne Apartments,
L.L.C. executed on August 9, 1995.
3.3ii Operating Agreement of Washington Towne Apartments, L.L.C.
entered into and effective August 9, 1995, by and between
Washington Towne, Inc., a Georgia corporation and University
Real Estate Partnership V, a California limited partnership.
10.1 Promissory Note dated September 13, 1995 by and between
Washington Towne Apartments, L.L.C. and First Union National
Bank of North Carolina for the principal amount of
$1,750,000.
10.2 Deed to Secure Debt and Security Agreement dated September
13, 1995 by and between Washington Towne Apartments, L.L.C.
and First Union National Bank of North Carolina.
10.3 Assignment of Leases and Rents dated September 13, 1995, by
and between Washington Towne Apartments, L.L.C. and First
Union National Bank of North Carolina.
Exhibit
Number Description
------ -----------
<C> <S>
10.4 Indemnity and Guaranty Agreement dated September 13, 1995 by
and between University Real Estate Partnership V and First
Union National Bank.
</TABLE>
11
<PAGE>
<TABLE>
<C> <S>
11.1 Statement regarding computation of Net Loss per Limited
Partnership Unit: Net Loss per Limited Partnership Unit is
computed by dividing net loss allocated to the Limited
Partners by the number of Limited Partnership Units
outstanding. Per unit information has been computed based on
20,452 Limited Partnership Units outstanding in 1994 and
1993.
</TABLE>
(b) Reports on Form 8-K. A report on form 8-K dated July 18, 1995 was
filed during the quarter ended September 30, 1995, and relating to
Item 4 (Changes in Registrant's Certifying Accountant) of such forms,
was filed during the current quarter. (Incorporated by reference to
Form 8-K -Current Report for the period ended September 30, 1995 as
filed with the Securities and Exchange Commission on July 20, 1995.)
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSITY REAL ESTATE PARTNERSHIP V
By: UNIVERSITY ADVISORY COMPANY
General Partner
By: SOUTHMARK INVESTORS, INC.
a General Partner
By: /s/ Glen Adams
___________________________ ----------------------------------
Date Glen Adams, President
Southmark Investors, Inc.
By: /s/ Charles B. Brewer
___________________________ ----------------------------------
Date Charles B. Brewer, Executive Vice
President and Principal Financial
Officer Southmark Investors, Inc.
13
<PAGE>
EXHIBIT 3.2i
ARTICLES OF INCORPORATION
OF
WASHINGTON TOWNE, INC.
ARTICLE I.
The name of the Corporation is Washington Towne, Inc. (the "Corporation").
ARTICLE II.
The period of the Corporation's duration is perpetual.
ARTICLE III.
The purpose for which the Corporation is organized, subject to the
provisions to O.C.G.A. (S) 14-2-302 of the Georgia Business Corporation Code, is
to acquire, manage, own and hold a limited liability company interest in
Washington Towne Apartments, L.L.C., a Georgia limited liability company (the
"Limited Liability Company"), and to act as a member ("Member") of such Limited
Liability Company with all of the rights, powers, obligations and liabilities of
a Member under the Operating Agreement of such Limited Liability Company and to
take any and all actions and do any and all things necessary or appropriate to
the accomplishment of same.
ARTICLE IV.
The aggregate number of shares that the Corporation shall have the
authority to issue is 1,000 shares of common stock with the par value of $0.01
each.
1
<PAGE>
EXHIBIT 3.2i
No shareholder of the Corporation shall have the right of cumulative voting
at any election of directors or upon any other matter.
No holder of securities of the Corporation shall be entitled as a matter of
right, preemptive or otherwise, to subscribe for or purchase any securities of
the Corporation now or hereafter authorized to be issued, or securities held in
the treasury of the Corporation, whether issued or sold for cash or other
consideration or as a dividend or otherwise. Any such securities may be issued
or disposed of by the Board of Directors to such persons and on such terms as in
its discretion it shall deem advisable. Unless otherwise provided in the By-Laws
or herein, each share of stock shall have one vote on each matter submitted to a
vote of the shareholders of the Corporation. The holders of shares of capital
stock shall be entitled to receive, in proportion to the number of shares of
capital stock held, the net assets of the Corporation upon dissolution.
ARTICLE V.
The Corporation will not commence business until it has received for the
issuance of its shares consideration of the value of not less than One Thousand
Dollars ($1,000.00), consisting of money, labor done or property actually
received.
ARTICLE VI.
The street address of the Corporation's initial registered office in the
State of Georgia is 1201 Peachtree Street N.E., Suite 1240, Atlanta, Georgia
30361, Fulton County and the name of its initial registered agent at such
address is C.T. Corporation System, Inc.
2
<PAGE>
EXHIBIT 3.2i
ARTICLE VII.
The number of directors constituting the initial Board of Directors is one,
and the name and address of the persons who are to serve as directors until the
first annual meeting of the shareholders or until their successors are elected
and qualified are:
<TABLE>
<CAPTION>
NAME ADDRESS
- ---- -------
<S> <C>
Glen Adams 2711 LBJ Freeway
Suite 950
Dallas, Texas 75234
</TABLE>
Additionally, there shall at all times be "Independent Directors" as set forth
in Article X below.
ARTICLE VIII.
No director shall be liable to the Corporation or its shareholders for
monetary damages for an act or omission in the director's capacity as a
director; except that this Article does not eliminate or limit the liability of
a director to the extent the director is found liable for:
(1) a breach of the director's duty of loyalty to the Corporation or its
shareholders;
(2) an act or omission not in good faith that constitutes a breach of duty
of the director to the Corporation or an act or omission that involves
intentional misconduct or a knowing violation of the law;
3
<PAGE>
EXHIBIT 3.2i
(3) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the
scope of the director's office; or
(4) an act or omission for which the liability of the director is
expressly provided by an applicable statute.
Any repeal or modification of this Article by the shareholders of the
Corporation shall be prospective only and shall not adversely affect any
limitation on the liability of a director of the Corporation existing at the
time of such repeal or modification.
ARTICLE IX.
Any action required by the Georgia Business Corporation Code to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holder or
holders of shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted. Any such written consents
shall be executed, dated, and filed with the Corporation in the manner required
by O.C.G.A. (S) 14-2-704 of the Georgia Business Corporation Code.
4
<PAGE>
EXHIBIT 3.2i
ARTICLE X.
The Corporation shall at all times observe the applicable legal
requirements for the recognition of the Corporation as a legal entity separate
from any Members and Affiliates (as defined below), including, without
limitation, as follows:
(a) At least two of the directors of the Corporation (the
"Independent Directors") shall be persons who are not, and have not within
the past 3 years been, an officer, director, employee or 10 percent
stockholder of (i) any Member of Washington Towne Apartments, L.L.C., (ii)
University Real Estate Partnership V, a California limited partnership, or
(iii) any of their respective Affiliates.
(b) The Corporation shall maintain its principal executive office and
telephone and facsimile numbers separate from that of any Affiliate and
shall conspicuously identify such office and numbers as its own.
Additionally, the Corporation shall use its own separate stationery,
invoices and checks which reflects its separate address, telephone number
and facsimile number, as appropriate.
(c) The Corporation shall maintain its corporate records and books
and accounts separate from those of any Affiliate or any other entity. The
Corporation shall prepare unaudited annual financial statements, and the
5
<PAGE>
EXHIBIT 3.2i
Corporation's financial statements shall substantially comply with
generally accepted accounting principles.
(d) The Corporation shall maintain its own separate bank accounts,
payroll and correct, complete and separate books of account. (e) The
Corporation shall hold itself out to the public (including any Affiliate's
creditors) under the Corporation's own name and as a separate and distinct
corporate entity and not as a department, division or otherwise of any
Affiliate.
(f) All customary formalities regarding the corporate existence of
the Corporation, including holding meetings of or obtaining the consent of
its Board of Directors, as appropriate, and its stockholders and
maintaining current and accurate minute books separate from those of any
Affiliate, shall be observed.
(g) The Corporation shall act solely in its own corporate name and
through its own duly authorized officers and agents. No Affiliate shall be
appointed or act as agent of the Corporation.
(h) Investments shall be made in the name of the Corporation directly
by the Corporation or on its behalf by brokers engaged and paid by the
Corporation or its agents.
(i) Except as required by First Union National Bank of North Carolina
(the "Bank") or any successor to the Bank, the Corporation shall not
guarantee or assume or hold itself out or permit itself to be held out as
having
6
<PAGE>
EXHIBIT 3.2i
guaranteed or assumed any liabilities or obligations of any Member or any
Affiliate, nor shall it make any loan, except as permitted in the Operating
Agreement of the Limited Liability Company.
(j) The Corporation is and will be solvent and shall pay its own
liabilities, indebtedness and obligations of any kind, including all
administrative expenses, from its own separate assets.
(k) Assets of the Corporation shall be separately identified,
maintained and segregated. The Corporation's assets shall at all times be
held by or on behalf of the Corporation, and if held on behalf of the
Corporation by another entity, shall at all times be kept identifiable (in
accordance with customary usages) as assets owned by the Corporation. This
restriction requires, among other things, that corporate funds shall not be
commingled with those of any Affiliate and the Corporation shall maintain
all accounts in its own name and with its own tax identification number,
separate from those of any Affiliate.
(l) The Corporation shall not take any action if, as a result of such
action, the Corporation would be required to register as an investment
company under the Investment Company Act of 1940, as amended.
(m) The Corporation shall at all times be adequately capitalized to
engage in the transactions contemplated at its formation.
7
<PAGE>
EXHIBIT 3.2i
(n) All data and records (including computer records) used by the
Corporation or any Affiliate in the collection and administration of any
loan shall reflect the Corporation's ownership interest therein.
(o) None of the Corporation's funds shall be invested in securities
issued by any Affiliate, other than the Corporation's transfer of all of
its right, title and interest in Washington Towne Apartments to the Limited
Liability Company.
"Affiliate" means any person or entity other than the Corporation (i) which
owns beneficially, directly or indirectly, more than 50 percent of the
outstanding shares of the common stock or which is otherwise in control of the
Corporation, (ii) of which more than 50 percent of the outstanding voting
securities are owned beneficially, directly or indirectly, by any entity
described in clause (i) above, or (iii) which is controlled by any entity
described in clause (i) above; provided, that for the purposes of this
definition the term "control" and "controlled by" shall have the meanings
assigned to them in Rule 405 under the Securities Act of 1933, as amended.
ARTICLE XI.
The Corporation shall not, without the affirmative vote of 100 percent of
the Board of Directors, including the affirmative vote of the Independent
Directors, with respect to itself or in its capacity as a voting Member of the
Limited Liability Company, institute proceedings to be adjudicated bankrupt or
insolvent; or consent to
8
<PAGE>
EXHIBIT 3.2i
the institution of bankruptcy or insolvency proceedings against it or the
Limited Liability Company; or file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law relating to
bankruptcy; or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Corporation or the
Limited Liability Company or a substantial part of their respective properties;
or make any assignment for the benefit of creditors; or admit in writing its
inability to pay its debts generally as they become due; or take any corporate
action in furtherance of any such action, whether with respect to itself or the
Limited Liability Company.
ARTICLE XII
Additionally, the Corporation shall not, without the affirmative vote of
100 percent of the Board of Directors, including the affirmative vote of the
Independent Directors, (a) liquidate or dissolve the Corporation in whole or in
part, (b) consolidate, merge or enter into any form of consolidation with or
into any other entity, nor convey, transfer or lease its assets substantially as
an entirety to any person or entity nor permit any entity to consolidate, merge
or enter into any form of consolidation with or into the Corporation, nor
convey, transfer or lease its assets substantially as an entirety to any person
or entity and (c) amend or modify these Articles of Incorporation, or permit the
Limited Liability Company to do any of the foregoing.
9
<PAGE>
EXHIBIT 3.2i
ARTICLE XIII.
Notwithstanding anything to the contrary, the Corporation may not amend
Articles III, X, XI, XII or XIII hereof, so long as any indebtedness remains
outstanding to the Bank by the Corporation or the Limited Liability Company.
10
<PAGE>
EXHIBIT 3.2i
ARTICLE XIV.
The name and address of the incorporator is:
NAME ADDRESS
---- -------
Melissa A. Mullin Knapp & Street
999 Peachtree Street
Suite 1950
Atlanta, Georgia 30309
EXECUTED BY THE UNDERSIGNED INCORPORATOR on this 9th day of August, 1995.
_/s/______________________________
---
Melissa A. Mullin
11
<PAGE>
EXHIBIT 3.2ii
___________________________________________________________
WASHINGTON TOWNE, INC.
BYLAWS
___________________________________________________________
<PAGE>
EXHIBIT 3.2ii
WASHINGTON TOWNE, INC.
BYLAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE - OFFICES AND AGENT
Section 1.1 Registered Office and Agent 1
Section 1.2 Other Offices 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Special Meetings 1
Section 2.4 Notice of Meetings 1
Section 2.5 Voting Group 2
Section 2.6 Quorum 2
Section 2.7 Vote Required for Action 2
Section 2.8 Voting of Shares 2
Section 2.9 Proxies 2
Section 2.10 Presiding Officer 3
Section 2.11 Adjournments 3
Section 2.12 Action of Shareholders Without a Meeting 3
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers 3
Section 3.2 Number, Election and Term of Office 4
Section 3.3 Removal 4
Section 3.4 Vacancies 4
Section 3.5 Compensation 4
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings 5
Section 4.2 Special Meetings 5
Section 4.3 Place of Meetings 5
Section 4.4 Notice of Meetings 5
Section 4.5 Quorum 5
</TABLE>
-i-
<PAGE>
EXHIBIT 3.2ii
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.6 Vote Required for Action 5
Section 4.7 Participation by Conference Telephone 6
Section 4.8 Action by Directors Without a Meeting 6
Section 4.9 Adjournments 6
Section 4.10 Committees of the Board of Directors 6
ARTICLE FIVE - MANNER OF NOTICE AND WAIVER AS TO
SHAREHOLDERS AND DIRECTORS
Section 5.1 Procedure 6
Section 5.2 Waiver 7
ARTICLE SIX - OFFICERS
Section 6.1 Number 8
Section 6.2 Election and Term 8
Section 6.3 Compensation 8
Section 6.4 Chairman of the Board 8
Section 6.5 President 8
Section 6.6 Vice Presidents 8
Section 6.7 Secretary 9
Section 6.8 Treasurer 9
Section 6.9 Bonds 9
ARTICLE SEVEN - DISTRIBUTIONS AND SHARE DIVIDENDS
Section 7.1 Authorization or Declaration 9
Section 7.2 Record Date With Regard to Distributions
and Share Dividends 9
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance of Shares 10
Section 8.2 Share Certificates 10
Section 8.3 Rights of Corporation with Respect
to Registered Owners 10
Section 8.4 Transfers of Shares 10
Section 8.5 Duty of Corporation to Register Transfer 10
Section 8.6 Lost, Stolen or Destroyed Certificates 11
</TABLE>
-ii-
<PAGE>
EXHIBIT 3.2ii
<TABLE>
<S> <C> <C>
Section 8.7 Fixing of Record Date With Regard to
Shareholder Action 11
</TABLE>
-iii-
<PAGE>
EXHIBIT 3.2ii
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE NINE - INDEMNIFICATION
Section 9.1 Definitions 11
Section 9.2 Basic Indemnification Arrangement 12
Section 9.3 Advances for Expenses 13
Section 9.4 Authorization of and Determination of
Entitlement to Indemnification 13
Section 9.5 Court-Ordered Indemnification and
Advances for Expenses 15
Section 9.6 Indemnification of Employees and Agents 15
Section 9.7 Shareholder Approved Indemnification 15
Section 9.8 Liability Insurance 16
Section 9.9 Witness Fees 16
Section 9.10 Report to Shareholders 16
Section 9.11 Amendments; Severability 16
ARTICLE TEN - MISCELLANEOUS
Section 10.1 Inspection of Books and Records 17
Section 10.2 Fiscal Year 17
Section 10.3 Corporate Seal 17
Section 10.4 Annual Financial Statements 17
Section 10.5 Conflict With Articles of Incorporation 17
ARTICLE ELEVEN - AMENDMENTS
Section 11.1 Power to Amend Bylaws 17
</TABLE>
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<PAGE>
EXHIBIT 3.2II
ARTICLE ONE
Offices and Agent
Section 1.1 Registered Office and Agent. The corporation shall
---------------------------
maintain a registered office in the State of Georgia and shall have a registered
agent whose business office is identical to the registered office.
Section 1.2 Other Offices. In addition to its registered office, the
-------------
corporation may have offices at any other place or places, within or without the
State of Georgia, as the Board of Directors may from time to time select or as
the business of the corporation may require or make desirable.
ARTICLE TWO
Shareholders' Meetings
Section 2.1 Place of Meetings. Meetings of shareholders may be held
-----------------
at any place within or without the State of Georgia as set forth in the notice
thereof or in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver, or if no place is so specified, at the principal office of
the corporation.
Section 2.2 Annual Meetings. The annual meeting of shareholders
---------------
shall be held on a day to be determined by the Board of Directors for the
purpose of electing directors and transacting any and all business that may
properly come before the meeting.
Section 2.3 Special Meetings. Special meetings of shareholders or a
----------------
special meeting in lieu of the annual meeting of shareholders may be called at
any time by the Board of Directors or the President. Special meetings of
shareholders or a special meeting in lieu of the annual meeting of shareholders
shall be called by the corporation upon the written request of the holders of
twenty-five percent (25%) of all the votes entitled to be cast on the issue or
issues proposed to be considered at the proposed special meeting.
Section 2.4 Notice of Meetings. Unless waived as contemplated in
------------------
Section 5.2, a notice of each meeting of shareholders stating the date, time and
place of the meeting shall be given not less than ten (10) days nor more than
sixty (60) days before the date thereof, by or at the direction of the Chairman
of the Board, the President, the Secretary, or the officer or persons calling
the meeting, to each shareholder entitled to vote at that meeting. In the case
of an annual meeting, the notice need not state the purpose or purposes of the
meeting unless the articles of incorporation or the Georgia Business Corporation
Code (the "Code") requires the purpose or purposes to be stated in the notice of
the meeting. In the case of a special meeting, including a special meeting in
lieu of an annual meeting, the notice of meeting shall state the purpose or
purposes for which the meeting is called.
-1-
<PAGE>
EXHIBIT 3.2II
Section 2.5 Voting Group. Voting group means all shares of one or
------------
more classes or series that are entitled to vote and be counted together
collectively on a matter at a meeting of shareholders. All shares entitled to
vote generally on the matter are for that purpose a single voting group.
Section 2.6 Quorum. With respect to shares entitled to vote as a
------
separate voting group on a matter at a meeting of shareholders, the presence, in
person or by proxy, of a majority of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
that matter unless the articles of incorporation or the Code provides otherwise.
Once a share is represented for any purpose at a meeting, other than solely to
object to holding the meeting or to transacting business at the meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of the meeting unless a new record date is or must be set for the
adjourned meeting pursuant to Section 8.7 of these bylaws.
Section 2.7 Vote Required for Action. If a quorum exists, action on
------------------------
a matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation, provisions of these
bylaws validly adopted by the shareholders, or the Code requires a greater
number of affirmative votes. If the articles of incorporation or the Code
provide for voting by two or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately. Action may be taken by one voting group on a matter even though no
action is taken by another voting group entitled to vote on the matter. With
regard to the election of directors, unless otherwise provided in the articles
of incorporation, if a quorum exists, action on the election of directors is
taken by a plurality of the votes cast by the shares entitled to vote in the
election.
Section 2.8 Voting of Shares. Unless the articles of incorporation
----------------
or the Code provides otherwise, each outstanding share having voting rights
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on any matter, demands vote by
ballot, in which case each ballot shall state the name of the shareholder voting
and the number of shares voted by him, and if the ballot be cast by proxy, it
shall also state the name of the proxy.
Section 2.9 Proxies. A shareholder entitled to vote pursuant to
-------
Section 2.8 may vote in person or by proxy pursuant to an appointment of proxy
executed in writing by the shareholder or by his attorney-in-fact. An
appointment of proxy shall be valid for only one meeting to be specified
therein, and any adjournments of such meeting, but shall not be valid for more
than eleven months unless expressly provided therein. Appointments of proxy
shall be dated and filed with the records of the meeting to which they relate.
If the validity
-2-
<PAGE>
EXHIBIT 3.2II
of any appointment of proxy is questioned, it must be submitted to the secretary
of the meeting of shareholders for examination or to a proxy officer or
committee appointed by the person presiding at the meeting. The secretary of the
meeting or, if appointed, the proxy officer or committee, shall determine the
validity or invalidity of any appointment of proxy submitted and reference by
the secretary in the minutes of the meeting to the regularity of an appointment
of proxy shall be received as prima facie evidence of the facts stated for the
purpose of establishing the presence of a quorum at the meeting and for all
other purposes.
Section 2.10 Presiding Officer. The Chairman of the Board, or in his
-----------------
absence, the President shall serve as the chairman of every meeting of
shareholders unless another person is elected by shareholders to serve as
chairman at the meeting. The chairman shall appoint any persons he deems
required to assist with the meeting.
Section 2.11 Adjournments. Whether or not a quorum is present to
------------
organize a meeting, any meeting of shareholders (including an adjourned meeting)
may be adjourned by the holders of a majority of the voting shares represented
at the meeting to reconvene at a specific time and place, but no later than 120
days after the date fixed for the original meeting unless the requirements of
the Code concerning the selection of a new record date have been met. At any
reconvened meeting within that time period, any business may be transacted that
could have been transacted at the meeting that was adjourned. If notice of the
adjourned meeting was properly given, it shall not be necessary to give any
notice of the reconvened meeting or of the business to be transacted, if the
date, time and place of the reconvened meeting are announced at the meeting that
was adjourned and before adjournment; provided, however, that if a new record
date is or must be fixed, notice of the reconvened meeting must be given to
persons who are shareholders as of the new record date.
Section 2.12 Action of Shareholders Without a Meeting. Action
----------------------------------------
required or permitted to be taken at a meeting of shareholders may be taken
without a meeting if the action is taken by all shareholders entitled to vote on
the action or, if so provided in the articles of incorporation, by persons who
would be entitled to vote at a meeting shares having voting power to cast not
less than the minimum number (or numbers, in the case of voting by groups) of
votes that would be necessary to authorize or take the action at a meeting at
which all shareholders entitled to vote were present and voted. The action must
be evidenced by one or more written consents describing the action taken, signed
by shareholders entitled to take action without a meeting and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
The corporation shall give written notice of actions taken as required by the
Code.
ARTICLE THREE
The Board of Directors
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<PAGE>
EXHIBIT 3.2II
Section 3.1 General Powers. All corporate powers shall be exercised
--------------
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of Directors. In addition to
the powers and authority expressly conferred upon it by these bylaws, the Board
of Directors may exercise all powers of the corporation and do all lawful acts
and things that are not by law, by any legal agreement among shareholders, by
the articles of incorporation or by these bylaws directed or required to be
exercised or done by the shareholders.
Section 3.2 Number, Election and Term of Office. The number of
-----------------------------------
directors of the corporation shall not be less than three nor more than nine,
the precise number to be fixed by resolution of shareholders or of the Board of
Directors from time to time. Except as provided in Section 3.4, the directors
shall be elected by the vote of shareholders as set forth in Section 2.7 at each
annual meeting of shareholders or special meeting in lieu of the annual meeting.
Except in case of death, written resignation, retirement, disqualification or
removal, each director shall serve until the next succeeding annual meeting and
thereafter until his successor is elected and qualifies or until the number of
directors is decreased. Notwithstanding anything herein to the contrary, so long
as any indebtedness remains outstanding to First Union National Bank of North
Carolina or its successors (the "Bank"), there shall be at least two
"Independent Directors" as defined in the articles of incorporation.
Section 3.3 Removal. One or more directors may be removed from
-------
office with or without cause by shareholders by a majority of the votes entitled
to be cast. If the director was elected by a voting group, only shareholders of
that voting group may participate in the vote to remove him. Removal action may
be taken at any meeting of shareholders with respect to which the notice stated
that the purpose, or one of the purposes, of the meeting is removal of the
director, and a removed director's successor may be elected at the same meeting.
If an "Independent Director", as defined in the articles of incorporation, is
removed from office, such Independent Director shall immediately be replaced
with another Independent Director so that so long as any indebtedness remains
outstanding to the Bank, there shall be at least two Independent Directors.
Section 3.4 Vacancies. A vacancy occurring in the Board of
---------
Directors, other than by reason of an increase in the number of directors, shall
be filled for the unexpired term by the first to take action of (a) shareholders
or (b) the Board of Directors, and if the directors remaining in office
constitute fewer than a quorum of the Board of Directors, they may fill the
vacancy by the affirmative vote of a majority of all directors remaining in
office. If the vacant office was held by a director elected by a voting group,
only the holders of shares of that voting group or the remaining directors
elected by that voting group are entitled to vote to fill the vacancy. A vacancy
occurring in the Board of Directors by reason of an increase in the number of
directors shall be filled in like manner as any other vacancy, but if filled by
action of the Board of Directors shall only be for a term of office continuing
until the next election of directors by shareholders and until the election and
qualification of a successor.
-4-
<PAGE>
EXHIBIT 3.2II
Section 3.5 Compensation. Unless the articles of incorporation
------------
provide otherwise, the Board of Directors may determine from time to time the
compensation, if any, directors may receive for their services as directors. A
director may also serve the corporation in a capacity other than that of
director and receive compensation, as determined by the Board of Directors, for
services rendered in any other capacity.
ARTICLE FOUR
Meetings of the Board of Directors
Section 4.1 Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held immediately after the annual meeting of shareholders or
a special meeting in lieu of the annual meeting. In addition, the Board of
Directors may schedule other meetings to occur at regular intervals throughout
the year.
Section 4.2 Special Meetings. Special meetings of the Board of
----------------
Directors may be called by or at the request of the Chairman of the Board or the
President or by any two directors in office at that time.
Section 4.3 Place of Meetings. Directors may hold their meetings at
-----------------
any place within or without the State of Georgia as the Board of Directors may
from time to time establish for regular meetings or as set forth in the notice
of special meetings or, in the event of a meeting held pursuant to waiver of
notice, as set forth in the waiver.
Section 4.4 Notice of Meetings. No notice shall be required for any
------------------
regularly scheduled meeting of the directors. Unless waived as contemplated in
Section 5.2, each director shall be given at least one day's notice (as set
forth in Section 5.1) of each special meeting stating the date, time and place
of the meeting.
Section 4.5 Quorum. Unless a greater number is required by the
------
articles of incorporation, these bylaws, or the Code, a quorum of the Board of
Directors consists of a majority of the total number of directors that has been
prescribed by resolution of shareholders or of the Board of Directors pursuant
to Section 3.2.
Section 4.6 Vote Required for Action.
------------------------
(a) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the Board of Directors unless
the Code, the articles of incorporation or these bylaws require the vote of a
greater number of directors.
-5-
<PAGE>
EXHIBIT 3.2II
(b) A director who is present at a meeting of the Board of Directors
or a committee of the Board of Directors when corporate action is taken is
deemed to have assented to the action taken unless:
(i) he objects at the beginning of the meeting (or promptly
upon his arrival) to holding it or transacting business at the meeting;
(ii) his dissent or abstention from the action taken is entered
in the minutes of the meeting; or
(iii) he delivers written notice of his dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 4.7 Participation by Conference Telephone. Any or all
-------------------------------------
directors may participate in a meeting of the Board of Directors or of a
committee of the Board of Directors through the use of any means of
communication by which all directors participating may simultaneously hear each
other during the meeting.
Section 4.8 Action by Directors Without a Meeting. Unless the
-------------------------------------
articles of incorporation or these bylaws provide otherwise, any action required
or permitted to be taken at any meeting of the Board of Directors or any action
that may be taken at a meeting of a committee of the Board of Directors may be
taken without a meeting if the action is taken by all the members of the Board
of Directors (or of the committee as the case may be). The action must be
evidenced by one or more written consents describing the action taken, signed by
each director (or each director serving on the committee, as the case may be),
and delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
Section 4.9 Adjournments. Whether or not a quorum is present to
------------
organize a meeting, any meeting of directors (including an adjourned meeting)
may be adjourned by a majority of the directors present, to reconvene at a
specific time and place. At any reconvened meeting any business may be
transacted that could have been transacted at the meeting that was adjourned. If
notice of the adjourned meeting was properly given, it shall not be necessary to
give any notice of the reconvened meeting or of the business to be transacted,
if the date, time and place of the reconvened meeting are announced at the
meeting that was adjourned.
Section 4.10 Committees of the Board of Directors. The Board of
------------------------------------
Directors by resolution may designate from among its members an executive
committee and one or more other committees, each consisting of one or more
directors all of whom serve at the pleasure
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<PAGE>
EXHIBIT 3.2II
of the Board of Directors. Except as limited by the Code, each committee shall
have the authority set forth in the resolution establishing the committee. The
provisions of this Article Four as to the Board of Directors and its
deliberations shall be applicable to any committee of the Board of Directors.
ARTICLE FIVE
Manner of Notice and Waiver as to Shareholders and Directors
Section 5.1 Procedure. Whenever these bylaws require notice to be
---------
given to any shareholder or director, the notice shall be given in accordance
with this Section 5.1. Notice under these bylaws shall be in writing unless oral
notice is reasonable under the circumstances. Any notice to directors may be
written or oral. Notice may be communicated in person; by telephone, telegraph,
teletype, or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice are impracticable, notice may be
communicated by a newspaper of general circulation in the area where published,
or by radio, television or other form of public broadcast communication. Written
notice to the shareholders, if in a comprehensible form, is effective when
mailed, if mailed with first-class postage prepaid and correctly addressed to
the shareholder's address shown in the corporation's current record of
shareholders. Except as provided above, written notice, if in a comprehensible
form, is effective at the earliest of the following:
(i) when received or when delivered, properly addressed, to
the addressee's last known principal place of business or residence;
(ii) five days after its deposit in the mail, as evidenced by
the postmark, if mailed with first-class postage prepaid and correctly
addressed; or
(iii) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
Oral notice is effective when communicated if communicated in a comprehensible
manner.
In calculating time periods for notice, when a period of time measured in days,
weeks, months, years or other measurement of time is prescribed for the exercise
of any privilege or the discharge of any duty, the first day shall not be
counted but the last day shall be counted.
Section 5.2 Waiver.
------
(a) A shareholder may waive any notice before or after the date and
time stated in the notice. Except as provided below in (b), the waiver must be
in writing, be
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<PAGE>
EXHIBIT 3.2II
signed by the shareholder entitled to the notice, and be delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
(b) A shareholder's attendance at a meeting (i) waives objection to
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
(c) Unless required by the Code, neither the business transacted nor
the purpose of the meeting need be specified in the waiver.
(d) A director may waive any notice before or after the date and time
stated in the notice. Except as provided below in (e), the waiver must be in
writing, signed by the director entitled to the notice, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
(e) A director's attendance at or participation in a meeting waives
any required notice to him of the meeting unless the director at the beginning
of the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE SIX
Officers
Section 6.1 Number. The officers of the corporation shall consist of
------
a Chairman of the Board, a President, a Secretary and a Treasurer and any other
officers as may be appointed by the Board of Directors or appointed by a duly
appointed officer pursuant to this Article Six. The Board of Directors shall
from time to time create and establish the duties of the other officers. Any two
or more offices may be held by the same person.
Section 6.2 Election and Term. All officers shall be appointed by
-----------------
the Board of Directors or by a duly appointed officer pursuant to this Article
Six and shall serve at the pleasure of the Board of Directors or the appointing
officers as the case may be. All officers, however appointed, may be removed
with or without cause by the Board of Directors and any officer appointed by
another officer may also be removed by the appointing officer with or without
cause.
Section 6.3 Compensation. The compensation of all officers of the
------------
corporation appointed by the Board of Directors shall be fixed by the Board of
Directors.
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<PAGE>
EXHIBIT 3.2II
Section 6.4 Chairman of the Board. The Chairman of the Board of
---------------------
Directors shall call to order meetings of the shareholders, the Board of
Directors and the Executive Committee and shall act as chairman of such
meetings. The Chairman of the Board shall perform such other duties as the
directors may direct from time to time.
Section 6.5 President. The President shall be the chief executive
---------
officer of the corporation and shall have general supervision of the business of
the corporation. He shall see that all orders and resolutions of the Board of
Directors are carried into effect. The President shall perform such other duties
as may from time to time be delegated to him by the Board of Directors.
Section 6.6 Vice Presidents. In the absence or disability of the
---------------
President, or at the direction of the President, the Vice President, if any,
shall perform the duties and exercise the powers of the President. If the
corporation has more than one Vice President the one designated by the Board of
Directors shall act in lieu of the President. Vice Presidents shall perform
whatever duties and have whatever powers the Board of Directors may from time to
time assign.
Section 6.7 Secretary. The Secretary shall be responsible for
---------
preparing minutes of the acts and proceedings of all meetings of shareholders
and of the Board of Directors and any committees thereof. He shall have
authority to give all notices required by law or these bylaws. He shall be
responsible for the custody of the corporate books, records, contracts and other
documents. The Secretary may affix the corporate seal to any lawfully executed
documents and shall sign any instruments as may require his signature. The
Secretary shall authenticate records of the corporation. The Secretary shall
perform whatever additional duties and have whatever additional powers the Board
of Directors may from time to time assign him. In the absence or disability of
the Secretary or at the direction of the President, any assistant secretary may
perform the duties and exercise the powers of the Secretary.
Section 6.8 Treasurer. The Treasurer shall be responsible for the
---------
custody of all funds and securities belonging to the corporation and for the
receipt, deposit or disbursement of funds and securities under the direction of
the Board of Directors. The Treasurer shall cause to be maintained full and true
accounts of all receipts and disbursements and shall make reports of the same to
the Board of Directors and the President upon request. The Treasurer shall
perform all duties as may be assigned to him from time to time by the Board of
Directors.
Section 6.9 Bonds. The Board of Directors by resolution may require
-----
any or all of the officers, agents or employees of the corporation to give bonds
to the corporation, with sufficient surety or sureties, conditioned on the
faithful performance of the duties of
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<PAGE>
EXHIBIT 3.2II
their respective offices or positions, and to comply with any other conditions
as from time to time may be required by the Board of Directors.
ARTICLE SEVEN
Distributions and Share Dividends
Section 7.1 Authorization or Declaration. Unless the articles of
----------------------------
incorporation provide otherwise, the Board of Directors from time to time in its
discretion may authorize or declare distributions or share dividends in
accordance with the Code.
Section 7.2 Record Date With Regard to Distributions and Share
--------------------------------------------------
Dividends. For the purpose of determining shareholders entitled to a
- ---------
distribution (other than one involving a purchase, redemption or other
reacquisition of the corporation's shares) or a share dividend, the Board of
Directors may fix a date as the record date. If no record date is fixed by the
Board of Directors, the record date shall be determined in accordance with the
provisions of the Code.
ARTICLE EIGHT
Shares
Section 8.1 Authorization and Issuance of Shares. In accordance
------------------------------------
with the Code, the Board of Directors may authorize shares of any class or
series provided for in the articles of incorporation to be issued for any
consideration valid under the provisions of the Code. To the extent provided in
the articles of incorporation, the Board of Directors shall determine the
preferences, limitations, and relative rights of the shares.
Section 8.2 Share Certificates. The interest of each shareholder in
------------------
the corporation shall be evidenced by a certificate or certificates representing
shares of the corporation which shall be in such form as the Board of Directors
from time to time may adopt. Share certificates shall be numbered consecutively,
shall be in registered form, shall indicate the date of issuance, the name of
the corporation and that it is organized under the laws of the State of Georgia,
the name of the shareholder, and the number and class of shares and the
designation of the series, if any, represented by the certificate. Each
certificate shall be signed by any one of the Chairman of the Board, the
President, a Vice President, the Secretary or the Treasurer. The corporate seal
need not be affixed.
Section 8.3 Rights of Corporation With Respect to Registered Owners.
-------------------------------------------------------
Prior to due presentation for transfer of registration of its shares, the
corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any share dividend or
distribution with respect to the shares, and for all other purposes; and
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<PAGE>
EXHIBIT 3.2II
the corporation shall not be bound to recognize any equitable or other claim to
or interest in the shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by law.
Section 8.4 Transfers of Shares. Transfers of shares shall be made
-------------------
upon the transfer books of the corporation, kept at the office of the transfer
agent designated to transfer the shares, only upon direction of the person named
in the certificate or by an attorney lawfully constituted in writing; and before
a new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen
or destroyed, the requirements of Section 8.6 of these bylaws shall have been
met.
Section 8.5 Duty of Corporation to Register Transfer. Notwithstanding
----------------------------------------
any of the provisions of Section 8.4 of these bylaws, the corporation is under a
duty to register the transfer of its shares only if:
(i) the certificate is endorsed by the appropriate person or
persons;
(ii) reasonable assurance is given that the endorsement or
affidavit is genuine and effective;
(iii) the corporation either has no duty to inquire into adverse
claims or has discharged that duty;
(iv) the requirements of any applicable law relating to the
collection of taxes have been met; and
(v) the transfer in fact is rightful or is to a bona fide
purchaser.
Section 8.6 Lost, Stolen or Destroyed Certificates. Any person
--------------------------------------
claiming a share certificate to be lost, stolen or destroyed shall make an
affidavit or affirmation of the fact in the manner required by the Board of
Directors and, if the Board of Directors requires, shall give the corporation a
bond of indemnity in form and amount, and with one or more sureties satisfactory
to the Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
Section 8.7 Fixing of Record Date With Regard to Shareholder Action.
-------------------------------------------------------
For the purpose of determining shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action, the Board of Directors may fix a future date as the record date, which
date shall be not more than seventy (70) days prior to the date on which the
particular action, requiring a determination of shareholders, is to be taken. A
determination of shareholders entitled to notice of or to vote at a
shareholders'
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<PAGE>
EXHIBIT 3.2II
meeting is effective for any adjournment of the meeting unless the Board of
Directors fixes a new record date, which it must do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting. If
no record date is fixed by the Board of Directors, the record date shall be
determined in accordance with the provisions of the Code.
ARTICLE NINE
Indemnification
Section 9.1 Definitions. As used in this Article, the term:
-----------
(a) "Corporation" includes any domestic or foreign predecessor entity
of this corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
corporation or an individual who, while a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. A director is
considered to be serving an employee benefit plan at the corporation's request
if his duties to the corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(c) "Expenses" includes attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(e) "Officer" means an individual who is or was an officer of the
corporation or an individual who, while an officer of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. An officer is
considered to be serving an employee benefit plan at the corporation's request
if his duties to the corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Officer" includes, unless the context requires otherwise, the estate or
personal representative of an officer.
(f) "Party" includes an individual who was, is, or is threatened to
be made, a named defendant or respondent in a proceeding.
-12-
<PAGE>
EXHIBIT 3.2II
(g) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
Section 9.2 Basic Indemnification Arrangement.
---------------------------------
(a) Except as provided in subsections 9.2(d) and 9.2(e) below, the
corporation shall indemnify an individual who is made a party to a proceeding
because he is or was a director or officer against liability incurred by him in
the proceeding if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A person's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 9.2(a).
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, be determinative that the proposed indemnitee did not meet the standard
of conduct set forth in subsection 9.2(a).
(d) The corporation shall not indemnify a person under this Article
in connection with (i) a proceeding by or in the right of the corporation in
which such person was adjudged liable to the corporation, or (ii) any proceeding
in which such person was adjudged liable on the basis that he improperly
received a personal benefit unless, and then only to the extent that, a court of
competent jurisdiction determines pursuant to Section 14-2-854 of the Code that
in view of the circumstances of the case, such person is fairly and reasonably
entitled to indemnification.
(e) Indemnification permitted under this Article in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 9.3 Advances for Expenses.
---------------------
(a) The corporation shall pay for or reimburse the reasonable
expenses incurred by a director or officer as a party to a proceeding in advance
of final disposition of the proceeding if:
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<PAGE>
EXHIBIT 3.2II
(i) such person furnishes the corporation a written
affirmation of his good faith belief that he has met the standard of
conduct set forth in subsection 9.2(a) above; and
(ii) such person furnishes the corporation a written
undertaking (meeting the qualifications set forth below in subsection
9.3(b)), executed personally or on his behalf, to repay any advances if it
is ultimately determined that he is not entitled to indemnification under
this Article or otherwise.
(b) The undertaking required by subsection 9.3(a)(ii) above must be
an unlimited general obligation of the proposed indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
Section 9.4 Authorization of and Determination of Entitlement to
----------------------------------------------------
Indemnification.
- ---------------
(a) The corporation acknowledges that indemnification of a director
or officer under Section 9.2 has been pre-authorized by the corporation in the
manner described in subsection 9.4(b) below. Nevertheless, the corporation shall
not indemnify a director or officer under Section 9.2 unless a separate
determination has been made in the specific case that indemnification of such
person is permissible in the circumstances because he has met the standard of
conduct set forth in subsection 9.2(a); provided, however, that regardless of
the result or absence of any such determination, and unless limited by the
articles of incorporation of the corporation, to the extent that a director or
officer has been successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party, or in defense of any claim, issue or matter
therein, because he is or was a director or officer, the corporation shall
indemnify such person against reasonable expenses incurred by him in connection
therewith.
(b) The determination referred to in subsection 9.4(a) above shall be
made, at the election of the Board of Directors:
(i) by the Board of Directors of the corporation by majority
vote of a quorum consisting of directors not at the time parties to the
proceeding;
(ii) if a quorum cannot be obtained under subdivision (i), by
majority vote of a committee duly designated by the Board of Directors (in
which designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the proceeding;
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<PAGE>
EXHIBIT 3.2II
(iii) by special legal counsel:
(1) selected by the Board of Directors or its committee
in the manner prescribed in subdivision (i) or (ii); or
(2) if a quorum of the Board of Directors cannot be
obtained under subdivision (i) and a committee cannot be designated
under subdivision (ii), selected by a majority vote of the full Board
of Directors (in which selection directors who are parties may
participate); or
(iv) by the shareholders; provided that shares owned by or
voted under the control of directors or officers who are at the time
parties to the proceeding may not be voted on the determination.
(c) As acknowledged above, the corporation has pre-authorized the
indemnification of directors and officers hereunder, subject to a case-by-case
determination that the proposed indemnitee met the applicable standard of
conduct under subsection 9.2(a). Consequently, no further decision need or
shall be made on a case-by-case basis as to the authorization of the
corporation's indemnification of directors or officers hereunder. Nevertheless,
evaluation as to reasonableness of expenses of a director or officer in the
specific case shall be made in the same manner as the determination that
indemnification is permissible, as described in subsection 9.4(b) above, except
that if the determination is made by special legal counsel, evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
9.4(b)(iii) to select counsel.
Section 9.5 Court-Ordered Indemnification and Advances for Expenses.
-------------------------------------------------------
Unless the articles of incorporation provide otherwise, a director or officer
who is a party to a proceeding may apply for indemnification or advances for
expenses to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any notice
the court considers necessary, may order indemnification or advances for
expenses if it determines that:
(i) The applicant is entitled to mandatory indemnification
under the final clause of subsection 9.4(a) above (in which case the
corporation shall pay the indemnitee's reasonable expenses incurred to
obtain court-ordered indemnification);
(ii) The applicant is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or not
he met the standard of conduct set forth in subsection 9.2(a) above or was
adjudged
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<PAGE>
EXHIBIT 3.2II
liable as described in subsection 9.2(d) above (but if he was adjudged so
liable, any court-ordered indemnification shall be limited to reasonable
expenses incurred by the indemnitee unless the articles of incorporation or
a bylaw, contract or resolution approved or ratified by shareholders
pursuant to Section 9.7 provides otherwise); or
(iii) In the case of advances for expenses, the applicant is
entitled pursuant to the articles of incorporation, bylaws or any
applicable resolution or agreement, to payment for or reimbursement of his
reasonable expenses incurred as a party to a proceeding in advance of final
disposition of the proceeding.
Section 9.6 Indemnification of Employees and Agents. Unless the
---------------------------------------
articles of incorporation provide otherwise, the corporation may indemnify and
advance expenses under this Article to an employee or agent of the corporation
who is not a director or officer to the same extent as to a director or officer.
Section 9.7 Shareholder Approved Indemnification.
------------------------------------
(a) If authorized by the articles of incorporation or a bylaw,
contract or resolution approved or ratified by shareholders of the corporation
by a majority of the votes entitled to be cast, the corporation may indemnify or
obligate itself to indemnify a person made a party to a proceeding, including a
proceeding brought by or in the right of the corporation, without regard to the
limitations in other sections of this Article. The corporation shall not
indemnify a person under this Section 9.7 for any liability incurred in a
proceeding in which the person is adjudged liable to the corporation or is
subjected to injunctive relief in favor of the corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the corporation;
(ii) for acts or omissions which involve intentional misconduct
or a knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832
of the Code; or
(iv) for any transaction from which he received an improper
personal benefit.
(b) Where approved or authorized in the manner described in
subsection 9.7(a) above, the corporation may advance or reimburse expenses
incurred in advance of final disposition of the proceeding only if:
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<PAGE>
EXHIBIT 3.2II
(i) the proposed indemnitee furnishes the corporation a written
affirmation of his good faith belief that his conduct does not constitute
behavior of the kind described in subsection 9.7(a)(i) - (iv) above; and
(ii) the proposed indemnitee furnishes the corporation a
written undertaking, executed personally, or on his behalf, to repay any
advances if it is ultimately determined that he is not entitled to
indemnification.
Section 9.8 Liability Insurance. The corporation may purchase and
-------------------
maintain insurance on behalf of a director or officer or an individual who is or
was an employee or agent of the corporation or who, while an employee or agent
of the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee or
agent, whether or not the corporation would have power to indemnify him against
the same liability under Sections 9.2, 9.3 or 9.4 above.
Section 9.9 Witness Fees. Nothing in this Article shall limit the
------------
corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
Section 9.10 Report to Shareholders. If the corporation indemnifies
----------------------
or advances expenses to a director in connection with a proceeding by or in the
right of the corporation, the corporation shall report the indemnification or
advance, in writing, to the shareholders with or before the notice of the next
shareholders' meeting.
Section 9.11 Amendments; Severability. No amendment, modification or
------------------------
rescission of this Article Nine, or any provision hereof, the effect of which
would diminish the rights to indemnification or advancement of expenses as set
forth herein shall be effective as to any person with respect to any action
taken or omitted by such person prior to such amendment, modification or
rescission. In the event that any of the provisions of this Article (including
any provision within a single section, subsection, division or sentence) is held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article shall remain enforceable
to the fullest extent permitted by law.
ARTICLE TEN
Miscellaneous
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<PAGE>
Section 10.1 Inspection of Books and Records. The Board of Directors
-------------------------------
shall have power to determine which accounts, books and records of the
corporation shall be opened to the inspection of shareholders, except those as
may by law specifically be made open to inspection, and shall have power to fix
reasonable rules and regulations not in conflict with the applicable law for the
inspection of accounts, books and records which by law or by determination of
the Board of Directors shall be open to inspection. Without the prior approval
of the Board of Directors in their discretion, the right of inspection set forth
in Section 14-2-1602(c) of the Code shall not be available to any shareholder
owning two (2%) percent or less of the shares outstanding.
Section 10.2 Fiscal Year. The Board of Directors is authorized to fix
-----------
the fiscal year of the corporation and to change the same from time to time as
it deems appropriate.
Section 10.3 Corporate Seal. If the Board of Directors determines
--------------
that there should be a corporate seal for the corporation, it shall be in the
form as the Board of Directors may from time to time determine.
Section 10.4 Annual Financial Statements. In accordance with the
---------------------------
Code, the corporation shall prepare and provide to shareholders such financial
statements as may be required by the Code.
Section 10.5 Conflict With Articles of Incorporation. In the event
---------------------------------------
that any provision of these bylaws conflicts with any provision of the articles
of incorporation, the articles of incorporation shall govern.
ARTICLE ELEVEN
Amendments
Section 11.1 Power to Amend Bylaws. The Board of Directors shall have
---------------------
power to alter, amend or repeal these bylaws or adopt new bylaws, but any bylaws
adopted by the Board of Directors may be altered, amended or repealed, and new
bylaws adopted, by the shareholders. The shareholders may prescribe by
expressing in the action they take in adopting or amending any bylaw or bylaws
that the bylaw or bylaws so adopted or amended shall not be altered, amended or
repealed by the Board of Directors.
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<PAGE>
EXHIBIT 3.3I
ARTICLES OF ORGANIZATION
OF
WASHINGTON TOWNE APARTMENTS, L.L.C.
I.
The name of the limited liability company (the "Company") is Washington
Towne Apartments, L.L.C.
II.
The management of the Company is vested in the members. The names and
addresses of the members are as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Washington Towne, Inc. 2420 Heaton Drive
East Point, Georgia
Attn: Property Manager
University Real Estate Partnership V 200 Crescent Court
Suite 1300
Dallas, Texas 75201
</TABLE>
III.
The latest date on which the Company is to dissolve is July 31, 2025.
IV.
The sole purpose of the Company is to acquire, own, hold, maintain,
operate, finance and refinance, and sell the Project, together with such other
activities as may be necessary or advisable in connection with the ownership of
the Project. Notwithstanding anything contained herein to the contrary, the
Company shall not engage in any business unrelated to the Project and shall not
acquire any real property or own assets other than those related to the Project
and/or otherwise in furtherance of the purposes of the Company. For the purposes
hereof, "Project" means Washington Towne Apartments located at 2420 Heaton
Drive, East Point, Georgia, and all real and personal property associated
therewith.
1
<PAGE>
EXHIBIT 3.3I
V.
The address of the Company's initial registered office in Georgia and the
name of the initial registered agent at that address is CT Corporation System,
1201 Peachtree Street, Suite 1240, Atlanta, Georgia 30361.
VI.
The name and address of the organizer is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Melissa A. Mullin 999 Peachtree Street
Suite 1950
Atlanta, Georgia 30309
</TABLE>
VII.
A. The Company shall not, without the affirmative vote of 100 percent of the
membership interests, institute proceedings to be adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against it; or file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; or consent to
the appointment of a receiver, liquidator, assignee, trustee, sequester (or
other similar official) of the Company or a substantial part of its property; or
make any assignment for the benefit of creditors; or admit in writing its
inability to pay its debts generally as they become due; or take any Company
action in furtherance of any such action.
B. The Company shall not, without the affirmative vote of 100 percent of the
membership interests, (a) liquidate or dissolve the Company in whole or in part,
(b) consolidate, merge or enter into any form of consolidation with or into any
other entity, nor convey, transfer or lease its assets substantially as an
entity to any person or entity, nor permit any entity to consolidate, merge or
enter into any form of consolidation with or into the Company, and (c) amend its
Articles of Organization.
C. Notwithstanding anything contained herein to the contrary, so long as any
indebtedness remains outstanding to First Union National Bank of North Carolina
or its successors, the Company and its Members may not amend Articles IV and VII
of these Articles of Organization.
2
<PAGE>
EXHIBIT 3.3I
IN WITNESS WHEREOF, the undersigned execute these Articles of Organization
this 9th day of August, 1995.
ORGANIZER:
/s/
__________________________________
Melissa A. Mullin
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<PAGE>
EXHIBIT 3.3ii
OPERATING AGREEMENT
OF
WASHINGTON TOWNE APARTMENTS, L.L.C.
THIS OPERATING AGREEMENT OF WASHINGTON TOWNE APARTMENTS, L.L.C. is entered
into and shall be effective as of the 9th day of August, 1995, by and between
WASHINGTON TOWNE, INC., a Georgia corporation ("Corporation") and UNIVERSITY
REAL ESTATE PARTNERSHIP V, a California limited partnership ("Partnership").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to form a limited liability company
under the provisions of the Georgia Limited Liability Company Act for the
purposes hereinafter described; and
WHEREAS, the parties hereto desire to set forth herein their respective
rights, duties and responsibilities with respect to such limited liability
company;
NOW, THEREFORE, in consideration of the mutual promises, obligations and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:
ARTICLE 1. DEFINITIONS.
--------- -----------
For purposes of this Agreement the following terms shall have the meanings
set forth below:
1.01 "Act" means the Georgia Limited Liability Company Act, as amended
---
from time to time (or any corresponding provisions of succeeding law).
1.02 "Affiliate" shall mean, with respect to any Person, (i) the officers
---------
and directors of any corporate Member; (ii) any persons or entities owning or
controlling 10% or more of any class of equity securities of any corporate
Member; (iii) any persons or entities directly or indirectly controlling,
controlled by or under common control with any Member or in which any Member has
a beneficial interest or an option to acquire a beneficial interest of more than
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<PAGE>
EXHIBIT 3.3ii
5%; (iv) any corporation, partnership or other entity with respect to which any
Member serves as an officer, director, partner, trustee or in a similar
capacity; (v) any officer, director, trustee, general partner, employee or
holder of 5% or more of the outstanding voting securities of any corporation,
partnership, trust of other entity controlling, controlled by or under common
control with a Member; (vi) any member of the immediate family of a Member or
person or entity described in (i) through (v) above; and (vii) any Member. The
term "control" (including the term "controlled by" and "under common control
with") shall include, without limitation, (i) the ownership, control or power to
vote 5% or more of (x) the outstanding shares of any class of voting securities
or (y) the partnership, membership or beneficial interests of any such person,
corporation or other entity, as the case may be, directly or indirectly, or
acting through one or more persons, corporations or other entities, (ii) the
control in any manner over the Member or the election of more than one director
or trustee (or persons or entities exercising similar functions) of such person
or entity, or (iii) the power to exercise, directly or indirectly, control over
the management or policies of such person or entity. The term "immediate family"
shall mean the spouse, ancestors, lineal descendants, brothers and sisters of
the person in question, including those related by adoption.
1.03 "Agreement" means this Operating Agreement as it may be amended from
---------
time to time in accordance with the provisions hereof.
1.04 "Approved by the Company" means approval by the unanimous vote of the
-----------------------
Members of the Company.
1.05 "Articles of Organization" means the Articles of Organization of
------------------------
Washington Towne Apartments, L.L.C., as filed with the Secretary of State of the
State of Georgia, as the same may be amended from time to time.
1.06 "Capital Account" means, with respect to each Member, the capital
---------------
account established and maintained by the Company for such Member as provided in
Section 7.01 hereof. The initial Capital Account of each Member is set forth on
Exhibit "A" which is attached hereto and made a part hereof by this reference.
1.07 "Capital Contribution" means, with respect to any Member, the money
--------------------
and any property (other than money) contributed to the Company with respect to
the Interest in the Company held by such Member pursuant to the terms of this
Agreement.
1.08 "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
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EXHIBIT 3.3ii
1.09 "Company" means Washington Towne Apartments, L.L.C., a Georgia
-------
limited liability company, governed by this Agreement.
1.10 "General Interest Rate" means the varying rate per annum that is
---------------------
equal to the interest rate publicly quoted by First Union National Bank of North
Carolina from time to time as its prime commercial or similar interest rate,
with adjustments in that varying rate to be made on the same date as any changes
in that rate.
1.11 "Interest" means the interest of a Member in the Company, including,
--------
without limitation, all rights to distributions (liquidating or otherwise),
allocations, information, and to consent or to approve. "Interests" means one or
---------
more Interest. The Interest of each Member shall not be evidenced by a
certificate. As of the date hereof, the Interest of each Member is as follows:
<TABLE>
<CAPTION>
Member Interest
------ --------
<S> <C>
CORPORATION 1%
PARTNERSHIP 99%
</TABLE>
1.12 "Liquidating Trustee" means the Person Approved by the Company,
-------------------
pursuant to Section 12.02 hereof, to wind up and liquidate the Company following
a Terminating Event.
1.13 "Member" means any Person executing this Agreement as a member. At
------
least one Member shall at all times be a corporation owned and controlled by the
Partnership having at least two "Independent Directors" as such term is defined
in the Articles of Incorporation of Corporation.
1.14 "Net Cash" means all gross proceeds received by the Company that are
--------
available for distribution following the payment of all operating expenses of
the Company.
1.15 "Notice" means all notices, offers, demands or other communications
------
required or permitted to be given pursuant to this Agreement.
1.16 "Person" means any individual, partnership, corporation, limited
------
liability company, enterprise, trust or other entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such person
where the context so permits.
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<PAGE>
EXHIBIT 3.3ii
1.17 "Profit" and "Loss" means, for each fiscal year, an amount equal to
-----------------
the taxable income or taxable loss of the Company for such fiscal year,
determined in accordance with Code Section 703(a) and Regulations (S)1.703-1,
with the following adjustments:
(a) Any tax-exempt income, as described in Code Section 705(a)(1)(B),
realized by the Company during such fiscal year shall be taken into account in
computing such taxable income or taxable loss as if it were taxable income; and
(b) Any expenditures of the Company for such fiscal year described in
Code Section 705(a)(2)(B), including any items treated under Regulations
(S)1.704-1(b)(2)(iv)(i) as items described in Code Section 705(a)(2)(B), shall
be taken into account in computing such taxable income or taxable loss as if
they were deductible items.
If the taxable income or taxable loss of the Company for such fiscal year, as
adjusted in the manner provided in Subsections (a) and (b) of this Section 1.17,
is a positive amount, such amount shall be the Profit of the Company for such
fiscal year; and, if such amount is negative, such amount shall be the Loss of
the Company for such fiscal year.
1.18 "Project" means Washington Towne Apartments located at 2420 Heaton
-------
Drive East Point, Georgia, and all real and personal property associated
therewith.
1.19 "Regulations" means the Treasury Regulations promulgated by the
-----------
Department of the Treasury under the Code from time to time.
1.20 "Tax Matters Partner" means the Member designated pursuant to Section
-------------------
5.03 hereof to act as "Tax Matters Partner" for the Company, as that term is
defined in Code Section 6231(a)(7), for purposes of Code Sections 6221 through
6232.
1.21 "Terminating Event" means any event specified in Section 12.01
-----------------
hereof, the occurrence of which will cause a termination, dissolution and
liquidation of the Company.
1.22 "Transfer" shall mean, as a noun, a sale, hypothecation, gift,
--------
pledge, assignment, or any other disposition or encumbrance whether voluntary,
involuntary, or by operation of law and, as a verb, to sell, hypothecate, give,
pledge, assign, or otherwise dispose of or encumber, whether voluntarily,
involuntarily or by operation of law.
Other terms defined herein have the meanings so given them.
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EXHIBIT 3.3ii
ARTICLE 2. FORMATION, PURPOSE, TERM, AND MEMBERSHIP.
--------- ----------------------------------------
2.01 Formation. The Company has been organized as a Georgia limited
---------
liability company by the filing of Articles of Organization under and pursuant
to the Act.
2.02 Company Name. The name of the Company is Washington Towne
------------
Apartments, L.L.C. and all business of the Company shall be conducted in such
name.
2.03 Statutory Compliance. The Company shall exist under and be governed
--------------------
by, and this Agreement shall be construed in accordance with, the applicable
laws of the State of Georgia. The Members shall make all filings and disclosures
required by, and shall otherwise comply with, all such laws. The Members shall
execute and file in the appropriate records any assumed or fictitious name
certificates and other documents and instruments as may be necessary or
appropriate with respect to the formation of, and conduct of business by, the
Company.
2.04 Principal Place of Business. The principal place of business of the
---------------------------
Company shall be located at 200 Crescent Court, Suite 1300, Dallas, Texas 75201
or such other location or additional locations as may be Approved by the
Company.
2.05 Purpose. The sole purpose of the Company is to acquire, own, hold,
-------
maintain, operate, finance and refinance, and sell the Project, together with
such other activities as may be necessary or advisable in connection with the
ownership of the Project. Notwithstanding anything contained herein to the
contrary, the Company shall not engage in any business unrelated to the Project
and shall not acquire any real property or own assets other than those related
to the Project and/or otherwise in furtherance of the purposes of the Company.
2.06 Term and Termination. The term of the Company shall commence on the
--------------------
date the Articles of Organization are filed with the Secretary of State of
Georgia and shall continue for the period fixed therein or such earlier time as
this Agreement or the Act may provide.
2.07 No State-Law Partnership. The Members intend that the Company not be
------------------------
a partnership (including, without limitation, a limited partnership) or joint
venture, and that no Member be a partner or joint venturer of any other Member,
for any purposes other than federal and state tax purposes, and this Agreement
may not be construed to suggest otherwise.
2.08 Payments of Individual Obligations. The Members shall use the
----------------------------------
Company's credit and assets solely for the benefit of the Company. No asset of
the Company shall be transferred or encumbered for or in payment of any
individual obligation of a Member.
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<PAGE>
EXHIBIT 3.3ii
2.09 Title to Property. All real and personal property owned by the
-----------------
Company shall be owned by the Company as an entity and, insofar as permitted by
applicable law, no Member shall have any ownership interest in such property in
its individual name or right, and each Member's interest in the Company shall be
personal property for all purposes. The Company shall hold all of its property
in the name of the Company and not in the name of any Member, unless it is
determined and Approved by the Company that the title should be held by a
nominee. Title to Company assets at any time held in the Company's name may be
conveyed by delivery of a deed executed by all of the Members. If, on the
Company's behalf, a nominee of the Company at any time acquires record title to
or a beneficial interest in, the Project (and any other real property hereafter
acquired by or on behalf of the Company) or other assets of the Company, the
title holder shall certify to the Company by duly executed instrument in
recordable form reasonably acceptable to all Members that it is acting only in
the capacity of a nominal record title holder or beneficial owner for the
benefit of the Company pursuant to this Agreement.
2.10 Members. The Members of the Company are the Persons executing this
-------
Agreement as of the date hereof as members. No Person shall be admitted as an
additional Member of the Company.
2.11 Representations and Warranties. Each Member hereby represents and
------------------------------
warrants to the Company and each Member that (a) it is duly organized, validly
existing, and in good standing under the laws of the state of its incorporation
or formation and is duly qualified and in good standing as a foreign corporation
or limited partnership in the jurisdiction of its principal place of business
(if not incorporated therein); (b) it has full corporate or partnership power
and authority to execute and agree to this Agreement and to perform its
obligations hereunder and all necessary actions by the board of directors,
shareholders, members, managers, partners or other Persons necessary for the due
authorization, execution, delivery, and performance of this Agreement by that
Member has been duly taken; (c) it has duly executed and delivered this
Agreement; and (d) its authorization, execution, delivery, and performance of
this Agreement does not conflict with any other agreement or arrangement to
which it is a party or by which it is bound.
2.12 Liability to Third Parties. No Member shall be liable for the debts,
---------
obligations or liabilities of the Company, including under a judgment decree or
order of a court.
2.13 Withdrawal. No Member shall, either directly or indirectly, unless
----------
Approved by the Company, take any action to require a partition of the Company
or of any of its assets or
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EXHIBIT 3.3ii
properties or cause the sale of any Company property, and notwithstanding any
provision of applicable law to the contrary, each Member (and its legal
representatives, successors, or assigns) hereby irrevocably waives and
renounces, to the fullest extent permitted by law, any and all rights to
maintain any action for liquidation or dissolution of the Company, or for
partition or to compel any sale with respect to its Interest or with respect to
any assets or properties of the Company.
ARTICLE 3. MANAGEMENT.
--------- ----------
3.01 Decisions and Actions of the Company. All actions and decisions must
------------------------------------
be Approved by the Company to constitute an action or decision of the Company.
Notwithstanding the foregoing, with respect to the execution of any documents or
papers executed in connection with that certain loan made to the Company by
First Union National Bank of North Carolina or its successors, the execution of
only the Corporation shall be necessary to bind the Company.
3.02 Compensation. No Member shall receive any compensation for its
------------
services but shall be reimbursed for its out of pocket expenses paid on behalf
of the Company if such reimbursement is Approved by the Company.
ARTICLE 4. MEETINGS OF THE MEMBERS.
--------- -----------------------
4.01 Annual Meeting. The Members shall hold an annual meeting to analyze
--------------
and discuss the financial status and operations of the Company and to plan for
the future of the Company. The annual meeting of the Members shall be the third
Tuesday of the first month of the fiscal year at 3:00 P.M. at the principal
place of business of the Company, or at such other time and place Approved by
the Company.
4.02 Special Meetings. Each Member may call a special meeting of the
----------------
Members to discuss and vote on any matter relating to the Company by sending
Notice to the other Member. The Notice sent by a Member to call a special
meeting of the Members pursuant to this Section 4.02 shall specify the time,
date and place of the special meeting called pursuant to such Notice, and shall
state the purpose or purposes for which such special meeting of the Members is
called and the matters to be discussed or submitted to a vote of the Members at
such special meeting. Such Notice shall be given on a date not less than five
(5) nor more than twenty (20) days prior to the date specified in such Notice
for such special meeting.
4.03 Action Without a Meeting. Any action or decision which can be taken
------------------------
or made by the Company at an annual or special meeting of the Members pursuant
to a vote of the
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EXHIBIT 3.3ii
Members can be taken by the Company without a meeting if a writing setting forth
the details of such action or decision of the Company is signed by all Members.
ARTICLE 5. ACCOUNTING AND RECORDS.
--------- ----------------------
5.01 Books and Records. The Company shall maintain at the office of the
-----------------
accountant separate books of account for the Company which shall show a true and
accurate record of all costs and expenses incurred, all charges made, all
credits made and received, and all income derived in connection with the
operation of the Company business. The Company shall determine whether to keep
its books and records on an accrual or a cash basis. The expenses chargeable to
the Company shall include only those which are reasonable and necessary for the
ordinary and efficient operation of the Company business and the performance of
the obligations of the Company under any agreements relating to the business of
the Company. A Member and its designated representative shall, at such Member's
sole expense, have the right, at any time without notice to any other Member, to
examine, copy, and audit the Company's books and records.
5.02 Tax Returns. The Company shall cause to be prepared and filed all
-----------
necessary federal and state income tax returns, and shall make any elections,
Approved by the Company, appropriate and in the best interests of the Company.
Neither the Company nor any Member may make an election for the Company to be
excluded from the application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable state law, and no
provision of this Agreement (including, without limitation, Section 2.07) shall
be construed to sanction or approve such an election.
5.03 Tax Matters Partner. The "tax matters partner" of the Company
--------------------
pursuant to section 6231(a)(7) of the Code shall be a Member Approved by the
Company. Any Member who is designated "tax matters partner" shall take such
action as may be necessary to cause each other Member to become a "notice
partner" within the meaning of section 6223 of the Code. Any Member who is
designated "tax matters partner" shall inform each other Member of all
significant matters that may come to its attention in its capacity as "tax
matters partner" by giving notice thereof to all Members and shall forward to
each other Member copies of all significant written communications it may
receive in that capacity. Any Member who is designated "tax matters partner"
may not take any action contemplated by sections 6222 through 6232 of the Code
without the unanimous consent of all Members, but this sentence does not
authorize such Member (or any other Member) to take any action left to the
determination of an individual Member under sections 6222 through 6232 of the
Code.
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EXHIBIT 3.3ii
5.04 Fiscal Year. The fiscal year of the Company shall be the calendar
-----------
year, unless otherwise Approved by the Company. As used in this Agreement, a
fiscal year shall include any partial fiscal year at the beginning and end of
the Company term.
5.05 Bank Accounts. Each Member shall have a fiduciary responsibility for
-------------
the safekeeping and use of all funds and assets of the Company, whether or not
in its immediate possession or control. The funds of the Company shall not be
commingled with the funds of any other Person and no Member shall employ, or
permit any other Person to employ, such funds in any manner except for the
benefit of the Company. The bank accounts of the Company shall be maintained in
such banking institutions as are Approved by the Company and withdrawals shall
be made only as Approved by the Company, on such signature or signatures as are
Approved by the Company.
ARTICLE 6. CAPITAL CONTRIBUTIONS.
--------- ---------------------
6.01 Initial Capital Contribution. Contemporaneously with the execution by
----------------------------
each Member of this Agreement, each Member shall make the Capital Contribution
described for that Member in Exhibit "A" attached hereto and made a part hereof.
6.02 Additional Capital Contributions. As of the date hereof, the Members
--------------------------------
do not anticipate a need for additional Capital Contributions. Additional
Capital Contributions shall not be made by the Members unless otherwise Approved
by the Company. Any additional Capital Contribution Approved by the Company will
be payable in proportion to the percentage Interests of the Members as of the
date the additional Capital Contribution is made.
6.03 Return of Contributions. A Member is not entitled to the return of
-----------------------
any part of its Capital Contribution or to be paid interest in respect of either
its Capital Account or its Capital Contribution. An unrepaid Capital
Contribution is not a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the Company to enable
the Company to return any Member's Capital Contribution.
6.04 Advances by Members. If the Company does not have sufficient
-------------------
cash to pay its obligations, any Member may agree to advance all or part of the
needed funds to or on behalf of the Company, if Approved by the Company. An
advance described in this Section 6.04 shall constitute a loan from the Member
to the Company, bear interest at the General Interest Rate from the date of the
advance until the date of payment, and shall not be deemed a Capital
Contribution.
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EXHIBIT 3.3ii
ARTICLE 7. CAPITAL ACCOUNTS.
--------- ----------------
7.01 Maintenance of Capital Accounts. A separate Capital Account shall be
-------------------------------
established and maintained for each Member. The amount of a Member's Capital
Account, as of any particular date, shall equal the Capital Contribution of such
Member adjusted to reflect:
(i) Such Member's distributive share of Profits or Losses (including,
if such date is not the close of the Company's fiscal year, the distributive
share of Profits and Losses of the Company for the period from the close of the
last fiscal year to such date); and
(ii) Distributions by the Company to such Member (including, if such
date is not the close of the Company's fiscal year, distributions by the Company
during the period from the close of the last fiscal year to such date).
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations.
ARTICLE 8. ALLOCATIONS.
--------- -----------
8.01 Profit and Loss. The Profit and Loss attributable to Company
---------------
activities for any fiscal year shall be allocated among the Members in
proportion to their percentage Interests. Notwithstanding the foregoing,
"nonrecourse deductions" (as defined in Treas. Reg. 1.704-2(i)(1), if any, for
each fiscal year of the Company shall be allocated among the Members in
accordance with the requirements of Treas. Reg. 1.704-2.
8.02 Tax Allocation: Code Section 704(c). Any items of income, gain, loss
--------------
and deduction with respect to any property that has been contributed by a Member
to the capital of the Company and which is required or permitted to be allocated
to the Members for income tax purposes under Code Section 704(c) so as to take
into account the variation between the tax basis of such property and its agreed
upon fair market value at the time of its contribution shall be allocated to the
Members solely for income tax purposes in the manner so required or permitted.
ARTICLE 9. DISTRIBUTIONS. Except as otherwise provided in Section 12.04
-------------
hereof (Liquidating Distributions), Net Cash, if any, for a fiscal year shall be
distributed by the Company from time to time as Approved by the Company, to the
Members in proportion to their
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EXHIBIT 3.3ii
percentage Interests. No distribution shall be made to Members if prohibited by
(S)14-11-407 of the Act.
ARTICLE 10. TRANSFERS OF INTERESTS. No Member shall Transfer all or any
---------- ----------------------
portion of a Member's Interest or any rights therein or voluntarily dissociate.
Any Transfer or attempted Transfer by any Member of all or any portion of a
Member's Interest in violation of the preceding sentence shall cause the Company
to immediately dissolve. Each Member hereby acknowledges the reasonableness of
the restrictions on the Transfer of a Member's Interest imposed by this
Agreement in view of the Company's purposes and the relationship of the Members.
Accordingly, the restrictions on the Transfer of a Member's Interest contained
herein shall be specifically enforceable. Each Member hereby further agrees to
hold the Company and the other Member (and the other Member's successors and
assigns) wholly and completely harmless from any cost, liability or damage
(including, without limitation, liabilities for income taxes and costs and
expenses, including attorneys' fees, of enforcing this restriction on the
Transfer of a Member's Interest) incurred by the Company or the other Member as
a result of such Member's Transfer or an attempt to Transfer all or any portion
of its Interest in violation of this Agreement.
ARTICLE 11. INDEMNIFICATION
---------- ---------------
11.01 Indemnification. The Company shall indemnify, defend and hold
---------------
harmless each of the Members and their respective Affiliates from and against
any and all claims, liabilities, damages, judgments, costs and expenses incurred
or suffered by such Member as the result of or in connection with the activities
of the Company, except for such claims, liabilities, damages, judgments, costs
and expenses of such Member that result from the gross negligence, bad faith,
fraud or willful misconduct of such Member or from the breach by such Member of
its obligations under this Agreement. All claims, liabilities, damages,
judgments, costs and expenses of a Member with respect to which it is entitled
to indemnification pursuant to this Section 11.01 shall be satisfied solely from
assets of the Company.
11.02 Indemnification of Officers, Employees and Agents. If Approved by
-------------------------------------------------
the Company, the Company may indemnify an officer, employee or agent of the
Company to the same extent and subject to the same conditions under which it may
indemnify Members under this Article 11.
11.03 Savings Clause. If this Article 11 or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Member or any other
Person indemnified pursuant to this
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<PAGE>
EXHIBIT 3.3ii
Article 11 as to costs, charges and expenses (including costs of suit and
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article 11 that shall not have been invalidated and to the fullest extent
permitted by applicable law.
ARTICLE 12. DISSOLUTION AND LIQUIDATION.
---------- ---------------------------
12.01 Dissolution. The Company shall terminate, dissolve and liquidate
-----------
upon the first to occur of any of the following events ("Terminating Events"):
(a) Upon the expiration of the period fixed for the duration of the
Company set forth in the Articles of Organization;
(b) The unanimous vote of all Members to terminate, dissolve and
liquidate the Company;
(c) Upon any Transfer of a Member's Interest in the Company;
(d) Upon the occurrence of an Event of Dissociation described in
Section 14-11-601 of the Act; or
(e) Upon entry of a decree of judicial dissolution of the Company
under Section 14-11-603 of the Act.
The Members agree that, notwithstanding any provision of the Act, the Company
will not dissolve prior to the occurrence of a Terminating Event. If it is
determined, by a court of competent jurisdiction, that the Company has dissolved
prior to the occurrence of a Terminating Event, the Members hereby agree to
continue the business of the Company without a winding up or liquidation.
12.02 Method of Liquidation. Upon the occurrence of a Terminating Event,
---------------------
the Company shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets and satisfying the claims of its
creditors and of the Members. Following the occurrence of a Terminating Event,
no Member shall take any action that is inconsistent with or not necessary or
appropriate for winding up the business and affairs of the Company. Upon the
occurrence of a Terminating Event, a Liquidating Trustee shall be appointed as
Approved by the
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EXHIBIT 3.3ii
Company, and the Liquidating Trustee shall terminate, dissolve, and liquidate
the Company in accordance with the provisions of this Article 12.
12.03 Duties of Liquidating Trustee. The Liquidating Trustee shall wind
-----------------------------
up the operations of the Company and liquidate the Company by filing any
certificates, notices or other documents required by applicable law to be filed
in connection with the termination, dissolution and liquidation of the Company,
and by liquidating all assets of the Company as promptly as is consistent with
obtaining the fair value therefor and distributing the proceeds from such
liquidation in the manner provided in Section 12.04 hereof.
12.04 Liquidating Distributions. The Liquidating Trustee shall distribute
-------------------------
proceeds obtained from the sale of the assets of the Company pursuant to the
termination, dissolution and liquidation of the Company in the following manner
and in the following order of priority:
(a) To the payment and discharge of all debts and liabilities of
the Company;
(b) Second, to the establishment of such reserves as the
Liquidating Trustee, in its sole discretion, determines are necessary for any
contingent or unforeseen liabilities or obligations of the Company arising out
of or in connection with the Company; provided, however, that any such reserve
shall be paid over to an escrow agent who is not a Member or an Affiliate to be
held by such agent for a reasonable period for the payment of such contingent
and unforeseen liabilities or obligations of the Company and at the expiration
of such period to distribute the balance thereafter remaining in the manner
hereinafter provided in this Section 12.04;
(c) Third, to the Members in accordance with their respective
positive Capital Account balances, after giving effect to all contributions,
distributions and allocations for all periods; and
(d) Fourth, to the Members in accordance with their percentage
Interests.
12.05 Rights of Members. Each Member shall look solely to the assets of
-----------------
the Company for the return of its Capital Contribution and shall have no right
or power to demand or receive property other than cash from the Company. No
Member shall have any priority over any other Member as to the return of its
Capital Contribution, distributions, or allocations unless otherwise provided in
this Agreement.
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EXHIBIT 3.3ii
12.06 Deficit Capital Accounts. Notwithstanding anything to the contrary
------------------------
contained in this Agreement, and notwithstanding any custom or rule of law to
the contrary, to the extent that any Member has a deficit in its Capital
Account, upon dissolution of the Company such deficit shall not be an asset of
the Company and such Member shall not be obligated to contribute the amount of
such deficit to the Company.
12.07 Certificate of Termination On completion of the distribution of
--------------------------
Company assets as provided herein, the Company shall be terminated, and a Member
(or such other Person or Persons as the Act may require or permit) shall file a
Certificate of Termination with the Secretary of State of Georgia and take such
other actions as may be necessary to terminate the Company.
ARTICLE 13. LEGAL SEPARATENESS.
----------- ------------------
The Company shall at all times observe the applicable legal requirements
for the recognition of the Company as a legal entity separate from a Member and
Affiliate, including, without limitation, as follows :
(a) The Company shall maintain its business records and books and
accounts separate from those of any Affiliate or other entity. The Company shall
prepare unaudited quarterly and annual financial statements, and the Company's
financial statements shall substantially comply with generally accepted
accounting principles.
(b) The Company shall maintain its own separate bank accounts, payroll
and correct, complete and separate books of account.
(c) The Company shall hold itself out to the public (including any
Affiliate's creditors) under the Company's own name and as a separate and
distinct legal entity and not as a department, division or otherwise of any
Affiliate.
(d) All customary formalities regarding the legal existence of the
Company, including holding meetings or obtaining the consent of its Members, as
appropriate, and maintaining current and accurate minute books separate from
those of any Affiliate shall be observed.
(e) The Company shall act solely in its own Company name and through its
own duly authorized Members and agents.
14
<PAGE>
EXHIBIT 3.3ii
(f) Investments shall be made in the name of the Company directly by the
Company or on its behalf by brokers engaged and paid by the Company or its
agents.
(g) The Company shall not guarantee or assume or hold itself out or
permit itself to be held out as having guaranteed or assumed any liabilities or
obligations of any Member or Affiliate, nor shall it make any loan except as
permitted by this Agreement.
(h) The Company is and will be solvent and shall pay its own liabilities,
indebtedness and obligations of any kind, including all administrative expenses,
from its own separate assets.
(i) Assets of the Company shall be separately identified, maintained and
segregated. The Company's assets shall at all times be held by or on behalf of
the Company and if held on behalf of the Company by another entity, shall at all
times be kept identifiable (in accordance with customary usages) as assets owned
by the Company. This restriction requires, among other things, that Company
funds shall not be commingled with those of any Affiliate and it shall maintain
all accounts in its own name and with its own tax identification number,
separate from those of any Affiliate. The Company shall not take any action if,
as a result of such action, the Company would be required to register as an
investment company under the Investment Company Act of 1940, as amended.
(j) The Company shall at all times be adequately capitalized to engage in
the transactions contemplated at its formation.
(k) All data and records (including computer records) used by the Company
or any Affiliate in the collection and administration of any loan shall reflect
the Company's ownership interest therein.
(l) None of the Company's funds shall be invested in securities issued by
any Affiliate.
ARTICLE 14. GENERAL.
---------- -------
14.01 Notices. All Notices provided for or permitted to be given under
-------
this Agreement must be in writing and must be given either by depositing that
writing in the United States Mail, addressed to the recipient, postage paid, and
registered or certified with return receipt requested or by delivering that
writing to the recipient in person, by courier, or by facsimile transmission.
All Notices to be sent to a Member must be sent to or made at the address for
that Member set forth on Exhibit "B", or such other address as that Member may
specify by Notice to the other
15
<PAGE>
EXHIBIT 3.3ii
Member. Any Notice given by a Member to the Company must also be given to the
other Member at the address given for such Member on Exhibit "B."
For purposes of this Agreement, any Notice deposited in the United States
Mail shall be deemed given on the third (3rd) day following the date of deposit,
and any Notice delivered to the recipient in person, by courier or by facsimile
transmission shall be deemed to be given upon receipt.
14.02 Waiver of Notice. Any Person entitled to receive any Notice
----------------
pursuant to this Agreement can waive such Notice by signing a writing to such
effect, either before or after such Notice is required to be given pursuant to
this Agreement.
14.03 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
---------------------------
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF GEORGIA, EXCLUDING
ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURSIDICTION. In the event
of a direct conflict betwen the provisions of this Agreement and any mandatory
porvision of the Act, the applicable provision of the Act shall control. The
invalidity or unenforceablility of any one or more of the particular provisions
of this Agreement shall not affect the enforceability of the other provisions
hereof, all of which are inserted herein conditionally on their being valid in
law, and in the event that one or more provisions contained herein shall be
invalid, this Agreement shall be construed as if such invalid provision had not
been inserted. The parties hereto agree that the covenants and obligations
contained in this Agreement are severable and divisible, that none of such
covenants or obligations depend on any other covenant or obligation for their
enforceability, and that each such covenant and obligation constitutes a
separate enforceable obligation between the Company and the Members. The
existence of any claim or cause of action by any Member against the Company or
another Member, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or such other Member of
the covenants and obligations contained in this Agreement.
14.04 Entire Agreement; Amendment or Modification. This Agreement
-------------------------------------------
contains the entire agreement between the parties hereto relating to the
continuation and operation of the Company, and this Agreement supersedes any and
all prior negotiations, understandings and agreements in regard thereto. There
are no representations, agreements, arrangements or understandings, whether
verbal or written, between the Members hereto relating to the subject matter of
this Agreement which are not fully expressed herein. This Agreement may be
amended or modified from time to time only by a written instrument.
Notwithstanding
16
<PAGE>
EXHIBIT 3.3ii
anything to the contrary contained herein, for so long as any loan by and
between the Company and First Union National Bank of North Carolina, or any
assignee or successor thereof (the "Bank"), remains outstanding, Sections 1.02,
1.04, 2.05, 3.01 and Article 13 shall not be amended, modified or altered
without the express written consent of the Bank.
14.05 Waiver of Partition. No Member shall, either directly or
-------------------
indirectly, take any action to require a partition or appraisement of the
Company or of any of its assets, or cause a receiver to be appointed for the
Company or any of its assets, or cause the sale of any Company property, and,
notwithstanding any provisions of applicable law to the contrary, each Member
(and the Member's legal representatives, successors, or assigns) hereby
irrevocably waives and renounces, to the fullest extent permitted by law, any
and all rights to maintain any action for partition or appraisement or to have a
receiver appointed for the Company or any of its assets or to compel any sale
with respect to such Member's Interest or with respect to any assets of the
Company.
14.06 No Right to Dissolve. Each Member hereby covenants and agrees, any
--------------------
provision of the Act notwithstanding, that the Members have entered into this
Agreement based on their mutual expectation that all Members will carry out the
duties and obligations undertaken by them hereunder and that no Member shall be
entitled to withdraw or otherwise voluntarily dissociate or demand or receive a
return of such Member's Capital Contribution (or a bond or other security for
the return of such Capital Contribution), or exercise any power under the Act to
dissolve the Company, except in accordance with Article 12 hereof.
14.07 Construction. The Article and Section headings of this Agreement
------------
are provided only for convenience of reference; they are not a part of this
Agreement and shall be ignored in its construction. Except where otherwise
clearly indicated by the context, the singular shall be deemed to include the
plural, the plural shall be deemed to include the singular and the masculine and
neuter shall include feminine and neuter.
14.08 Rights and Remedies Cumulative. The rights and remedies provided by
------------------------------
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive the right to use any or all other remedies.
Such rights and remedies are given in addition to any other rights the parties
may have under law, statute, ordinance, or otherwise.
14.09 General Indemnification by Members. Notwithstanding the provisions
----------------------------------
of Section 11.01, each Member hereby agrees to indemnify and hold harmless the
Company and the other Member from and against any claims (and costs and expenses
arising therefrom)
17
<PAGE>
EXHIBIT 3.3ii
which may arise due to or on account of the past or future gross negligence or
intentional torts, illegal acts, breaches of fiduciary duty, bad faith, fraud,
and willful misconduct, by that Member that creates an obligation or liability
for the Company or for the other Member, to the extent such obligation or
liability is not reimbursed by insurance or otherwise. The provision of this
Section 14.09 hereof shall survive the dissolution and termination of the
Company.
14.10 Waiver. No consent or waiver, express or implied, by any Member to
------
or of any breach or default in the performance by another Member of such other
Member's obligations hereunder shall be deemed or construed to be a consent or
waiver to or of any other breach or default in the performance by such other
Member of the same or any other obligations of such Member hereunder. Failure on
the part of a Member to complain of any act or failure to act of the other
Member or to declare the other Member in default, irrespective of how long such
failure continues, shall not constitute a waiver of such Member's rights
hereunder.
14.11 Binding Agreement. Subject to the restrictions on transfer and
-----------------
encumbrances set forth herein, this Agreement shall inure to the benefit of and
be binding upon the undersigned Members and their respective legal
representatives, successors and assigns; provided, however, that no Member may
assign its rights or delegate its duties hereunder without the prior written
consent of all other Members.
14.12 Equitable Remedies. The rights and remedies of the Members
------------------
hereunder shall be cumulative, and the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provision hereof. Each of
the Members confirms that damages at law may be an inadequate remedy for breach
or threatened breach of this Agreement and each Member agrees that, in the event
of a breach of any provision hereof, the respective rights and obligations
hereunder shall be enforceable by specific performance, injunction or other
equitable remedy. Nothing herein contained is intended to, nor shall it, limit
or affect any right or rights at law, by statute or otherwise of the party
aggrieved as against any other party for a breach or threatened breach of any
provision hereof, it being the intention of the Members that the respective
rights and obligations of the Members hereunder shall be enforceable in equity
as well as at law or otherwise.
14.13 Counterparts. This Agreement may be executed and delivered in one
------------
or more counterpart copies, and all counterpart copies so executed and delivered
shall each be deemed to be an original and all together shall constitute one and
the same Agreement binding on all the parties thereto; provided, however, that
no signatures shall be binding or effective unless and until all signatures have
been obtained and delivered.
18
<PAGE>
EXHIBIT 3.3ii
14.14 Survival. The parties hereto acknowledge and agree that the
--------
obligations contained in Articles 11, and Section 14.09 hereof (and such other
provisions of this Agreement as are necessary or desirable to enforce or
interpret said Articles and Sections) shall specifically survive a Member's
withdrawal from the Company. Each Member shall continue to be a party hereto,
and bound hereby, even after such Member has withdrawn from the Company, but
only to the extent that the provisions hereof survive the withdrawal of such
Member from the Company.
14.15 Creditors. None of the provisions of this Agreement shall be for
---------
the benefit of or enforceable by any creditor of the Company.
14.16 Investment Representations. Each Member hereby acknowledges,
--------------------------
represents, warrants, covenants, agrees and understands that:
(a) Each Member hereby acknowledges receipt of all information
concerning the business and finances of the Company and all information and
documents requested by the Member necessary for the Member to evaluate its
investment in the Company. Each Member agrees that the Member, and its
attorneys and accountants, have been offered an ample opportunity to review
such information, and each Member understands the risk involved with the
Company's business.
(b) THE INTERESTS ARE BEING OFFERED AND WILL BE SOLD WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933 PURSUANT TO CERTAIN
EXEMPTIONS FOR PRIVATE OFFERINGS AND WITHOUT REGISTRATION UNDER ANY STATE
SECURITIES LAWS PURSUANT TO SIMILAR EXEMPTIONS.
(c) The Interest of each Member will be acquired solely for the
account of the Member for investment and is not being purchased for resale
or distribution.
(d) Each Member understands that the investment in the Interests
has not been reviewed by, passed on, or submitted for review to any federal
or state agency or other regulatory organization.
(e) Each Member has sufficient financial resources so that it could
hold the Interest indefinitely or could, without affecting its ability to
satisfy its financial needs and individual contingencies, afford a complete
loss of its investment in the Interest.
19
<PAGE>
EXHIBIT 3.3ii
(f) Each Member understands that issuance of the Interest to it is
made in reliance on its acknowledgments, representations, warranties and
agreements set forth herein.
13.17 Further Assurances. In connection with this Agreement and the
------------------
transactions contemplated hereby, each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
20
<PAGE>
EXHIBIT 3.3ii
IN WITNESS WHEREOF, the parties have set their hands and seals hereto on
the date first above written.
ATTEST WASHINGTON TOWNE, INC., a Georgia
corporation
By:_____________________ By: /s/
Secretary ------------------------------------
Name: Charles B. Brewer
------------------------------
Title: Exec. V.P.
-----------------------------
UNIVERSITY REAL ESTATE PARTNERSHIP V,
a California limited partnership
By: University Advisory Company, its
general partner and a California
general partnership
By: Southmark Investors, Inc., a Nevada
corporation and a general partner of
University Advisory Company
ATTEST:
By:______________________ By: /s/
Title ------------------------------------
Name: Charles B. Brewer
-------------------------------
Title: Exec. V.P.
------------------------------
21
<PAGE>
EXHIBIT 3.3ii
EXHIBIT "A"
-----------
CAPITAL ACCOUNTS
----------------
Member Capital Accounts
------ ----------------
CORPORATION All right, title and interest in an
undivided 1% interest in certain real
property and personal property known
as Washington Towne Apartments located
at 2420 Heaton Drive, East Point,
Georgia
PARTNERSHIP All right, title and interest in an
undivided 99% interest in certain real
property and personal property known as
Washington Towne Apartments located at
2420 Heaton Drive, East Point, Georgia
22
<PAGE>
EXHIBIT 3.3ii
EXHIBIT "B"
-----------
NOTICE ADDRESSES
----------------
UNIVERSITY
----------
2420 Heaton Drive
East Point, Georgia
Attn: Property Manager
PARTNERSHIP
-----------
200 Crescent Court
Suite 1300
Dallas, Texas 75201
23
<PAGE>
EXHIBIT 10.1
PROMISSORY NOTE
---------------
$1,750,000 September 13, 1995
FOR VALUE RECEIVED, the undersigned, WASHINGTON TOWNE APARTMENTS, L.L.C., a
Georgia limited liability company ("Borrower"), whose address is 2420 Heaton
Drive, East Point, Georgia, promises to pay to the order of First Union National
Bank of North Carolina, a national banking association ("Lender"), at the office
of Lender at One First Union Center, TW-8, Charlotte, North Carolina 28288, or
at such other place as Lender may designate to Borrower in writing from time to
time, the principal sum of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100
DOLLARS ($1,750,000.00) together with interest on so much thereof as is from
time to time outstanding and unpaid, from the date of the advance of the
principal evidenced hereby, at the rate of Eight and Six Hundred Twenty-Five
Thousandths (8.625%) percent per annum (the "Note Rate"), in lawful money of the
United States of America, which shall at the time of payment be legal tender in
payment of all debts and dues, public and private.
ARTICLE I - TERMS AND CONDITIONS
--------------------------------
1.01 Payment of Principal and Interest. Said interest shall be computed
---------------------------------
hereunder based on a 360-day year and based on twelve (12) 30-day months for
each full calendar month and on the actual number of days elapsed for any
partial month in which interest is being calculated. In computing the number of
days during which interest accrues, the day on which funds are initially
advanced shall be included regardless of the time of day such advance is made,
and the day on which funds are repaid shall be included unless repayment is
credited prior to close of business. Payments in federal funds immediately
available in the place designated for payment received by Lender prior to 2:00
p.m. local time at said place of payment shall be credited prior to close of
business, while other payments may, at the option of Lender, not be credited
until immediately available to Lender in federal funds in the place designated
for payment prior to 2:00 p.m. local time at said place of payment on a day on
which Lender is open for business. Such
1
<PAGE>
EXHIBIT 10.1
principal and interest shall be payable in equal consecutive monthly
installments of $14,239.19 each, beginning on the first day of the second full
calendar month following the date of this Note (or on the first day of the first
full calendar month following the date hereof, in the event the advance of the
principal amount evidenced by this Note is the first day of a calendar month),
and continuing on the first day of each and every month thereafter through and
including October 1, 2005 (the "Maturity Date"), at which time the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon, shall be due and payable in full. Each such monthly
installment shall be applied first to the payment of accrued interest and then
to reduction of principal. If the advance of the principal amount evidenced by
this Note is made on a date other than the first day of a calendar month, then
Borrower shall pay to Lender contemporaneously with the execution hereof
interest at the Note Rate for a period from the date hereof through and
including the first day of the next succeeding calendar month.
1.02 Prepayment.
----------
(a) This Note may be prepaid in whole but not in part (except as
otherwise specifically provided herein) at any time after the second (2nd)
anniversary of this Note provided (i) written notice of such prepayment is
received by Lender not more than sixty (60) days and not less than thirty (30)
days prior to the date of such prepayment, (ii) such prepayment is accompanied
by all interest accrued hereunder and all other sums due hereunder and under the
other Loan Documents (as hereinafter defined), and (iii) if such prepayment
occurs prior to the date that is six (6) months prior to the Maturity Date,
Lender is paid a prepayment fee in an amount equal to the greater of (A) one
(1%) percent of the principal amount being prepaid or (B) the positive excess of
(1) the present value ("PV") of all future installments of principal and
interest due under this Note including the principal amount due at maturity
(collectively, "All Future Payments"), discounted at an interest rate per annum
equal to the sum of (a) the Treasury Constant Maturity Yield Index published
during the second full week preceding the date on which such premium is payable
for instruments having a maturity coterminous with the remaining term of this
Note, and (b) fifty (50) basis points over (2) the principal amount of this Note
outstanding immediately before such prepayment [(PV of All Future Payments) -
(principal balance at time of prepayment) =
2
<PAGE>
EXHIBIT 10.1
prepayment fee]. "Treasury Constant Maturity Yield Index" shall mean the average
yield for "This Week" as reported by the Federal Reserve Board in Federal
Reserve Statistical Release H.15(519). If there is no Treasury Constant Maturity
Yield Index for instruments having a maturity coterminous with the remaining
term of this Note, then the index shall be equal to the weighted average yield
to maturity of the Treasury Constant Maturity Yield Indices with maturities next
longer and shorter than such remaining average life to maturity, calculated by
averaging (and rounding upward to the nearest whole multiple of 1 /100 of 1% per
annum, if the average is not such a multiple) the yields of the relevant
Treasury Constant Maturity Yield Indices (rounded, if necessary, to the nearest
1/100 of 1% with any figure of 1/200 of 1% or above rounded upward). In the
event that any prepayment fee is due hereunder, Lender shall deliver to Borrower
a statement setting forth the amount and determination of the prepayment fee,
and, provided that Lender shall have in good faith applied the formula described
above, Borrower shall not have the right to challenge the calculation or the
method of calculation set forth in any such statement in the absence of manifest
error, which calculation may be made by Lender on any day during the thirty (30)
day period preceding the date of such prepayment. Lender shall not be obligated
or required to have actually reinvested the prepaid principal balance at the
Treasury Constant Maturity Yield or otherwise as a condition to receiving the
prepayment fee. No prepayment fee or premium shall be due or payable in
connection with any prepayment of the indebtedness, in whole, evidenced by this
Note made on or after the date that is six (6) months prior to the Maturity
Date. In addition to the aforesaid prepayment fee if, upon any such prepayment
(whether prior to or after the date that is six (6) months prior to the Maturity
Date), the aforesaid prior written notice has not been timely received by
Lender, the prepayment fee shall be increased by an amount equal to the lesser
of (i) thirty (30) days' unearned interest computed on the outstanding principal
balance of this Note so prepaid and (ii) unearned interest computed on the
outstanding principal balance of this Note so prepaid for the period from, and
including, the date of prepayment through the otherwise stated maturity date of
this Note.
(b) Partial prepayments of this Note shall not be permitted, except
partial prepayments resulting from Lender applying insurance or condemnation
proceeds to reduce the outstanding principal balance of this Note as provided in
the
3
<PAGE>
EXHIBIT 10.1
Security Instrument (as hereinafter defined), in which event no prepayment
fee or premium shall be due. No notice of prepayment shall be required under
the circumstance specified in the preceding sentence. No principal amount
repaid may be reborrowed. Partial payments of principal shall be applied to the
unpaid principal balance evidenced hereby but such application shall not reduce
the amount of the fixed monthly installments required to be paid pursuant to
Section 1.01 above.
(c) Except as otherwise expressly provided in Section 1.02(b) above,
the prepayment fees provided above shall be due, to the extent permitted by
applicable law, under any and all circumstances where all or any portion of this
Note is paid prior to the Maturity Date, whether such prepayment is voluntary or
involuntary (including, without limitation, any prepayment made prior to the
second anniversary of the date hereof), even if such prepayment results from
Lender's exercise of its rights upon Borrower's default and acceleration of the
maturity date of this Note (irrespective of whether foreclosure proceedings have
been commenced), and shall be in addition to any other sums due hereunder or
under any of the other Loan Documents. No tender of a prepayment of this Note
with respect to which a prepayment fee is due shall be effective unless such
prepayment is accompanied by the prepayment fee. Any tender of payment of such
indebtedness made prior to the second anniversary date hereof, whether voluntary
or involuntary, must include a prepayment fee computed as provided in Section
1.02(a) above plus an additional prepayment fee of one percent (1%) of the
principal balance of this Note.
1.03 Security. The indebtedness evidenced by this Note and the
--------
obligations created hereby are secured by that certain Deed to Secure Debt and
Security Agreement (the "Security Instrument") from Borrower to Lender, dated as
of September 13, 1995, concerning property located in East Point, Georgia. The
Security Instrument together with this Note and all other documents to or of
which Lender is a party or beneficiary now or hereafter evidencing, securing,
guarantying, modifying or otherwise relating to the indebtedness evidenced
hereby, are herein referred to collectively as the "Loan Documents". All of the
terms and provisions of the Loan Documents are incorporated herein by reference.
Some of the Loan Documents are to be filed for record on or about the date
hereof in the appropriate public records.
4
<PAGE>
EXHIBIT 10.1
1.04 Default. It is hereby expressly agreed that should any default occur
-------
in the payment of principal or interest as stipulated above and such payment is
not made within fifteen (15) days of the date such payment is due (provided that
no grace period is provided for the payment of principal and interest due on the
Maturity Date), or should any other default occur under any of the Loan
Documents which is not cured within any applicable grace or cure period, then a
default shall exist hereunder, and in such event the indebtedness evidenced
hereby, including all sums advanced or accrued hereunder or under any other Loan
Document, and all unpaid interest accrued thereon, shall, at the option of
Lender and without notice to Borrower, at once become due and payable and may be
collected forthwith, whether or not there has been a prior demand for payment
and regardless of the stipulated date of maturity. In the event that any
payment is not received by Lender on the date when due (subject to the
applicable grace period), then in addition to any default interest payments due
hereunder, Borrower shall also pay to Lender a late charge in an amount equal to
five percent (5.0%) of the amount of such overdue payment. So long as any
default exists hereunder, regardless of whether or not there has been an
acceleration of the indebtedness evidenced hereby, and at all times after
maturity of the indebtedness evidenced hereby (whether by acceleration or
otherwise), interest shall accrue on the outstanding principal balance of this
Note at a rate per annum equal to four percent (4.0%) plus the interest rate
which would be in effect hereunder absent such default or maturity, or if such
increased rate of interest may not be collected under applicable law, then at
the maximum rate of interest, if any, which may be collected from Borrower under
applicable law (the "Default Interest Rate"), and such default interest shall be
immediately due and payable. Borrower acknowledges that it would be extremely
difficult or impracticable to determine Lender's actual damages resulting from
any late payment or default, and such late charges and default interest are
reasonable estimates of those damages and do not constitute a penalty. The
remedies of Lender in this Note or in the Loan Documents, or at law or in
equity, shall be cumulative and concurrent, and may be pursued singly,
successively or together in Lender's discretion. Time is of the essence of this
Note. In the event this Note, or any part hereof, is collected by or through an
attorney-at-law, Borrower agrees to pay all costs of collection including, but
not limited to, reasonable attorneys' fees actually incurred.
5
<PAGE>
EXHIBIT 10.1
1.05 Exculpation. Notwithstanding anything in the Loan Documents to the
-----------
contrary, but subject to the qualifications hereinbelow set forth, Lender agrees
that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for
the other obligations arising under the Loan Documents to the full extent (but
only to the extent) of the security therefor, the same being all properties
(whether real or personal), rights, estates and interests now or at any time
hereafter securing the payment of this Note and/or the other obligations of
Borrower under the Loan Documents (collectively, the "Security Property"), (ii)
if default occurs in the timely and proper payment of all or any part of such
indebtedness evidenced hereby or in the timely and proper performance of the
other obligations of Borrower under the Loan Documents, any judicial or other
proceedings brought by Lender against Borrower shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security interests, estates, assignments, rights and security interests now or
at any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, and no attachment, execution
or other writ of process shall be sought, issued or levied upon any assets,
properties or funds of Borrower other than the Security Property except with
respect to the liability described below in this section, and (iii) in the event
of a foreclosure of such liens, security interests, estates, assignments, rights
or security interests securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, no judgment for any deficiency
upon the indebtedness evidenced hereby shall be sought or obtained by Lender
against Borrower, except with respect to the liability described below in this
section; provided, however, that, notwithstanding the foregoing provisions of
this section, Borrower shall be fully and personally liable and subject to legal
action (a) for proceeds paid under any insurance policies (or paid as a result
of any other claim or cause of action against any person or entity) by reason of
damage, loss or destruction to all or any portion of the Security Property, to
the full extent of such proceeds not previously delivered to Lender, but which,
under the terms of the Loan Documents, should have been delivered to Lender, (b)
for proceeds or awards resulting from the condemnation or other taking in lieu
of condemnation of all or any portion of the Security Property, or any of them,
to the full extent of such proceeds or awards not previously delivered to
Lender, but which, under the terms of the Loan Documents, should have been
delivered to Lender, (c) for all
6
<PAGE>
EXHIBIT 10.1
tenant security deposits or other refundable deposits paid to or held by
Borrower or any other person or entity in connection with leases of all or any
portion of the Security Property which are not applied in accordance with the
terms of the applicable lease or other agreement, (d) for rent and other
payments received from tenants under leases of all or any portion of the
Security Property paid more than one month in advance, (e) for rents, issues,
profits and revenues of all or any portion of the Security Property received or
applicable to a period after any notice of default from Lender hereunder or
under the Loan Documents in the event of any default by Borrower hereunder or
thereunder which are not either applied to the ordinary and necessary expenses
of owning and operating the Security Property or paid to Lender, (f) for waste
committed on the Security Property, damage to the Security Property as a result
of the intentional misconduct or gross negligence of Borrower or any of its
principals, officers or general partners, or any agent or employee of any such
persons, or any removal of the Security Property in violation of the terms of
the Loan Documents, to the full extent of the losses or damages incurred by
Lender on account of such failure, (g) for failure to pay any valid taxes,
assessments, mechanic's liens, materialmen's liens or other liens which could
create liens on any portion of the Security Property which would be superior to
the lien or security interest of the Security Instrument or the other Loan
Documents, to the full extent of the amount claimed by any such lien claimant,
(h) for all obligations and indemnities of Borrower under the Loan Documents
relating to hazardous or toxic substances or compliance with environmental laws
and regulations to the full extent of any losses or damages (including, but not
limited to, those resulting from diminution in value of any Security Property)
incurred by Lender as a result of the existence of such hazardous or toxic
substances or failure to comply with environmental laws or regulations, and (i)
for fraud or material misrepresentation by Borrower or any of its principals,
officers, or general partners, any guarantor, any indemnitor or any agent,
employee or other person authorized to make statements or representations on
behalf of Borrower, any principal, officer or partner of Borrower, any guarantor
or any indemnitor, to the full extent of any losses, damages and expenses of
Lender on account thereof. References herein to particular sections of the Loan
Documents shall be deemed references to such sections as affected by other
provisions of the Loan Documents relating thereto. Nothing contained in this
section shall (1) be deemed to be a release or impairment of the indebtedness
evidenced
7
<PAGE>
EXHIBIT 10.1
by this Note or the other obligations of Borrower under the Loan Documents or
the lien of the Loan Documents upon the Security Property, or (2) preclude
Lender from foreclosing the Loan Documents in case of any default or from
enforcing any of the other rights of Lender except as stated in this section, or
(3) limit or impair in any way whatsoever the Indemnity and Guaranty Agreement
and the Hazardous Substances Indemnity Agreement each of even date executed and
delivered in connection with the indebtedness evidenced by this Note or release,
relieve, reduce, waive or impair in any way whatsoever, any obligation of any
party to such Indemnity and Guaranty Agreement and Hazardous Substances
Indemnity Agreement.
ARTICLE II - GENERAL CONDITIONS
-------------------------------
2.01 No Waiver: Amendment. No failure to accelerate the debt
--------------------
evidenced hereby by reason of default hereunder, acceptance of a partial or past
due payment, or indulgences granted from time to time shall be construed (i) as
a novation of this Note or as a reinstatement of the indebtedness evidenced
hereby or as a waiver of such right of acceleration or of the right of Lender
thereafter to insist upon strict compliance with the terms of this Note, or (ii)
to prevent the exercise of such right of acceleration or any other right granted
hereunder or by any applicable laws; and Borrower hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or
any installment due hereunder, made by agreement with any person now or
hereafter liable for the payment of this Note shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Note, either in whole or in part unless Lender agrees otherwise in writing.
This Note may not be changed orally, but only by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification or
discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of
-------
demand, protest and nonpayment and all other notices are hereby waived by
Borrower. Borrower hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any moratorium, reinstatement,
marshalling,
8
<PAGE>
EXHIBIT 10.1
forbearance, valuation, stay, extension, redemption, appraisement, exemption and
homestead now or hereafter provided by the Constitution and laws of the United
States of America and of each state thereof, both as to itself and in and to all
of its property, real and personal, against the enforcement and collection of
the obligations evidenced by this Note or the other Loan Documents.
2.03 Limit of Validity. The provisions of this Note and of all
-----------------
agreements between Borrower and Lender, whether now or existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of this Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Lender for the use, forbearance or retention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Borrower and Lender shall, at the
time performance or fulfillment of such provision shall be due, exceed the limit
for Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then ipso facto the obligation to be performed or
---- -----
fulfilled shall be reduced to such limit and if, from any circumstance
whatsoever, Lender shall ever receive anything of value deemed Interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive Interest shall be applied to the reduction of the principal balance
owing under this Note in the inverse order of its maturity (whether or not then
due) or at the option of Lender be paid over to Borrower, and not to the payment
of Interest. All Interest (including, but not limited to, any amounts or
payments deemed to be Interest) paid or agreed to be paid to Lender shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal balance
of this Note so that the Interest thereof for such full period will not exceed
the maximum amount permitted by applicable law. This Section 2.03 will control
all agreements between Borrower and Lender.
2.04 Use of Funds. Borrower hereby warrants, represents and covenants
------------
that no funds disbursed hereunder shall be used for personal, family or
household purposes.
9
<PAGE>
EXHIBIT 10.1
2.05 Unconditional Payment. Borrower is and shall be obligated to pay
---------------------
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Lender hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to
Borrower and shall not be discharged or satisfied with any prior payment thereof
or cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.
2.06 Miscellaneous. This Note shall be interpreted, construed and
-------------
enforced according to the laws of the State of Georgia. The terms and
provisions hereof shall be binding upon and inure to the benefit of Borrower and
Lender and their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms "Borrower" and "Lender" shall be
deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in
the masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Time is of the essence
with respect to all provisions of this Note. This Note and the other Loan
Documents contain the entire agreements between the parties hereto relating to
the subject matter hereof and thereof and all prior agreements relative hereto
and thereto which are not contained herein or therein are terminated.
10
<PAGE>
EXHIBIT 10.1
Borrower's Tax Identification No.:
58-2189497
11
<PAGE>
EXHIBIT 10.1
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the
date first above written.
Signed, sealed and delivered WASHINGTON TOWNE APARTMENTS, L.L.C.,
in the presence of a Georgia limited liability company
______________________ By: Washington Towne, Inc.,
UNOFFICIAL WITNESS a Georgia corporation,
Its: member
___________________ By: _/s/____________________
NOTARY PUBLIC Name:
Its:
Executed this __ day of
September, 1995.
My Commission Expires: Attest:_/s/___________________
Name:
(NOTARY SEAL) Its:
(CORPORATE SEAL)
PAY TO THE ORDER OF ___________________________________, WITHOUT RECOURSE.
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By:_____________________________
Name:
Title:
12
<PAGE>
EXHIBIT 10.2
DEED TO SECURE DEBT AND SECURITY AGREEMENT
------------------------------------------
THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (this "SECURITY DEED") is
made as of the 13th day of September, 1995, by WASHINGTON TOWNE APARTMENTS,
L.L.C., as Grantor ("GRANTOR"), whose address is 2420 Heaton Drive, East Point,
Georgia in favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association, as Grantee ("GRANTEE"), whose address is One First Union
Center, TW-8, Charlotte, North Carolina 28288.
WITNESSETH:
----------
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH
IS HEREBY ACKNOWLEDGED, GRANTOR HEREBY IRREVOCABLY MORTGAGES, GRANTS, BARGAINS,
SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, AND GRANTS A SECURITY
INTEREST, TO GRANTEE, ITS SUCCESSORS AND ASSIGNS, with power of sale, in all of
Grantor's estate, right, title and interest in, to and under any and all of the
following described property, whether now owned or hereafter acquired
(collectively, the "PROPERTY"):
(A) All that certain real property situated at 2420 Heaton Drive, East
Point, in the County of Fulton, State of Georgia, more particularly described on
Exhibit A attached hereto and incorporated herein by this reference (the "REAL
- ---------
ESTATE"), together with all of the easements, rights, privileges, franchises,
tenements, hereditaments and appurtenances now or hereafter thereunto belonging
or in any way appertaining thereto, and all of the estate, right, title,
interest, claim and demand whatsoever of Grantor therein or thereto, either at
law or in equity, in possession or in expectancy, now or hereafter acquired;
(B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Real Estate
(the "IMPROVEMENTS"):
(C) All furniture, furnishings, fixtures, goods, equipment, inventory or
personal property owned by Grantor and now or hereafter located on, attached to
or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposals and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Grantor as are now or hereafter used or furnished in operating the
Improvements, or the activities conducted therein, and all building materials
and
1
<PAGE>
EXHIBIT 10.2
equipment hereafter situated on or about the Real Estate or Improvements, and
all warranties and guaranties relating thereto, and all additions thereto and
substitutions and replacements therefor (exclusive of any of the foregoing owned
or leased by tenants of space in the Improvements);
(D) All easements, rights-of-way, strips and gores of land, vaults,
streets, ways, alleys, passages, sewer rights, and other emblements now or
hereafter located on the Real Estate or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Real Estate and/or Improvements
or any part thereof, or which hereafter shall in any way belong, relate or be
appurtenant thereto, whether now owned or hereafter acquired by Grantor;
(E) All water, ditches, wells, reservoirs and drains and all water, ditch,
well, reservoir and drainage rights which are appurtenant to, located on, under
or above or used in connection with the Real Estate or the Improvements, or any
part thereof, whether now existing or hereafter created or acquired;
(F) All minerals, crops, timber, trees, shrubs, flowers and landscaping
features now or hereafter located on, under or above the Real Estate;
(G) All cash funds, deposit accounts and other rights and evidence of
rights to cash, now or hereafter created or held by Grantee pursuant to this
Security Deed or any other of the Loan Documents (as hereinafter defined),
including, without limitation, all funds now or hereafter on deposit in the
Impound Account and the Payment Reserve (each as hereinafter defined);
(H) All leases, licenses, concessions and occupancy agreements of the Real
Estate or the Improvements now or hereafter entered into and all rents,
royalties, issues, profits, revenue, income and other benefits (collectively,
the "RENTS AND PROFITS") of the Real Estate or the Improvements, now or
hereafter arising from the use or enjoyment of all or any portion thereof or
from any present or future lease, license, concession, occupancy agreement or
other agreement pertaining thereto or arising from any of the Contracts (as
hereinafter defined) or any of the General Intangibles (as hereinafter defined)
and all cash or securities deposited to secure performance by the tenants,
lessees or licensees, as applicable, of their obligations under any such leases,
licenses, concessions or occupancy agreements, whether said cash or securities
are to be held until the expiration of the terms of said leases, licenses,
concessions or occupancy agreements or applied to one or more of the
installments of rent coming due prior to the expiration of said terms, subject,
however, to the provisions contained in Section 1.11 hereinbelow;
(I) All contracts and agreements now or hereafter entered into covering
any part of the Real Estate or the Improvements (collectively, the "CONTRACTS")
and all revenue, income and other benefits thereof, including, without
limitation, management agreements, service contracts,
2
<PAGE>
EXHIBIT 10.2
maintenance contracts, equipment leases, personal property leases and any
contracts or documents relating to construction on any part of the Real Estate
or the Improvements (including plans, drawings, surveys, tests, reports, bonds
and governmental approvals) or to the management or operation of any part of the
Real Estate or the Improvements;
(J) All present and future monetary deposits given to any public or
private utility with respect to utility services furnished to any part of the
Real Estate or the Improvements;
(K) All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles (including,
without limitation, trademarks, trade names, servicemarks and symbols now or
hereafter used in connection with any part of the Real Estate or the
Improvements, all names by which the Real Estate or the Improvements may be
operated or known, all rights to carry on business under such names, and all
rights, interest and privileges which Grantor has or may have as developer or
declarant under any covenants, restrictions or declarations now or hereafter
relating to the Real Estate or the Improvements) and all notes or chattel paper
now or hereafter arising from or by virtue of any transactions related to the
Real Estate or the Improvements (collectively, the "GENERAL INTANGIBLES");
(L) All water taps, sewer taps, certificates of occupancy, permits,
licenses, franchises, certificates, consents, approvals and other rights and
privileges now or hereafter obtained in connection with the Real Estate or the
Improvements and all present and future warranties and guaranties relating to
the Improvements or to any equipment, fixtures, furniture, furnishings, personal
property or components of any of the foregoing now or hereafter located or
installed on the Real Estate or the Improvements;
(M) All building materials, supplies and equipment now or hereafter placed
on the Real Estate or in the Improvements and all architectural renderings,
models, drawings, plans, specifications, studies and data now or hereafter
relating to the Real Estate or the Improvements;
(N) All right, title and interest of Grantor in any insurance policies or
binders now or hereafter relating to the Property including any unearned
premiums thereon;
(O) All proceeds, products, substitutions and accessions (including claims
and demands therefor) of the conversion, voluntary or involuntary, of any of the
foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards; and
(P) All other or greater rights and interests of every nature in the Real
Estate or the Improvements and in the possession or use thereof and income
therefrom, whether now owned or hereafter acquired by Grantor.
3
<PAGE>
EXHIBIT 10.2
FOR THE PURPOSE OF SECURING:
(1) The debt evidenced by that certain promissory note (such promissory
note, together with any and all renewals, modifications, consolidations and
extensions thereof, is hereinafter referred to as the "NOTE") of even date with
this Security Deed, made by Grantor to the order of Grantee in the principal
amount of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($1,750,000.00), together with interest as therein provided, which Note has a
stated maturity date of October 1, 2005;
(2) The full and prompt payment and performance of all of the provisions,
agreements, covenants and obligations herein contained and contained in any
other agreements, documents or instruments now or hereafter evidencing, securing
or otherwise relating to the indebtedness evidenced by the Note (the Note, this
Security Deed, and such other agreements, documents and instruments, together
with any and all renewals, amendments, extensions and modifications thereof, are
hereinafter collectively referred to as the "LOAN DOCUMENTS") and the payment of
all other sums therein covenanted to be paid;
(3) Any and all additional advances made by Grantee to protect or preserve
the Property or the lien or security interest created hereby on the Property, or
for taxes, assessments or insurance premiums as hereinafter provided or for
performance of any of Grantor's obligations hereunder or under the other Loan
Documents or for any other purpose provided herein or in the other Loan
Documents (whether or not the original Grantor remains the owner of the Property
at the time of such advances); and
(4) Any and all other indebtedness now owing or which may hereafter be
owing by Grantor to Grantee, however and whenever incurred or evidenced, whether
express or implied, direct or indirect, absolute or contingent, or due or to
become due, and all renewals, modifications, consolidations, replacements and
extensions thereof.
(All of the sums referred to in Paragraphs (1) through (4) above are herein
----------------------
sometimes referred to as the "SECURED INDEBTEDNESS" or the "INDEBTEDNESS SECURED
HEREBY").
TO HAVE AND TO HOLD the Property unto Grantee, its successors and assigns
forever, for the purposes and uses herein set forth.
PROVIDED, HOWEVER, that if the principal and interest and all other sums
due or to become due under the Note, including, without limitation, any
prepayment fees required pursuant to the terms of the Note, shall have been paid
at the time and in the manner stipulated therein and all other sums payable
hereunder and all other indebtedness secured hereby shall have been paid and all
other covenants contained in the Loan Documents shall have been performed, then,
in such case, this Security Deed shall be satisfied and the estate, right, title
and interest of Grantee in the
4
<PAGE>
EXHIBIT 10.2
Property shall cease, and upon payment to Grantee of all costs and expenses
incurred for the preparation of the release hereinafter referenced and all
recording costs if allowed by law, Grantee shall release this Security Deed and
the lien hereof by proper instrument.
ARTICLE I
COVENANTS OF GRANTOR
--------------------
For the purpose of further securing the indebtedness secured hereby and for
the protection of the security of this Security Deed, for so long as the
indebtedness secured hereby or any part thereof remains unpaid, Grantor
covenants and agrees as follows:
1.1 Warranties of Grantor. Grantor, for itself and its successors and
---------------------
assigns, does hereby represent, warrant and covenant to and with Grantee, its
successors and assigns, that:
(a) Grantor has good and marketable fee simple title to the Property,
subject only to those matters expressly set forth on Exhibit B attached hereto
---------
and by this reference incorporated herein (the "PERMITTED EXCEPTIONS"), and has
full power and lawful authority to grant, bargain, sell, convey, assign,
transfer and mortgage its interest in the Property in the manner and form hereby
done or intended. Grantor will preserve its interest in and title to the
Property and will forever warrant and defend the same to Grantee against any and
all claims whatsoever and will forever warrant and defend the validity and
priority of the lien and security interest created herein against the claims of
all persons and parties whomsoever, subject to the Permitted Exceptions. The
foregoing warranty of title shall survive the foreclosure of this Security Deed
and shall inure to the benefit of and be enforceable by Grantee in the event
Grantee acquires title to the Property pursuant to any foreclosure;
(b) No bankruptcy or insolvency proceedings are pending or
contemplated by Grantor or, to the best knowledge of Grantor, against Grantor or
by or against any endorser, cosigner or guarantor of the Note;
(c) All reports, certificates, affidavits, statements and other data
furnished by Grantor to Grantee in connection with the loan evidenced by the
Note are true and correct in all material respects and do not omit to state any
fact or circumstance necessary to make the statements contained therein not
misleading;
(d) The execution, delivery and performance of this Security Deed,
the Note and all of the other Loan Documents have been duly authorized by all
necessary action to be, and are, binding and enforceable against Grantor in
accordance with the respective terms thereof, subject to general principles of
equity and subject to the effect of bankruptcy, moratorium or other laws
affecting creditors' rights, and do not contravene, result in a breach of or
constitute (upon
5
<PAGE>
EXHIBIT 10.2
the giving of notice or the passage of time or both) a default under the
operating agreement, articles of organization or other organizational documents
of Grantor or any contract or agreement of any nature to which Grantor is a
party or by which Grantor or any of its property may be bound and do not, to the
best of Grantor's knowledge and belief, violate or contravene any law, order,
decree, rule or regulation to which Grantor is subject;
(e) The Real Estate and the Improvements, and the intended use
thereof by Grantor, to the best of Grantor's knowledge and belief, comply with
all applicable restrictive covenants, zoning ordinances, subdivision and
building codes, flood disaster laws, applicable health and environmental laws
and regulations and all other ordinances, orders or requirements issued by any
state, federal or municipal authorities having or claiming jurisdiction over the
Property. The Real Estate and Improvements constitute a separate tax parcel for
purposes of ad valorem taxation. The Real Estate and Improvements do not require
any rights over, or restrictions against, other property in order to comply with
any of the aforesaid governmental ordinances, orders or requirements;
(f) All utility services necessary and sufficient for the full use,
occupancy, operation and disposition of the Real Estate and the Improvements for
their intended purposes are available to the Property, including water, storm
sewer, sanitary sewer, gas, electric, cable and telephone facilities, through
public rights-of-way or perpetual private easements approved by Grantee;
(g) All streets, roads, highways, bridges and waterways necessary for
access to and full use, occupancy, operation and disposition of the Real Estate
and the Improvements have been completed, have been dedicated to and accepted by
the appropriate municipal authority and are open and available to the Real
Estate and the Improvements without further condition or cost to Grantor;
(h) All curb cuts, driveways and traffic signals shown on the survey
delivered to Grantee prior to the execution and delivery of this Security Deed
are existing and have been fully approved by the appropriate governmental
authority;
(i) There are no judicial, administrative, mediation or arbitration
actions, suits or proceedings pending or, to the best of Grantor's knowledge and
belief, threatened against or affecting Grantor, (and, if Grantor is a
partnership, any of its general partners) or the Property which, if adversely
determined, would materially impair either the Property or Grantor's ability to
perform the covenants or obligations required to be performed under the Loan
Documents;
(j) The Property is free from delinquent water charges, sewer rents,
taxes and assessments;
6
<PAGE>
EXHIBIT 10.2
(k) As of the date of this Security Deed, the Property is free from
unrepaired damage caused by fire, flood, accident or other casualty;
(l) As of the date of this Security Deed, no part of the Real Estate
or the Improvements has been taken in condemnation, eminent domain or like
proceeding nor is any such proceeding pending or to Grantor's knowledge and
belief, threatened or contemplated;
(m) Grantor possesses all franchises, patents, copyrights,
trademarks, tradenames, licenses and permits adequate for the conduct of its
business substantially as now conducted;
(n) To the best of Grantor's knowledge and belief, the Improvements
are structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial compliance
with the plans and specifications relating thereto. All major building systems
located within the Improvements, including, without limitation, the heating and
air conditioning systems and the electrical and plumbing systems, are in good
working order and condition;
(o) Grantor has delivered to Grantee true, correct and complete
copies of all material Contracts and all amendments thereto or modifications
thereof;
(p) Grantor and the Property are free from any past due obligations
for sales and payroll taxes;
(q) There are no security agreements or financing statements
affecting any of the Property other than (i) as disclosed in writing by Grantor
to Grantee prior to the date hereof and (ii) the security agreements and
financing statements created in favor of Grantee; and
(r) The Property forms no part of any property owned, used or claimed
by Grantor as a residence or business homestead and is not exempt from forced
sale under the laws of the State of Georgia. Grantor hereby disclaims and
renounces each and every claim to all or any portion of the Property as a
homestead.
1.2 Defense of Title. If, while this Security Deed is in force, the title
----------------
to the Property or the interest of Grantee therein shall be the subject,
directly or indirectly, of any action at law or in equity, or be attached
directly or indirectly, or endangered, clouded or adversely affected in any
manner, Grantor, at Grantor's expense, shall take all necessary and proper steps
for the defense of said title or interest, including the employment of counsel
approved by Grantee, the prosecution or defense of litigation, and the
compromise or discharge of claims made against said title or interest.
Notwithstanding the foregoing, in the event that Grantee determines that Grantor
is not adequately performing its obligations under this Section, Grantee may,
without limiting or
7
<PAGE>
EXHIBIT 10.2
waiving any other rights or remedies of Grantee hereunder, take such steps with
respect thereto as Grantee shall deem necessary or proper and any and all costs
and expenses incurred by Grantee in connection therewith, together with interest
thereon at the Default Interest Rate (as defined in the Note) from the date
incurred by Grantee until actually paid by Grantor, shall be immediately paid by
Grantor on demand and shall be secured by this Security Deed and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note.
1.3 Performance of Obligations. Grantor shall pay when due the principal
--------------------------
of and the interest on the indebtedness evidenced by the Note. Grantor shall
also pay all charges, fees and other sums required to be paid by Grantor as
provided in the Loan Documents, and shall observe, perform and discharge all
obligations, covenants and agreements to be observed, performed or discharged by
Grantor set forth in the Loan Documents in accordance with their terms.
Further, Grantor shall promptly and strictly perform and comply with all
covenants, conditions, obligations and prohibitions required of Grantor in
connection with any other document or instrument affecting title to the
Property, or any part thereof, regardless of whether such document or instrument
is superior or subordinate to this Security Deed.
1.4 Insurance. Grantor shall, at Grantor's expense, maintain in force and
---------
effect on the Property at all times while this Security Deed continues in effect
the following insurance:
(a) "All-risk" coverage insurance against loss or damage to the
Property from fire, windstorm, tornado, and hail and damage by such other
further and additional risks as may now or hereafter be embraced by the standard
"all-risk" form of insurance policy, with claims to be settled on a replacement
cost basis. Grantee shall be named as first mortgagee on all such insurance
policies. The amount of such insurance shall be not less than one hundred
percent (100%) of the full replacement cost of the Improvements (as determined
by an MAI appraisal), furniture, furnishings, fixtures, equipment and other
items (whether personalty or fixtures) included in the Property and owned by
Grantor from time to time, without reduction for depreciation. The determination
of the replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing such coverage or, at Grantee's election, by
reference to such indices, appraisals or information as Grantee determines in
its reasonable discretion. Each policy or policies will contain inflation guard
coverage ensuring that the policy limit will be increased over time to reflect
the effect of inflation. Full replacement cost, as used herein, means, with
respect to the Improvements, the cost of replacing the Improvements without
regard to deduction for depreciation, exclusive of the cost of excavations,
foundations and footings below the lowest basement floor, and means, with
respect to such furniture, furnishings, fixtures, equipment and other items, the
cost of replacing the same. Each policy or policies shall contain a replacement
cost endorsement and either an agreed amount endorsement (to avoid the operation
of any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Grantee's approval. The maximum deductible under such policy or
policies shall not exceed
8
<PAGE>
EXHIBIT 10.2
$10,000. Such insurance may be in the form of a blanket policy provided that the
policy contains an endorsement to the effect that the coverage will not be
affected by the failure to pay any portion of the premium which is not allocable
to the Property or any other action not relating to the Property which would
otherwise permit the issuer to cancel the coverage.
(b) Comprehensive "Commercial General Liability" insurance against
claims for personal injury, bodily injury, death and property damage occurring
on, in or about the Improvements or the elevators or escalators therein,
including, without limitation, coverage against so-called occurrences in amounts
not less than $1,000,000 per occurrence and $2,000,000 general aggregate
coverage (umbrella coverage shall not be less than an additional $2,000,000) for
bodily injury, personal injury and property damage. This policy must contain,
but not be limited to, coverage for premises and operations liability, products
and completed operations liability, contractual liability, hired and non-owned
automobile liability, personal injury liability and property damage liability.
During any construction on the Real Estate, Grantor's general contractor for
such construction shall also provide the insurance required in this Subsection
----------
(b). Grantee hereby retains the right to periodically review the amount of said
liability insurance being maintained by Grantor and to require an increase in
the amount of said liability insurance should Grantee deem an increase to be
reasonably prudent under then existing circumstances. Grantee shall be named as
additional insured with respect to all liability insurance.
(c) Insurance covering the major components of the central heating,
air conditioning and ventilating systems, boilers, other pressure vessels, high
pressure piping and machinery, elevators and escalators, if any, and other
similar equipment installed in the Improvements, in an amount equal to one
hundred percent (100%) of the full replacement cost of the Improvements which
policies shall insure against physical damage to and loss of occupancy and use
of the Improvements arising out of an accident or breakdown covered thereunder.
(d) If the Real Estate or any part thereof is situated in an area
identified by the Secretary of Housing and Urban Development as now having or
subsequently designated as having special flood hazards (including, without
limitation, those areas designated by the Federal Emergency Management Agency
("FEMA") as Zone A or Zone V), flood insurance under the National Flood
Insurance Program in an amount equal to the lesser of (i) the full replacement
cost of the Improvements (or the outstanding balance of the Note if replacement
cost coverage is not available) or (ii) the maximum amount of flood insurance
available. The deductible under such flood insurance shall not exceed $3,000
per building, unless a higher amount is required by FEMA or other law.
(e) During the period of any construction on the Real Estate or
renovation or alteration of the Improvements, a so-called "Builder's All-Risk
Completed Value" or "Course of Construction" insurance policy in non-reporting
form for any Improvements under construction,
9
<PAGE>
EXHIBIT 10.2
renovation or alteration in an amount approved by Grantee and Worker's
Compensation Insurance covering all persons engaged in such construction,
renovation or alteration.
(f) Rental value or rental income insurance in amounts sufficient to
compensate Grantor for all Rents and Profits during a period of not less than
one year in which the Property may be damaged or destroyed. Grantee shall be
named as loss payee on all insurance for loss of rents or business income.
(g) Such other insurance on the Property or on any replacements or
substitutions thereof or additions thereto as may from time to time be required
by Grantee against other insurable hazards or casualties which at the time are
commonly insured against in the case of property similarly situated, due regard
being given to the height and type of buildings, their construction, location,
use and occupancy, including, without limitation, sinkhole, mine subsidence and
earthquake insurance if the Property is located in an area prone to such
hazards. If required, such insurance must be in an amount equal to one hundred
percent (100%) of the full replacement cost of the Improvements with a
deductible not in excess of five percent (5%) of the original principal amount
of the Note.
(h) If the Property has legal "non-conforming" uses under current
building, zoning or land use laws or ordinances, Law and Ordinance coverage
which shall cover costs of demolition, loss to undamaged portion of the
Improvements and increased cost of construction.
All such insurance shall (i) be with insurers authorized to do
business in the state within which the Real Estate is located and who have and
maintain a rating of at least the third (3rd) highest rating category by Moody's
or Standard & Poors and A-VIII from A.M. Best, (ii) contain the complete address
of the Real Estate (or a complete legal description), (iii) be for terms of at
least one year, with premium prepaid, (iv) contain deductibles which do not
exceed $10,000, (v) be subject to the approval of Grantee as to insurance
companies, amounts, content, forms of policies, method by which premiums are
paid and expiration dates and (vi) contain a standard non-contributory mortgagee
clause or endorsement listing Grantee as follows:
First Union National Bank of North Carolina,
its successors and assigns as their
interests may appear
c/o First Union Mortgage Corporation
P.O. Box 2991
Raleigh, North Carolina 27602
Grantor shall as of the date hereof deliver to Grantee evidence
satisfactory to Grantee that, as of the date hereof, said insurance policies
have been prepaid as required above and certified copies of such insurance
policies and original certificates of insurance signed by an
10
<PAGE>
EXHIBIT 10.2
authorized agent evidencing such insurance satisfactory to Grantee. Grantor
shall renew all such insurance and deliver to Grantee policies evidencing such
renewals at least thirty (30) days before any such insurance shall expire.
Without limiting the required endorsements to insurance policies, Grantor
further agrees that all such policies shall provide that proceeds thereunder
shall be payable to Grantee, its successors and assigns, pursuant and subject to
a mortgagee clause (without contribution) of standard form attached to, or
otherwise made a part of, the applicable policy and that Grantee, its successors
and assigns, shall be named as an additional insured under all liability
insurance policies. Grantor further agrees that all such insurance policies: (i)
shall provide for at least thirty (30) days' prior written notice to Grantee
prior to any cancellation or termination thereof and prior to any modification
thereof which affects the interest of Grantee; (ii) shall contain an endorsement
or agreement by the insurer that any loss shall be payable to Grantee in
accordance with the terms of such policy notwithstanding any act or negligence
of Grantor which might otherwise result in forfeiture of such insurance; (iii)
if any of the leases affecting the Property require that any policies affecting
the Property contain a waiver of subrogation provision, all policies shall,
either by their terms or by endorsement, provide for such waiver and (iv) shall
either name Grantee as an additional insured or waive all rights of subrogation
against Grantee. The delivery to Grantee of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance policies by Grantor to Grantee as
further security for the indebtedness secured hereby. In the event of
foreclosure of this Security Deed, or other transfer of title to the Property in
extinguishment in whole or in part of the secured indebtedness, all right, title
and interest of Grantor in and to all proceeds payable under such policies then
in force concerning the Property shall thereupon vest in the purchaser at such
foreclosure, or in Grantee or other transferee in the event of such other
transfer of title. Approval of any insurance by Grantee shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance. In the event Grantor fails to provide, maintain, keep in force or
deliver and furnish to Grantee the policies of insurance required by this
Security Deed or evidence of their renewal as required herein, Grantee may, but
shall not be obligated to, procure such insurance and Grantor shall pay all
amounts advanced by Grantee, together with interest thereon at the Default
Interest Rate from and after the date advanced by Grantee until actually repaid
by Grantor, promptly upon demand by Grantee. Any amounts so advanced by Grantee,
together with interest thereon, shall be secured by this Security Deed and by
all of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. Grantee shall not be responsible for nor incur any
liability for the insolvency of the insurer or other failure of the insurer to
perform, even though Grantee has caused the insurance to be placed with the
insurer after failure of Grantor to furnish such insurance.
1.5 Payment of Taxes. Grantor shall pay or cause to be paid, except to
----------------
the extent provision is actually made therefor pursuant to Section 1.6 or
-----------
Section 1.7 of this Security Deed, all taxes and assessments which are or may
- -----------
become a lien on the Property or which are assessed against or imposed upon the
Property. Grantor shall furnish Grantee with receipts (or if receipts
11
<PAGE>
EXHIBIT 10.2
are not immediately available, with copies of canceled checks evidencing payment
with receipts to follow promptly after they become available) showing payment of
such taxes and assessments at least fifteen (15) days prior to the applicable
delinquency date therefor. Notwithstanding the foregoing, Grantor may in good
faith, by appropriate proceedings and upon notice to Grantee, contest the
validity, applicability or amount of any asserted tax or assessment so long as
(a) such contest is diligently pursued, (b) Grantee determines, in its
subjective opinion, that such contest suspends the obligation to pay the tax and
that nonpayment of such tax or assessment will not result in the sale, loss,
forfeiture or diminution of the Property or any part thereof or any interest of
Grantee therein, and (c) prior to the earlier of the commencement of such
contest or the delinquency date of the asserted tax or assessment, Grantor
deposits in the Impound Account (as hereinafter defined) an amount determined by
Grantee to be adequate to cover the payment of such tax or assessment and a
reasonable additional sum to cover possible interest, costs and penalties;
provided, however, that Grantor shall promptly cause to be paid any amount
adjudged by a court of competent jurisdiction to be due, with all interest,
costs and penalties thereon, promptly after such judgment becomes final; and
provided, further, that in any event each such contest shall be concluded, the
- -------- ------- ----
taxes, assessments, interest, costs and penalties shall be paid prior to the
date any writ or order is issued under which the Property may be sold, lost or
forfeited.
1.6 Tax and Insurance Impound Account. Grantor shall establish and
---------------------------------
maintain at all times while this Security Deed continues in effect an impound
account (the "IMPOUND ACCOUNT") with Grantee for payment of real estate taxes
and assessments and insurance on the Property and as additional security for the
indebtedness secured hereby. Simultaneously with the execution hereof, Grantor
shall deposit in the Impound Account an amount determined by Grantee to be
necessary to ensure that there will be on deposit with Grantee an amount which,
when added to the monthly payments subsequently required to be deposited with
Grantee hereunder on account of real estate taxes, assessments and insurance
premiums, will result in there being on deposit with Grantee in the Impound
Account an amount sufficient to pay the next due annual installment of real
estate taxes and assessment on the Property at least one (1) month prior to the
delinquency date thereof (if paid in one installment) and the next due annual
insurance premiums with respect to the Property at least one (1) month prior to
the due date thereof (if paid in one installment). Commencing on the first
monthly payment date under the Note and continuing thereafter on each monthly
payment date under the Note, Grantor shall pay to Grantee, concurrently with and
in addition to the monthly payment due under the Note and until the Note and all
other indebtedness secured hereby is fully paid and performed, deposits in an
amount equal to one-twelfth (1/12) of the amount of the annual real estate taxes
and assessments that will next become due and payable on the Property, plus one-
twelfth (1/12) of the amount of the annual premiums that will next become due
and payable on insurance policies which Grantor is required to maintain
hereunder, each as estimated and determined by Grantee. So long as no default
hereunder or under the other Loan Documents has occurred and is continuing, all
sums in the Impound Account shall be held by Grantee in the Impound Account to
pay said taxes, assessments and insurance premiums in one installment before the
same become delinquent. Grantor shall be responsible for ensuring the
12
<PAGE>
EXHIBIT 10.2
receipt by Grantee, at least thirty (30) days prior to the respective due date
for payment thereof, of all bills, invoices and statements for all taxes,
assessments and insurance premiums to be paid from the Impound Account, and so
long as no default hereunder or under the other Loan Documents has occurred and
is continuing, Grantee shall pay the governmental authority or other party
entitled thereto directly to the extent funds are available for such purpose in
the Impound Account. In making any payment from the Impound Account, Grantee
shall be entitled to rely on any bill, statement or estimate procured from the
appropriate public office or insurance company or agent without any inquiry into
the accuracy of such bill, statement or estimate and without any inquiry into
the accuracy, validity, enforceability or contestability of any tax, assessment,
valuation, sale, forfeiture, tax lien or title or claim thereof. The Impound
Account shall not, unless otherwise explicitly required by applicable law, be or
be deemed to be escrow or trust funds, but, at Grantee's option and in Grantee's
discretion, may either be held in a separate account or be commingled by Grantee
with the general funds of Grantee. No interest on the funds contained in the
Impound Account shall be paid by Grantee to Grantor. The Impound Account is
solely for the protection of Grantee and entails no responsibility on Grantee's
part beyond the payment of taxes, assessments and insurance premiums following
receipt of bills, invoices or statements therefor in accordance with the terms
hereof and beyond the allowing of due credit for the sums actually received.
Upon assignment of this Security Deed by Grantee, any funds in the Impound
Account shall be turned over to the assignee and any responsibility of Grantee,
as assignor, with respect thereto shall terminate. If the total funds in the
Impound Account shall exceed the amount of payments actually applied by Grantee
for the purposes of the Impound Account, such excess may be credited by Grantee
on subsequent payments to be made hereunder or, at the option of Grantee,
refunded to Grantor. If, however, the Impound Account shall not contain
sufficient funds to pay the sums required when the same shall become due and
payable, Grantor shall, within ten (10) days after receipt of written notice
thereof, deposit with Grantee the full amount of any such deficiency. If Grantor
shall fail to deposit with Grantee the full amount of such deficiency as
provided above, Grantee shall have the option, but not the obligation, to make
such deposit, and all amounts so deposited by Grantee, together with interest
thereon at the Default Interest Rate from the date incurred by Grantee until
actually paid by Grantor, shall be immediately paid by Grantor on demand and
shall be secured by this Security Deed and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note. If there is
a default under this Security Deed which is not cured within any applicable
grace or cure period, Grantee may, but shall not be obligated to, apply at any
time the balance then remaining in the Impound Account against the indebtedness
secured hereby in whatever order Grantee shall subjectively determine. No such
application of the Impound Account shall be deemed to cure any default
hereunder. Upon full payment of the indebtedness secured hereby in accordance
with its terms or at such earlier time as Grantee may elect, the balance of the
Impound Account then in Grantee's possession shall be paid over to Grantor and
no other party shall have any right or claim thereto.
1.7 Payment Reserve.
---------------
13
<PAGE>
EXHIBIT 10.2
(a) Contemporaneously with the execution hereof, Grantor has
established with Grantee a reserve in the amount equal to two (2) regular
monthly installments of principal, interest and all required deposits or
impounds (the "PAYMENT RESERVE"). Grantor understands and agrees that,
notwithstanding the establishment of the Payment Reserve as herein required, all
of the proceeds of the Note have been, and shall be considered, fully disbursed
and shall bear interest and be payable on the terms provided therein. No
interest on funds contained in the Payment Reserve shall be paid by Grantee to
Grantor.
(b) For so long as no default has occurred hereunder or under any of
the other Loan Documents beyond any applicable grace or cure period, Grantee
shall on each monthly payment due date under the Note to and including December
1, 1995, advance from the Payment Reserve to itself the amount of the monthly
installment due and payable by Grantor under the Note on such monthly payment
due date and shall also advance from the Payment Reserve into the Impound
Account the amount of any deposit for taxes and insurance premiums and into the
Replacement Reserve (as hereinafter defined) the amount of any deposit for
Repairs (as hereinafter defined) required to be paid by Grantor concurrently
with each such monthly installment pursuant to the terms hereof. Provided no
default, or event which with the passage of time or the giving of notice, or
both, which would constitute a default, has occurred after the final
disbursement from the Payment Reserve on December 1, 1995, any amounts then
remaining in the Payment Reserve shall be paid to Grantor. Nothing contained
herein, including, without limitation, the existence of the Payment Reserve,
shall release Grantor of any obligation to make payments under the Note, this
Security Deed or the other Loan Documents strictly in accordance with the terms
hereof or thereof and, in this regard, without limiting the generality of the
foregoing, should the amounts contained in the Payment Reserve not be sufficient
to pay in full the monthly installments and the Impound Account and Replacement
Reserve deposits referenced above in this subparagraph, Grantor shall be
responsible for paying such deficiency on the due date of any such monthly
installment.
1.8 Replacement Reserve: Security Interest Reserves.
-----------------------------------------------
(a) At Lender's option, as additional security for the indebtedness
secured hereby, Grantor shall establish and maintain at all times while this
Security Deed continues in effect a repair reserve (the "REPLACEMENT RESERVE")
with Grantee for payment of certain non-recurring types of costs and expenses
incurred by Grantor for interior and exterior work to the Property, including
without limitation, performance of work to the roofs, chimneys, gutters,
downspouts, paving, curbs, driveways, ramps, balconies, porches, patios,
exterior walls, exterior doors and doorways, windows, elevators and mechanical
and HVAC equipment (collectively, the "REPAIRS") provided such costs and
expenses are incurred for repairs (i) not incurred for ordinary wear and tear at
the Property and (ii) categorized under generally accepted accounting principles
as a capital expense and not as an operating expense. Commencing on the first
monthly payment date under the Note and continuing thereafter on each monthly
payment date under the Note,
14
<PAGE>
EXHIBIT 10.2
Grantor shall pay to Grantee, concurrently with and in addition to the monthly
payment due under the Note and until the Note and all other indebtedness secured
hereby is fully paid and performed, a deposit to the Replacement Reserve in an
amount equal to $4,107.00 per month. So long as no default hereunder or under
the other Loan Documents has occurred and is continuing, all sums in the
Replacement Reserve shall be held by Grantee in the Replacement Reserve to pay
the costs and expenses of Repairs. So long as no default hereunder or under the
other Loan Documents has occurred and is continuing, Grantee shall, to the
extent funds are available for such purpose in the Replacement Reserve, disburse
to Grantor the amount paid or incurred by Grantor in performing such Repairs
within ten (10) days following: (a) the receipt by Grantee of a written request
from Grantor for disbursement from the Replacement Reserve and a certification
in the form attached hereto as Exhibit C that the applicable item of Repair has
---------
been completed; (b) the delivery to Grantee of invoices, receipts or other
evidence satisfactory to Grantee, verifying the cost of performing the Repairs;
(c) for disbursement requests in excess of $10,000.00, the delivery to Grantee
of affidavits, lien waivers or other evidence reasonably satisfactory to Grantee
showing that all materialmen, laborers, subcontractors and any other parties who
might or could claim statutory or common law liens and have furnished material
or labor to the Property have been paid all amounts due for labor and materials
furnished to the Property; (d) for disbursement requests in excess of
$10,000.00, delivery to Grantee of a certification from an inspecting architect
or other third party acceptable to Grantee describing the completion of the
Repairs and the value of the completed Repairs and verifying the completion of
the Repairs and the value of the completed Repairs; (e) for disbursement
requests in excess of $10,000.00, delivery to Grantee of a new certificate of
occupancy for the portion of the Improvements covered by such Repairs, if said
new certificate of occupancy is required by law, or a certification by Grantor
that no new certificate of occupancy is required; and (f) the receipt by Grantee
of an administrative fee in the amount of $150.00. Grantee shall not be required
to make advances from the Replacement Reserve more frequently than once in any
ninety (90) day period. In making any payment from the Replacement Reserve,
Grantee shall be entitled to rely on such request from Grantor without any
inquiry into the accuracy, validity or contestability of any such amount.
Grantee may, at Grantor's expense, make or cause to be made during the term of
this Security Deed an annual inspection at the Property to determine the need,
as determined by Grantee in its reasonable judgment, for further Repairs of the
Property. In the event that such inspection reveals that further Repairs of the
Property are required, Grantee shall provide Grantor with a written description
of the required Repairs and Grantor shall complete such Repairs to the
reasonable satisfaction of Grantee within ninety (90) days after the receipt of
such description from Grantee, or such later date as may be approved by Grantee
in its sole discretion. The Replacement Reserve shall not, unless otherwise
explicitly required by applicable law, be or be deemed to be escrow or trust
funds, but, at Grantee's option and in Grantee's discretion, may either be held
in a separate account or be commingled by Grantee with the general funds of
Grantee. Interest on the funds contained in the Replacement Reserve shall be
credited to Grantor as provided in Section 4.31 hereof. The Replacement Reserve
is solely for the protection of Grantee and entails no responsibility on
Grantee's part beyond the payment of the costs and expenses described in this
15
<PAGE>
EXHIBIT 10.2
Section in accordance with the terms hereof and beyond the allowing of due
credit for the sums actually received. In the event that the amounts on deposit
or available in the Replacement Reserve are inadequate to pay the cost of the
Repairs, Grantor shall pay the amount of such deficiency. Upon assignment of
this Security Deed by Grantee, any funds in the Replacement Reserve shall be
turned over to the assignee and any responsibility of Grantee, as assignor, with
respect thereto shall terminate. If there is a default under this Security Deed
which is not cured within any applicable grace or cure period, Grantee may, but
shall not be obligated to, apply at any time the balance then remaining in the
Replacement Reserve against the indebtedness secured hereby in whatever order
Grantee shall subjectively determine. No such application of the Replacement
Reserve shall be deemed to cure any default hereunder. Upon full payment of the
indebtedness secured hereby in accordance with its terms or at such earlier time
as Grantee may elect, the balance of the Replacement Reserve then in Grantee's
possession shall be paid over to Grantor and no other party shall have any right
or claim thereto.
(b) As additional security for the payment and performance by Grantor
of all duties, responsibilities and obligations under the Note and the other
Loan Documents, Grantor hereby unconditionally and irrevocably assigns, conveys,
pledges, mortgages, transfers, delivers, deposits, sets over and confirms unto
Grantee, and hereby grants to Grantee a security interest in, (i) the Impound
Account, the Payment Reserve, the Repair and Remediation Reserve (as defined in
Exhibit D) and the Replacement Reserve (collectively, the "RESERVES"), (ii) the
accounts into which the Reserves have been deposited, (iii) all insurance of
said accounts, (iv) all accounts, contract rights and general intangibles or
other rights and interests pertaining thereto, (v) all sums now or hereafter
therein or represented thereby, (vi) all replacements, substitutions or proceeds
thereof, (vii) all instruments and documents now or hereafter evidencing the
Reserves or such accounts, (viii) all powers, options, rights, privileges and
immunities pertaining to the Reserves (including the right to make withdrawals
therefrom), and (ix) all proceeds of the foregoing. Grantor hereby authorizes
and consents to the account into which the Reserves have been deposited being
held in Grantee's name or the name of any entity servicing the Note for Grantee
and hereby acknowledges and agrees that Grantee, or at Grantee's election, such
servicing agent, shall have exclusive control over said account. Notice of the
assignment and security interest granted to Grantee herein may be delivered by
Grantee at any time to the financial institution wherein the Reserves have been
established, and Grantee, or such servicing entity, shall have possession of all
passbooks or other evidences of such accounts. Grantor hereby assumes all risk
of loss with respect to amounts on deposit in the Reserves. Grantor hereby
knowingly, voluntarily and intentionally stipulates, acknowledges and agrees
that the advancement of the funds from the Reserves as set forth herein is at
Grantor's direction and is not the exercise by Grantee of any right of set-off
or other remedy upon a default. Grantor hereby waives all right to withdraw
funds from the Reserves. If a default shall occur hereunder or under any other
of the Loan Documents which is not cured within any applicable grace or cure
period, then Grantee may, without notice or demand on Grantor, at its option:
(A) withdraw any or all of the funds (including, without limitation, interest)
then remaining in the Reserves and apply the same, after deducting all costs
16
<PAGE>
EXHIBIT 10.2
and expenses of safekeeping, collection and delivery (including, but not limited
to, attorneys' fees, costs and expenses) to the indebtedness evidenced by the
Note or any other obligations of Grantor under the other Loan Documents in such
manner or as Grantee shall deem appropriate in its sole discretion, and the
excess, if any, shall be paid to Grantor, (B) exercise any and all rights and
remedies of a secured party under any applicable Uniform Commercial Code, and/or
(C) exercise any other remedies available at law or in equity. No such use or
application of the funds contained in the Reserves shall be deemed to cure any
default hereunder or under the other Loan Documents.
1.9 Casualty and Condemnation. Grantor shall give Grantee prompt written
-------------------------
notice of the occurrence of any casualty affecting, or the institution of any
proceedings for eminent domain or for the condemnation of, the Property or any
portion thereof. All insurance proceeds on the Property, and all causes of
action, claims, compensation, awards and recoveries for any damage, condemnation
or taking of all or any part of the Property or for any damage or injury to it
for any loss or diminution in value of the Property, are hereby assigned to and
shall be paid to Grantee. Grantee may participate in any suits or proceedings
relating to any such proceeds, causes of action, claims, compensation, awards or
recoveries, and Grantee is hereby authorized, in its own name or in Grantor's
name, to adjust any loss covered by insurance or any condemnation claim or cause
of action, and to settle or compromise any claim or cause of action in
connection therewith, and Grantor shall from time to time deliver to Grantee any
instruments required to permit such participation; provided, however, that
Grantee shall not have the right to participate in the adjustment of any loss
which is not in excess of the lesser of (i) ten percent (10%) of the then
outstanding principal balance of the Note, and (ii) $250,000.00. Grantee shall
apply any sums received by it under this Section first to the payment of all of
its costs and expenses (including, but not limited to, legal fees and
disbursements) incurred in obtaining those sums, and then, as follows:
(a) In the event that less than sixty percent (60%) of the
Improvements located on the Real Estate have been taken or destroyed, then if:
(1) no default is then continuing hereunder or under any of the
other Loan Documents and no event has occurred which, with the giving of
notice or the passage of time or both, would constitute a default hereunder
or under any of the other Loan Documents, and
(2) the Property can, in Grantee's judgment, with diligent
restoration or repair, be returned to a condition at least substantially
equal to the condition thereof that existed prior to the casualty or
partial taking causing the loss or damage within the earlier to occur of
(i) six (6) months after the receipt of insurance proceeds or condemnation
awards by either Grantor or Grantee, and (ii) the stated maturity date of
the Note, and
17
<PAGE>
EXHIBIT 10.2
(3) all necessary governmental approvals can be obtained to
allow the rebuilding and reoccupancy of the Property as described in
Section 1.9(a)(2) above, and
-----------------
(4) there are sufficient sums available (through insurance
proceeds or condemnation awards and contributions by Grantor, the full
amount of which shall at Grantee's option have been deposited with Grantee)
for such restoration or repair (including, without limitation, for any
costs and expenses of Grantee to be incurred in administering said
restoration or repair) and for payment of principal and interest to become
due and payable under the Note during such restoration or repair, and
(5) the economic feasibility of the Improvements after such
restoration or repair will be such that income from their operation is
reasonably anticipated to be sufficient to pay operating expenses of the
Property and debt service on the indebtedness secured hereby in full with
the same coverage ratio considered by Grantee in its determination to make
the loan secured hereby, and
(6) Grantor shall have delivered to Grantee, at Grantor's sole
cost and expense, an appraisal report in form and substance satisfactory to
Grantee appraising the value of the Property as so restored or repaired to
be not less than the appraised value of the Property considered by Grantee
in its determination to make the loan secured hereby, and
(7) Grantor so elects by written notice delivered to Grantee
within ten (10) days after settlement of the aforesaid insurance or
condemnation claim,
then, Grantee shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Grantor therefor, to Grantor
in the manner and upon such terms and conditions as would be required by a
prudent interim construction lender, including, but not limited to, the prior
approval by Grantee of plans and specifications, contractors and form of
construction contracts and the furnishing to Grantee of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors,
in form and substance satisfactory to Grantee in its discretion, with any
remainder being applied by Grantee for payment of the indebtedness secured
hereby in whatever order Grantee directs in its absolute discretion.
(b) In all other cases, namely, in the event that sixty percent (60%)
or more of the Improvements located on the Real Estate have been taken or
Grantor does not elect to restore or repair the Property pursuant to clause (a)
----------
above, or otherwise fails to meet the requirements of clause (a) above, then in
----------
any of such events, Grantee shall elect, in Grantee's absolute discretion and
without regard to the adequacy of Grantee's security, to do either of the
following: (1) accelerate the maturity date of the Note and declare any and all
indebtedness secured hereby
18
<PAGE>
EXHIBIT 10.2
to be immediately due and payable and apply the remainder of such sums received
pursuant to this Section to the payment of the indebtedness secured hereby in
whatever order Grantee directs in its absolute discretion, with any remainder
being paid to Grantor, or (2) notwithstanding that Grantor may have elected not
to restore or repair the Property pursuant to the provisions of Section
-------
1.9(a)(7) above, require Grantor to restore or repair the Property in the manner
- ---------
and upon such terms and conditions as would be required by a prudent interim
construction lender, including, but not limited to, the deposit by Grantor with
Grantee, within thirty (30) days after demand therefor, of any deficiency
necessary in order to assure the availability of sufficient funds to pay for
such restoration or repair, including Grantee's costs and expenses to be
incurred in connection therewith, the prior approval by Grantee of plans and
specifications, contractors and form of construction contracts and the
furnishing to Grantee of permits, bonds, lien waivers, invoices, receipts and
affidavits from contractors and subcontractors, in form and substance
satisfactory to Grantee in its discretion, and apply the remainder of such sums
toward such restoration and repair, with any balance thereafter remaining being
applied by Grantee for payment of the indebtedness secured hereby in whatever
order Grantee directs in its absolute discretion. Any reduction in the
indebtedness secured hereby resulting from Grantee's application of any sums
received by it hereunder shall take effect only when Grantee actually receives
such sums and elects to apply such sums to the indebtedness secured hereby and,
in any event, the unpaid portion of the indebtedness secured hereby shall remain
in full force and effect and Grantor shall not be excused in the payment
thereof. Partial payments received by Grantor, as described in the preceding
sentence, shall be applied first to the final payment due under the Note and
thereafter to installments due under the Note in the inverse order of their due
date. If Grantor elects or Grantee directs Grantor to restore or repair the
Property after the occurrence of a casualty or partial taking of the Property as
provided above, Grantor shall promptly and diligently, at Grantor's sole cost
and expense and regardless of whether the insurance proceeds or condemnation
award, as appropriate, shall be sufficient for the purpose, restore, repair,
replace and rebuild the Property as nearly as possible to its value, condition
and character immediately prior to such casualty or partial taking in accordance
with the foregoing provisions and Grantor shall pay to Grantee all costs and
expenses of Grantee incurred in administering said rebuilding, restorations or
repairs, provided that Grantee makes such proceeds or award available for such
purpose. Grantor agrees to execute and deliver from time to time such further
instruments as may be requested by Grantee to confirm the foregoing assignment
to Grantee of any award, damage, insurance proceeds, payment or other
compensation. Grantee is hereby irrevocably constituted and appointed the
attorney-in-fact of Grantor (which power of attorney shall be irrevocable so
long as any indebtedness secured hereby is outstanding, shall be deemed coupled
with an interest, shall survive the voluntary or involuntary dissolution of
Grantor and shall not be affected by any disability or incapacity suffered by
Grantor subsequent to the date hereof), with full power of substitution, subject
to the terms of this section, to settle for, collect and receive any such
awards, damages, insurance proceeds, payments or other compensation from the
parties or authorities making the same, to appear in and prosecute any
proceedings therefor and to give receipts and acquittances therefor.
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EXHIBIT 10.2
1.10 Construction Liens. Grantor shall pay when due all claims and demands
------------------
of mechanics, materialmen, laborers and others for any work performed or
materials delivered for the Real Estate or Improvements; provided, however,
that, Grantor shall have the right to contest in good faith any such claim or
demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to Grantee and provided that neither the Property nor any interest
therein would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest. In the event Grantor shall contest any such claim or
demand, Grantor shall promptly notify Grantee of such contest and thereafter
shall, upon Grantee's request, promptly provide a bond, cash deposit or other
security satisfactory to Grantee to protect Grantee's interest and security
should the contest be unsuccessful. If Grantor shall fail to immediately
discharge or provide security against any such claim or demand as aforesaid,
Grantee may do so and any and all expenses incurred by Grantee, together with
interest thereon at the Default Interest Rate from the date incurred by Grantee
until actually paid by Grantor, shall be immediately paid by Grantor on demand
and shall be secured by this Security Deed and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.
1.11 Rents and Profits. As additional and collateral security for the
-----------------
payment of the indebtedness secured hereby and cumulative of any and all rights
and remedies herein provided for, Grantor hereby absolutely and presently
assigns to Grantee all existing and future Rents and Profits. Grantor hereby
grants to Grantee the sole, exclusive and immediate right, without taking
possession of the Property, to demand, collect (by suit or otherwise), receive
and give valid and sufficient receipts for any and all of said Rents and
Profits, for which purpose Grantor does hereby irrevocably make, constitute and
appoint Grantee its attorney-in-fact with full power to appoint substitutes or a
trustee to accomplish such purpose (which power of attorney shall be irrevocable
so long as any indebtedness secured hereby is outstanding, shall be deemed to be
coupled with an interest, shall survive the voluntary or involuntary dissolution
of Grantor and shall not be affected by any disability or incapacity suffered by
Grantor subsequent to the date hereof). Grantee shall be without liability for
any loss which may arise from a failure or inability to collect Rents and
Profits, proceeds or other payments. However, until the occurrence of a default
under this Security Deed which has not been cured within any applicable grace or
cure period, Grantor shall have a license to collect and receive the Rents and
Profits when due and prepayments thereof for not more than one (1) month prior
to due date thereof. Upon the occurrence of a default hereunder which has not
been cured within any applicable grace or cure period, Grantor's license shall
automatically terminate without notice to Grantor and Grantee may thereafter,
without taking possession of the Property, collect the Rents and Profits itself
or by an agent or receiver. From and after the termination of such license,
Grantor shall be the agent of Grantee in collection of the Rents and Profits,
and all of the Rents and Profits so collected by Grantor shall be held in trust
by Grantor for the sole and exclusive benefit of Grantee, and Grantor shall,
within one (1) business day after receipt of any Rents and Profits, pay the same
to Grantee to be applied by Grantee as hereinafter set forth. Neither the demand
for or collection of Rents and Profits by Grantee shall constitute any
assumption by Grantee of any obligations
20
<PAGE>
EXHIBIT 10.2
under any agreement relating thereto. Grantee is obligated to account only for
such Rents and Profits as are actually collected or received by Grantee. Grantor
irrevocably agrees and consents that the respective payors of the Rents and
Profits shall, upon demand and notice from Grantee of a default hereunder, pay
said Rents and Profits to Grantee without liability to determine the actual
existence of any default claimed by Grantee. Grantor hereby waives any right,
claim or demand which Grantor may now or hereafter have against any such payor
by reason of such payment of Rents and Profits to Grantee, and any such payment
shall discharge such payor's obligation to make such payment to Grantor. All
Rents and Profits collected or received by Grantee may be applied against all
expenses of collection, including, without limitation, attorneys' fees, against
costs of operation and management of the Property and against the indebtedness
secured hereby, in whatever order or priority as to any of the items so
mentioned as Grantee directs in its sole subjective discretion and without
regard to the adequacy of its security. Neither the exercise by Grantee of any
rights under this Section nor the application of any Rents and Profits to the
secured indebtedness shall cure or be deemed a waiver of any default hereunder.
The assignment of Rents and Profits hereinabove granted shall continue in full
force and effect during any period of foreclosure or redemption with respect to
the Property. Grantor has executed an Assignment of Leases and Rents dated of
even date herewith (the "ASSIGNMENT") in favor of Grantee covering all of the
right, title and interest of Grantor, as landlord, lessor or licensor, in and to
any leases, licenses and occupancy agreements relating to all or portions of the
Property. All rights and remedies granted to Grantee under the Assignment shall
be in addition to and cumulative of all rights and remedies granted to Grantee
hereunder.
1.12 Leases and Licenses.
-------------------
(a) Prior to execution of any leases of space in the Improvements
after the date hereof, Grantor shall submit to Grantee, for Grantee's prior
approval, which approval shall not be unreasonably withheld, a copy of the form
lease Grantor plans to use in leasing space in the Improvements. All leases of
space in the Improvements shall be on terms consistent with the terms for
similar leases in the market area of the Real Estate, shall provide for free
rent only if the same is consistent with prevailing market conditions and shall
provide for market rents then prevailing in the market area of the Real Estate.
Such leases shall also provide for security deposits in reasonable amounts.
Grantor shall also submit to Grantee for Grantee's approval, which approval
shall not be unreasonably withheld, prior to the execution thereof, any proposed
lease, license or occupancy agreement of the Improvements or any portion thereof
that differs materially and adversely from the aforementioned form lease.
Grantor shall not execute any lease, license or occupancy agreement for all or a
substantial portion of the Property, except for an actual occupancy by the
tenant, lessee or licensee thereunder, and shall at all times promptly and
faithfully perform, or cause to be performed, all of the covenants, conditions
and agreements contained in all leases, licenses and occupancy agreements with
respect to the Property, now or hereafter existing, on the part of the landlord,
lessor or licensor thereunder to be kept and performed. Grantor shall furnish to
Grantee, within ten (10) days after a request by Grantee to
21
<PAGE>
EXHIBIT 10.2
do so, but in any event by January 1 of each year, a current rent roll,
certified by Grantor as being true and correct, containing the names of all
tenants, lessees and licensees with respect to the Property, the terms of their
respective leases, licenses or occupancy agreements, the spaces occupied and the
rentals or fees payable thereunder and the amount of each tenant's security
deposit. Upon the request of Grantee, Grantor shall deliver to Grantee a copy of
each such lease, license and occupancy agreement. Grantor shall not do or suffer
to be done any act that might result in a default by the landlord, lessor or
licensor under any such lease, license or occupancy agreement or allow the
tenant, lessee or licensee thereunder to withhold payment or rent and, except as
otherwise expressly permitted by the terms of Section 1.13 hereof, shall not
------------
further assign any such lease, license or occupancy agreement or any such rents.
Grantor, at no cost or expense to Grantee, shall enforce, short of termination,
the performance and observance of each and every condition and covenant of each
of the parties under such leases. Grantor shall not, without the prior written
consent of Grantee, modify any of the leases, terminate or accept the surrender
of any leases, waive or release any other party from the performance or
observance of any obligation or condition under such leases except in the normal
course of business in a manner which is consistent with sound and customary
leasing and management practices for similar properties in the community in
which the Property is located. Grantor shall not permit the prepayment of any
rents under any of the leases for more than one (1) month prior to the due date
thereof.
(b) Each lease, license and occupancy agreement executed after the
date hereof affecting any of the Real Estate or the Improvements must provide,
in a manner approved by Grantee, that the tenant, lessee or licensee, as
appropriate, will recognize as its landlord, lessor or licensor and attorn to
any person succeeding to the interest of Grantor upon any foreclosure of this
Security Deed or deed in lieu of foreclosure. Each such lease, license and
occupancy agreement shall also provide that, upon request of said successor in
interest, the tenant, lessee or licensee shall execute and deliver an instrument
or instruments confirming its attornment as provided for in this Section;
provided, however, that neither Grantee nor any successor-in-interest shall be
bound by any payment of rental for more than one (1) month in advance, or any
amendment or modification of said lease or rental agreement made without the
express written consent of Grantee or said successor-in-interest.
(c) Upon the occurrence of a default under this Security Deed which
is not cured within any applicable grace period, whether before or after the
whole principal sum secured hereby is declared to be immediately due or whether
before or after the institution of legal proceedings to foreclose this Security
Deed, forthwith, upon demand of Grantee, Grantor shall surrender to Grantee, and
Grantee shall be entitled to take actual possession of, the Property or any part
thereof personally, or by its agent or attorneys. In such event, Grantee shall
have, and Grantor hereby gives and grants to Grantee, the right, power and
authority to make and enter into leases, licenses and occupancy agreements with
respect to the Property or portions thereof for such rents and for such periods
of occupancy and upon conditions and provisions as Grantee may
22
<PAGE>
EXHIBIT 10.2
deem desirable in its sole discretion, and Grantor expressly acknowledges and
agrees that the term of such lease, license or occupancy agreement may extend
beyond the date of any foreclosure sale at the Property; it being the intention
of Grantor that in such event Grantee shall be deemed to be and shall be the
attorney-in-fact of Grantor for the purpose of making and entering into leases,
licenses or occupancy agreements of parts or portions of the Property for the
rents and upon the terms, conditions and provisions deemed desirable to Grantee
in its sole discretion and with like effect as if such leases, licenses or
occupancy agreements had been made by Grantor as the owner in fee simple of the
Property free and clear of any conditions or limitations established by this
Security Deed. The power and authority hereby given and granted by Grantor to
Grantee shall be deemed to be coupled with an interest, shall not be revocable
by Grantor so long as any indebtedness secured hereby is outstanding, shall
survive the voluntary or involuntary dissolution of Grantor and shall not be
affected by any disability or incapacity suffered by Grantor subsequent to the
date hereof. In connection with any action taken by Grantee pursuant to this
Section, Grantee shall not be liable for any loss sustained by Grantor resulting
from any failure to let the Property, or any part thereof, or from any other act
or omission of Grantee in managing the Property, nor shall Grantee be obligated
to perform or discharge any obligation, duty or liability under any lease,
license or occupancy agreement covering the Property or any part thereof or
under or by reason of this instrument or the exercise of rights or remedies
hereunder. Grantor shall, and does hereby, indemnify Grantee for, and hold
Grantee harmless from, any and all claims, actions, demands, liabilities, loss
or damage which may or might be incurred by Grantee under any such lease,
license or occupancy agreement or under this Security Deed or by the exercise of
rights or remedies hereunder and from any and all claims and demands whatsoever
which may be asserted against Grantee by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in any such lease, license or occupancy agreement other
than those finally determined to have resulted solely from the gross negligence
or willful misconduct of Grantee. Should Grantee incur any such liability, the
amount thereof, including, without limitation, costs, expenses and attorneys'
fees, together with interest thereon at the Default Interest Rate from the date
incurred by Grantee until actually paid by Grantor, shall be immediately due and
payable to Grantee by Grantor on demand and shall be secured hereby and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. Nothing in this Section shall impose on Grantee any duty,
obligation or responsibility for the control, care, management or repair of the
Property, or for the carrying out of any of the terms and conditions of any such
lease, license or occupancy agreement, nor shall it operate to make Grantee
responsible or liable for any waste committed on the Property by the tenants or
by any other parties or for any dangerous or defective condition of the
Property, or for any negligence in the management, upkeep, repair or control of
the Property. Grantor hereby assents to, ratifies and confirms any and all
actions of Grantee with respect to the Property taken under this Section.
1.13 Alienation and Further Encumbrances.
-----------------------------------
23
<PAGE>
EXHIBIT 10.2
(a) Grantor acknowledges that Grantee has relied upon the
principals/partners of Grantor and their experience in owning and operating
properties similar to the Property in connection with the closing of the loan
evidenced by the Note. Accordingly, except as specifically allowed hereinbelow
in this Section and notwithstanding anything to the contrary contained in
Section 4.6 hereof, in the event that the Property or any part thereof or
- -----------
interest therein shall be sold, conveyed, disposed of, alienated, hypothecated,
leased (except to tenants of space in the Improvements in accordance with the
provisions of Section 1.12 hereof), assigned, pledged, mortgaged, further
------------
encumbered or otherwise transferred or Grantor shall be divested of its title to
the Property or any interest therein, in any manner or way, whether voluntarily
or involuntarily, without the prior written consent of Grantee being first
obtained, which consent may be withheld in Grantee's sole discretion, then the
same shall constitute a default hereunder and Grantee shall have the right, at
its option, to declare any or all of the indebtedness secured hereby,
irrespective of the maturity date specified in the Note, immediately due and
payable and to otherwise exercise any of its other rights and remedies contained
in Article III hereof. If such acceleration is during any period when a
-----------
prepayment fee is payable pursuant to the provisions set forth in the Note,
then, in addition to all of the foregoing, such prepayment fee shall also then
be immediately due and payable to the same end as though Grantor were prepaying
the entire indebtedness secured hereby on the date of such acceleration. For
the purposes of this Section: (i) in the event either Grantor or any of its
general partners is a corporation or trust, the sale, conveyance, transfer or
disposition of more than 10% of the issued and outstanding capital stock of
Grantor or any of its general partners or of the beneficial interest of such
trust (or the issuance of new shares of capital stock in Grantor or any of its
general partners so that immediately after such issuance the total capital stock
then issued and outstanding is more than 110% of the total immediately prior to
such issuance) shall be deemed to be a transfer of an interest in the Property,
and (ii) in the event Grantor or any general partner of Grantor is a limited or
general partnership, a joint venture or a limited liability company, a change in
the ownership interests in any general partner, any joint venturer or any
member, either voluntarily, involuntarily or otherwise, or the sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbering of all or any
portion of the interest of any such general partner, joint venturer or member in
Grantor or such general partner (whether in the form of a beneficial or
partnership interest or in the form of a power of direction, control or
management, or otherwise), shall be deemed to be a transfer of an interest in
the Property. Notwithstanding the foregoing, however, (i) limited partnership
interests in Grantor or in any general partner of Grantor shall be freely
transferable without the consent of Grantee, and (ii) any involuntary transfer
caused by the death of Grantor or any general partner, shareholder, joint
venturer, or beneficial owner of a trust shall not be a default under this
Security Deed so long as Grantor is reconstituted, if required, following such
death and so long as those persons responsible for the management of the
Property remain unchanged as a result of such death or any replacement
management is approved by Grantee.
(b) Notwithstanding the foregoing provisions of this Section, Grantee
shall consent to a one time sale, conveyance or transfer of the Property in its
entirety (hereinafter,
24
<PAGE>
EXHIBIT 10.2
"SALE") to any person or entity provided that each of the following terms and
conditions are satisfied:
(1) No default is then continuing hereunder or under any of the
other Loan Documents;
(2) Grantor gives Grantee written notice of the terms of such
prospective Sale not less than sixty (60) days before the date on which
such Sale is scheduled to close and, concurrently therewith, gives Grantee
all such information concerning the proposed transferee of the Property
(hereinafter, "BUYER") as Grantee would require in evaluating an initial
extension of credit to a borrower and pays to Grantee a non-refundable
application fee in the amount of $2,500.00. Grantee shall have the right to
approve or disapprove the proposed Buyer. In determining whether to give
or withhold its approval of the proposed Buyer, Grantee shall consider the
Buyer's experience and track record in owning and operating facilities
similar to the Property, the Buyer's financial strength, the Buyer's
general business standing and the Buyer's relationships and experience with
contractors, vendors, tenants, lenders and other business entities;
provided, however, that, notwithstanding Grantee's agreement to consider
the foregoing factors in determining whether to give or withhold such
approval, such approval shall be given or withheld based on what Grantee
determines to be commercially reasonable in Grantee's sole discretion and,
if given, may be given subject to such conditions as Grantee may deem
appropriate;
(3) Grantor pays Grantee, concurrently with the closing of such
Sale, a non-refundable assumption fee in an amount equal to all out-of-
pocket costs and expenses, including, without limitation, attorneys' fees,
incurred by Grantee in connection with the Sale, plus an amount equal to
one percent (1.0%) of the then outstanding principal balance of the Note;
(4) The Buyer assumes and agrees to pay the indebtedness secured
hereby subject to the provisions of Section 4.27 hereof and, prior to or
------------
concurrently with the closing of such Sale, the Buyer executes, without any
cost or expense to Grantee, such documents and agreements as Grantee shall
reasonably require to evidence and effectuate said assumption and delivers
such legal opinions as Grantee may require;
(5) Grantor and the Buyer execute, without any cost or expense
to Grantee, new financing statements or financing statement amendments and
any additional documents reasonably requested by Grantee;
(6) Grantor delivers to Grantee, without any cost or expense to
Grantee, such endorsements to Grantee's title insurance policy, hazard
insurance endorsements or certificates and other similar materials as
Grantee may deem necessary at the time of the
25
<PAGE>
EXHIBIT 10.2
Sale, all in form and substance satisfactory to Grantee, including, without
limitation, an endorsement or endorsements to Grantee's title insurance
policy insuring the lien of this Security Deed, extending the effective
date of such policy to the date of execution and delivery (or, if later, of
recording) of the assumption agreement referenced above in subparagraph (4)
----------------
of this Section, with no additional exceptions added to such policy, and
insuring that fee simple title to the Property is vested in the Buyer;
(7) Grantor executes and delivers to Grantee, without any cost
or expense to Grantee, a release of Grantee, its officers, directors,
employees and agents, from all claims and liability relating to the
transactions evidenced by the Loan Documents, through and including the
date of the closing of the Sale, which agreement shall be in form and
substance satisfactory to Grantee and shall be binding upon the Buyer;
(8) Subject to the provisions of Section 4.27 hereof, such Sale
------------
is not construed so as to relieve Grantor of any personal liability under
the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising prior to or simultaneously with the
closing of such Sale, and Grantor executes, without any cost or expense to
Grantee, such documents and agreements as Grantee shall reasonably require
to evidence and effectuate the ratification of said personal liability; and
(9) Such Sale is not construed so as to relieve any current
guarantor or indemnitor of its obligations under any guaranty or indemnity
agreement executed in connection with the loan secured hereby and each such
current guarantor and indemnitor executes, without any cost or expense to
Grantee, such documents and agreements as Grantee shall reasonably require
to evidence and effectuate the ratification of each such guaranty and
indemnity agreement, provided that if the Buyer or a party associated with
the Buyer approved by Grantee in its sole discretion assumes the
obligations of the current guarantor or indemnitor under its guaranty or
indemnity agreement and the Buyer or such party associated with the Buyer,
as applicable, executes, without any cost or expense to Grantee, a new
guaranty or indemnity agreement in form and substance satisfactory to
Grantee, then Grantee shall release the current guarantor or indemnitor
from all obligations arising under its guaranty or indemnity agreement
after the closing of such Sale.
1.14 Payment of Utilities, Assessments, Charges, Etc. Grantor shall pay
-----------------------------------------------
when due all utility charges which are incurred by Grantor or which may become a
charge or lien against any portion of the Property for gas, electricity, water
and sewer services furnished to the Real Estate and/or the Improvements and all
other assessments or charges of a similar nature, or assessments payable
pursuant to any restrictive covenants, whether public or private, affecting the
Real Estate and/or the Improvements or any portion thereof, whether or not such
assessments or charges are or may become liens thereon.
26
<PAGE>
EXHIBIT 10.2
1.15 Access Privileges and Inspections. Grantee and the agents,
---------------------------------
representatives and employees of Grantee shall, subject to the rights of
tenants, have full and free access to the Real Estate and the Improvements and
any other location where books and records concerning the Property are kept at
all reasonable times during normal business hours upon reasonable advance notice
for the purposes of inspecting the Property and of examining, copying and making
extracts from the books and records of Grantor relating to the Property.
Grantor shall lend assistance to all such agents, representatives and employees
of Grantee.
1.16 Waste; Alteration of Improvements. Grantor shall not commit, suffer
---------------------------------
or permit any waste on the Property nor take any actions that might invalidate
any insurance carried on the Property. Grantor shall maintain the Property in
good condition and repair. No part of the Improvements may be removed,
demolished or materially altered, without the prior written consent of Grantee.
Without the prior written consent of Grantee, Grantor shall not commence
construction of any improvements on the Real Estate other than improvements
required for the maintenance or repair of the Property.
1.17 Zoning. Without the prior written consent of Grantee, Grantor shall
------
not seek, make, suffer, consent to or acquiesce in any change in the zoning or
conditions of use of the Real Estate or the Improvements. Grantor shall comply
with and make all payments required under the provisions of any covenants,
conditions or restrictions affecting the Real Estate or the Improvements.
Grantor shall comply with all existing and future requirements of all
governmental authorities having jurisdiction over the Property. Grantor shall
keep all licenses, permits, franchises and other approvals necessary for the
operation of the Property in full force and effect. Grantor shall operate the
Property as an apartment development for so long as the indebtedness secured
hereby is outstanding. If, under applicable zoning provisions, the use of all
or any part of the Real Estate or the Improvements is or becomes a nonconforming
use, Grantor shall not cause or permit such use to be discontinued or abandoned
without the prior written consent of Grantee. Further, without Grantee's prior
written consent, Grantor shall not file or subject any part of the Real Estate
or the Improvements to any declaration of condominium or co-operative or convert
any part of the Real Estate or the Improvements to a condominium, co-operative
or other form of multiple ownership and governance.
1.18 Financial Statements and Books and Records. Grantor shall keep
------------------------------------------
accurate books and records of account of the Property and its own financial
affairs sufficient to permit the preparation of financial statements therefrom
in accordance with generally accepted accounting principles. Grantee and its
duly authorized representatives shall have the right to examine, copy and audit
Grantor's records and books of account at all reasonable times. So long as this
Security Deed continues in effect, Grantor shall provide to Grantee, in addition
to any other financial statements required hereunder or under any of the other
Loan Documents, the following financial statements and information, all of which
must be certified to Grantee as being true and correct by Grantor or the entity
to which they pertain, as applicable, be prepared in accordance with
27
<PAGE>
EXHIBIT 10.2
generally accepted accounting principles consistently applied and be in form and
substance acceptable to Grantee:
(a) copies of all tax returns filed by Grantor, within thirty (30) days
after the date of filing;
(b) monthly operating statements for the Property, within ten (10) days
after the end of each month during the first six (6) months of the term of the
loan secured hereby;
(c) quarterly operating statements for the Property, within thirty (30)
days after the end of each calendar quarter;
(d) annual balance sheets for the Property and annual financial statements
for Grantor, each principal or general partner in Grantor, and each indemnitor
and guarantor under any indemnity or guaranty executed in connection with the
loan secured hereby, within ninety (90) days after the end of each calendar
year; and
(e) such other information with respect to the Property, Grantor, the
principals or general partners in Grantor, and each indemnitor and guarantor
under any indemnity or guaranty executed in connection with the loan secured
hereby, which may be requested from time to time by Grantee, within a reasonable
time after the applicable request.
If any of the aforementioned materials are not furnished to Grantee within the
applicable time periods or Grantee is dissatisfied with the contents of any of
the foregoing, in addition to any other rights and remedies of Grantee contained
herein, Grantee shall have the right, but not the obligation, to obtain the same
by means of an audit by an independent certified public accountant selected by
Grantee, in which event Grantor agrees to pay, or to reimburse Grantee for, any
expense of such audit and further agrees to provide all necessary information to
said accountant and to otherwise cooperate in the making of such audit.
1.19 Further Documentation. Grantor shall, on the request of Grantee and
---------------------
at the expense of Grantor: (a) promptly correct any defect, error or omission
which may be discovered in the contents of this Security Deed or in the contents
of any of the other Loan Documents; (b) promptly execute, acknowledge, deliver
and record or file such further instruments (including, without limitation,
further mortgages, deeds of trust, security deeds, security agreements,
financing statements, continuation statements and assignments of rents or
leases) and promptly do such further acts as may be necessary, desirable or
proper to carry out more effectively the purposes of this Security Deed and the
other Loan Documents and to subject to the liens and security interests hereof
and thereof any property intended by the terms hereof and thereof to be covered
hereby and thereby, including specifically, but without limitation, any
renewals, additions, substitutions, replacements or appurtenances to the
Property; (c) promptly execute,
28
<PAGE>
EXHIBIT 10.2
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by Grantee to
protect, continue or perfect the liens or the security interests hereunder
against the rights or interests of third persons; and (d) promptly furnish to
Grantee, upon Grantee's request, a duly acknowledged written statement and
estoppel certificate addressed to such party or parties as directed by Grantee
and in form and substance supplied by Grantee, setting forth all amounts due
under the Note, stating whether any event has occurred which, with the passage
of time or the giving of notice or both, would constitute an event of default
hereunder, stating whether any offsets or defenses exist against the
indebtedness secured hereby and containing such other matters as Grantee may
reasonably require.
1.20 Payment of Costs; Reimbursement to Grantee. Grantor shall pay all
------------------------------------------
costs and expenses of every character incurred in connection with the closing of
the loan evidenced by the Note and secured hereby or otherwise attributable or
chargeable to Grantor as the owner of the Property, including, without
limitation, appraisal fees, recording fees, documentary, stamp, mortgage or
intangible taxes, brokerage fees and commissions, title policy premiums and
title search fees, uniform commercial code/tax lien/litigation search fees,
escrow fees and attorneys' fees. If Grantor defaults in any such payment, which
default is not cured within any applicable grace or cure period, Grantee may pay
the same and Grantor shall reimburse Grantee on demand for all such costs and
expenses incurred or paid by Grantee, together with such interest thereon at the
Default Interest Rate from and after the date of Grantee's making such payment
until reimbursement thereof by Grantor. Any such sums disbursed by Grantee,
together with such interest thereon, shall be additional indebtedness of Grantor
secured by this Security Deed and by all of the other Loan Documents securing
all or any part of the indebtedness evidenced by the Note. Further, Grantor
shall promptly notify Grantee in writing of any litigation or threatened
litigation affecting the Property, or any other demand or claim which, if
enforced, could impair or threaten to impair Grantee's security hereunder.
Without limiting or waiving any other rights and remedies of Grantee hereunder,
if Grantor fails to perform any of its covenants or agreements contained in this
Security Deed or in any of the other Loan Documents and such failure is not
cured within any applicable grace or cure period, or if any action or proceeding
of any kind (including, but not limited to, any bankruptcy, insolvency,
arrangement, reorganization or other debtor relief proceeding) is commenced
which might affect Grantee's interest in the Property or Grantee's right to
enforce its security, then Grantee may, at its option, with or without notice to
Grantor, make any appearances, disburse any sums and take any actions as may be
necessary or desirable to protect or enforce the security of this Security Deed
or to remedy the failure of Grantor to perform its covenants and agreements
(without, however, waiving any default of Grantor). Grantor agrees to pay on
demand all expenses of Grantee incurred with respect to the foregoing
(including, but not limited to, fees and disbursements of counsel), together
with interest thereon at the Default Interest Rate from and after the date on
which Grantee incurs such expenses until reimbursement thereof by Grantor. Any
such expenses so incurred by Grantee, together with interest thereon as provided
above, shall be additional indebtedness of Grantor secured by this Security Deed
and by all of the other Loan Documents securing all or any part of the
indebtedness
29
<PAGE>
EXHIBIT 10.2
evidenced by the Note. The necessity for any such actions and of the amounts to
be paid shall be determined by Grantee in its discretion. Grantee is hereby
empowered to enter and to authorize others to enter upon the Property or any
part thereof for the purpose of performing or observing any such defaulted term,
covenant or condition without thereby becoming liable to Grantor or any person
in possession holding under Grantor. Grantor hereby acknowledges and agrees that
the remedies set forth in this Section 1.20 shall be exercisable by Grantee, and
------------
any and all payments made or costs or expenses incurred by Grantee in connection
therewith shall be secured hereby and shall be, without demand, immediately
repaid by Grantor with interest thereon at the Default Interest Rate,
notwithstanding the fact that such remedies were exercised and such payments
made and costs incurred by Grantee after the filing by Grantor of a voluntary
case or the filing against Grantor of an involuntary case pursuant to or within
the meaning of the Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C.,
or after any similar action pursuant to any other debtor relief law (whether
statutory, common law, case law or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable to Grantor,
Grantee, any guarantor or indemnitor, the secured indebtedness or any of the
Loan Documents. Grantor hereby indemnifies and holds Grantee harmless from and
against all loss, cost and expenses with respect to any default hereof, any
liens (i.e., judgments, mechanics' and materialmen's liens, or otherwise),
charges and encumbrances filed against the Property, and from any claims and
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Real Estate or the Improvements or any nuisance
made or suffered thereon, including, in any case, attorneys' fees, costs and
expenses as aforesaid, whether at pretrial, trial or appellate level, and such
indemnity shall survive payment in full of the indebtedness secured hereby. This
Section shall not be construed to require Grantee to incur any expenses, make
any appearances or take any actions.
1.21 Security Interest. This Security Deed is also intended to encumber
-----------------
and create a security interest in, and Grantor hereby grants to Grantee a
security interest in all sums on deposit with Grantee pursuant to the provisions
of Sections 1.6, 1.7 and 1.8 hereof or any other Section hereof and all
------------ --- ---
fixtures, chattels, accounts, equipment, inventory, contract rights, general
intangibles and other personal property included within the Property, all
renewals, replacements of any of the aforementioned items, or articles in
substitution therefor or in addition thereto or the proceeds thereof (said
property is hereinafter referred to collectively as the "COLLATERAL"), whether
or not the same shall be attached to the Real Estate or the Improvements in any
manner. It is hereby agreed that to the extent permitted by law, all of the
foregoing property is to be deemed and held to be a part of and affixed to the
Real Estate and the Improvements. The foregoing security interest shall also
cover Grantor's leasehold interest in any of the foregoing property which is
leased by Grantor. Notwithstanding the foregoing, all of the foregoing property
shall be owned by Grantor and no leasing or installment sales or other financing
or title retention agreement in connection therewith shall be permitted without
the prior written approval of Grantee. Grantor shall, from time to time upon the
request of Grantee, supply Grantee with a
30
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EXHIBIT 10.2
current inventory of all of the property in which Grantee is granted a security
interest hereunder, in such detail as Grantee may require. Grantor shall
promptly replace all of the Collateral subject to the lien or security interest
of this Security Deed when worn or obsolete with Collateral comparable to the
worn out or obsolete Collateral when new and will not, without the prior written
consent of Grantee, remove from the Real Estate or the Improvements any of the
Collateral subject to the lien or security interest of this Security Deed except
such as is replaced by an article of equal suitability and value as above
provided, owned by Grantor free and clear of any lien or security interest
except that created by this Security Deed and the other Loan Documents and
except as otherwise expressly permitted by the terms of Section 1.13 of this
------------
Security Deed. All of the Collateral shall be kept at the location of the Real
Estate except as otherwise required by the terms of the Loan Documents. Grantor
shall not use any of the Collateral in violation of any applicable statute,
ordinance or insurance policy.
1.22 Security Agreement. This Security Deed constitutes a security
------------------
agreement between Grantor and Grantee with respect to the Collateral in which
Grantee is granted a security interest hereunder, and, cumulative of all other
rights and remedies of Grantee hereunder, Grantee shall have all of the rights
and remedies of a secured party under any applicable Uniform Commercial Code.
Grantor hereby agrees to execute and deliver on demand and hereby irrevocably
constitutes and appoints Grantee the attorney-in-fact of Grantor to execute and
deliver and, if appropriate, to file with the appropriate filing officer or
office such security agreements, financing statements, continuation statements
or other instruments as Grantee may request or require in order to impose,
perfect or continue the perfection of the lien or security interest created
hereby. Except with respect to Rents and Profits to the extent specifically
provided herein to the contrary, Grantee shall have the right of possession of
all cash, securities, instruments, negotiable instruments, documents,
certificates and any other evidences of cash or other property or evidences of
rights to cash rather than property, which are now or hereafter a part of the
Property, and Grantor shall promptly deliver the same to Grantee, endorsed to
Grantee, without further notice from Grantee. Grantor agrees to furnish Grantee
with notice of any change in the name, identity, corporate structure, residence,
or principal place of business or mailing address of Grantor within ten (10)
days of the effective date of any such change. Upon the occurrence of any
default hereunder not cured within any applicable grace or cure period, Grantee
shall have the rights and remedies as prescribed in this Security Deed, or as
prescribed by general law, or as prescribed by any applicable Uniform Commercial
Code, all at Grantee's election. Any disposition of the Collateral may be
conducted by an employee or agent of Grantee. Any person, including both Grantor
and Grantee, shall be eligible to purchase any part or all of the Collateral at
any such disposition. Expenses of retaking, holding, preparing for sale, selling
or the like (including, without limitation, Grantee's attorneys' fees and legal
expenses), together with interest thereon at the Default Interest Rate from the
date incurred by Grantee until actually paid by Grantor, shall be paid by
Grantor on demand and shall be secured by this Security Deed and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note. Grantee shall have the right to enter upon the Real Estate and the
Improvements or any real property where any of the
31
<PAGE>
EXHIBIT 10.2
property which is the subject of the security interest granted herein is located
to take possession of, assemble and collect the same or to render it unusable,
or Grantor, upon demand of Grantee, shall assemble such property and make it
available to Grantee at the Real Estate, a place which is hereby deemed to be
reasonably convenient to Grantee and Grantor. If notice is required by law,
Grantee shall give Grantor at least ten (10) days' prior written notice of the
time and place of any public sale of such property or of the time of or after
which any private sale or any other intended disposition thereof is to be made,
and if such notice is sent to Grantor, as the same is provided for the mailing
of notices herein, it is hereby deemed that such notice shall be and is
reasonable notice to Grantor. No such notice is necessary for any such property
which is perishable, threatens to decline speedily in value or is of a type
customarily sold on a recognized market. Any sale made pursuant to the
provisions of this Section shall be deemed to have been a public sale conducted
in a commercially reasonable manner if held contemporaneously with the
foreclosure sale as provided in Section 3.1(e) hereof upon giving the same
--------------
notice with respect to the sale of the Property hereunder as is required under
sold Section 3.1(e). Furthermore, to the extent permitted by law, in conjunction
--------------
with, in addition to or in substitution for the rights and remedies available to
Grantee pursuant to any applicable Uniform Commercial Code:
(a) In the event of a foreclosure sale, the Property may, at the option of
Grantee, be sold as a whole; and
(b) It shall not be necessary that Grantee take possession of the
aforementioned Collateral, or any part thereof, prior to the time that any sale
pursuant to the provisions of this Section is conducted and it shall not be
necessary that said Collateral, or any part thereof, be present at the location
of such sale; and
(c) Grantee may appoint or delegate any one or more persons as agent to
perform any act or acts necessary or incident to any sale held by Grantee,
including the sending of notices and the conduct of the sale, but in the name
and on behalf of Grantee.
The name and address of Grantor (as Debtor under any applicable Uniform
Commercial Code) are:
WASHINGTON TOWNE APARTMENTS L.L.C.
2420 Heaton Drive
East Point, Georgia
The name and address of Grantee (as Secured Party under any applicable Uniform
Commercial Code) are:
First Union National Bank of North Carolina
One First Union Center, TW-8
Charlotte, North Carolina 28288
32
<PAGE>
EXHIBIT 10.2
1.23 Easements and Rights-of-Way. Grantor shall not grant any easement or
---------------------------
right-of-way with respect to all or any portion of the Real Estate or the
Improvements without the prior written consent of Grantee, which consent shall
not be unreasonably withheld. The purchaser at any foreclosure sale hereunder
may, at its discretion, disaffirm any easement or right-of-way granted in
violation of any of the provisions of this Security Deed and may take immediate
possession of the Property free from, and despite the terms of, such grant of
easement or right-of-way. If Grantee consents to the grant of an easement or
right-of-way, Grantee agrees to grant such consent provided that Grantee is paid
a standard review fee together with all other expenses, including, without
limitation, attorneys' fees, incurred by Grantee in the review of Grantor's
request and in the preparation of documents effecting the subordination.
1.24 Compliance with Laws. Grantor shall at all times comply with all
--------------------
statutes, ordinances, regulations and other governmental or quasi-governmental
requirements and private covenants now or hereafter relating to the ownership,
construction, use or operation of the Property, including, but not limited to,
those concerning employment and compensation of persons engaged in operation and
maintenance of the Property and any environmental or ecological requirements,
even if such compliance shall require structural changes to the Property;
provided, however, that, Grantor may, upon providing Grantee with security
satisfactory to Grantee, proceed diligently and in good faith to contest the
validity or applicability of any such statute, ordinance, regulation or
requirement so long as during such contest the Property shall not be subject to
any lien, charge, fine or other liability and shall not be in danger of being
forfeited, lost or closed. Grantor shall not use or occupy, or allow the use or
occupancy of, the Property in any manner which violates any lease of or any
other agreement applicable to the Property or any applicable law, rule,
regulation or order or which constitutes a public or private nuisance or which
makes void, voidable or cancelable, or increases the premium of, any insurance
then in force with respect thereto.
1.25 Additional Taxes. In the event of the enactment after this date of
----------------
any law of the state where the Property is located or of any other governmental
entity deducting from the value of the Property for the purpose of taxation any
lien or security interest thereon, or imposing upon Grantee the payment of the
whole or any part of the taxes or assessments or charges or liens herein
required to be paid by Grantor, or changing in any way the laws relating to the
taxation of mortgages or security agreements or debts secured by mortgages or
security agreements or the interest of the grantee or secured party in the
property covered thereby, or the manner of collection of such taxes, so as to
adversely affect this Security Deed or the indebtedness secured hereby or
Grantee, then, and in any such event, Grantor, upon demand by Grantee, shall pay
such taxes, assessments, charges or liens, or reimburse Grantee therefor;
provided, however, that if in the opinion of counsel for Grantee (a) it might be
unlawful to require Grantor to make such payment, or (b) the making of such
payment might result in the imposition of interest beyond the maximum amount
permitted by law, then and in either such event, Grantee may elect, by notice
33
<PAGE>
EXHIBIT 10.2
in writing given to Grantor, to declare all of the indebtedness secured hereby
to be and become due and payable in full thirty (30) days from the giving of
such notice.
1.26 Secured Indebtedness. It is understood and agreed that this Security
--------------------
Deed shall secure payment of not only the indebtedness evidenced by the Note but
also any and all substitutions, replacements, renewals and extensions of the
Note, any and all indebtedness and obligations arising pursuant to the terms
hereof and any and all indebtedness and obligations arising pursuant to the
terms of any of the other Loan Documents, all of which indebtedness is equally
secured with and has the same priority as any amounts advanced as of the date
hereof. It is agreed that any future advances made by Grantee to or for the
benefit of Grantor from time to time under this Security Deed or the other Loan
Documents and whether or not such advances are obligatory or are made at the
option of Grantee, or otherwise, made for any purpose, within twenty (20) years
from the date hereof, and all interest accruing thereon, shall be equally
secured by this Security Deed and shall have the same priority as all amounts,
if any, advanced as of the date hereof and shall be subject to all of the terms
and provisions of this Security Deed.
1.27 Grantor's Waivers. To the full extent permitted by law, Grantor
-----------------
agrees that Grantor shall not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, moratorium or extension, or any law now or
hereafter in force providing for the reinstatement of the indebtedness secured
hereby prior to any sale of the Property to be made pursuant to any provisions
contained herein or prior to the entering of any decree, judgment or order of
any court of competent jurisdiction, or any right under any statute to redeem
all or any part of the Property so sold. Grantor, for Grantor and Grantor's
successors and assigns, and for any and all persons ever claiming any interest
in the Property, to the full extent permitted by law, hereby knowingly,
intentionally and voluntarily with and upon the advice of competent counsel: (a)
waives, releases, relinquishes and forever forgoes all rights of valuation,
appraisement, stay of execution, reinstatement and notice of election or
intention to mature or declare due the secured indebtedness (except such notices
as are specifically provided for herein); (b) waives, releases, relinquishes and
forever forgoes all right to a marshalling of the assets of Grantor, including
the Property, to a sale in the inverse order of alienation, or to direct the
order in which any of the Property shall be sold in the event of foreclosure of
the liens and security interests hereby created and agrees that any court having
jurisdiction to foreclose such liens and security interests may order the
Property sold as an entirety; and (c) waives, releases, relinquishes and forever
forgoes all rights and periods of redemption provided under applicable law. To
the full extent permitted by law, Grantor shall not have or assert any right
under any statute or rule of law pertaining to the exemption of homestead or
other exemption under any federal, state or local law now or hereafter in
effect, the administration of estates of decedents or other matters whatever to
defeat, reduce or affect the right of Grantee under the terms of this Security
Deed to a sale of the Property, for the collection of the secured indebtedness
without any prior or different resort for collection, or the right of Grantee
under the terms of this Security Deed to the payment of the indebtedness secured
hereby
34
<PAGE>
EXHIBIT 10.2
out of the proceeds of sale of the Property in preference to every other
claimant whatever. Further, Grantor hereby knowingly, intentionally and
voluntarily, with and upon the advice of competent counsel, waives, releases,
relinquishes and forever forgoes all present and future statutes of limitations
as a defense to any action to enforce the provisions of this Security Deed or to
collect any of the indebtedness secured hereby to the fullest extent permitted
by law. Grantor covenants and agrees that upon the commencement of a voluntary
or involuntary bankruptcy proceeding by or against Grantor, Grantor shall not
seek a supplemental stay or otherwise shall not seek pursuant to 11 U.S. C.
(S)105 or any other provision of the Bankruptcy Reform Act of 1978, as amended,
or any other debtor relief law (whether statutory, common law, case law, or
otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may
be or become applicable, to stay, interdict, condition, reduce or inhibit the
ability of Grantee to enforce any rights of Grantee against any guarantor or
indemnitor of the secured obligations or any other party liable with respect
thereto by virtue of any indemnity, guaranty or otherwise.
1.28 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
-------------------------------------------------
(A) GRANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(I) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF GEORGIA OVER ANY SUIT,
ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THE NOTE, THIS
SECURITY DEED OR ANY OTHER OF THE LOAN DOCUMENTS, (II) AGREES THAT ANY SUCH
ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION SITTING IN FULTON COUNTY, GEORGIA, (III) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND (IV) TO THE FULLEST EXTENT PERMITTED BY LAW,
AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM
(BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF GRANTEE TO BRING ANY ACTION, SUIT
OR PROCEEDING IN ANY OTHER FORUM). GRANTOR FURTHER CONSENTS AND AGREES TO
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO
THE GRANTOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 4.5 HEREOF, AND
-----------
CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(B) GRANTOR AND GRANTEE, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, WAIVE, RELINQUISH AND
35
<PAGE>
EXHIBIT 10.2
FOREVER FORGO THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THE INDEBTEDNESS SECURED HEREBY
OR ANY CONDUCT, ACT OR OMISSION OF GRANTEE OR GRANTOR, OR ANY OF THEIR
DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY
OTHER PERSONS AFFILIATED WITH GRANTEE OR GRANTOR, IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
1.29 Contractual Statute of Limitations. Grantor hereby agrees that any
----------------------------------
claim or cause of action by Grantor against Grantee, or any of Grantee's
directors, officers, employees, agents, accountants or attorneys, based upon,
arising from or relating to the indebtedness secured hereby, or any other
matter, cause or thing whatsoever, whether or not relating thereto, occurred,
done, omitted or suffered to be done by Grantee or by Grantee's directors,
officers, employees, agents, accountants or attorneys, whether sounding in
contract or in tort or otherwise, shall be barred unless asserted by Grantor by
the commencement of an action or proceeding in a court of competent jurisdiction
by the filing of a complaint within one (1) year after Grantor first acquires or
reasonably should have acquired knowledge of the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is based
and service of a summons and compliant on an officer of Grantee or any other
person authorized to accept service of process on behalf of Grantee, within
thirty (30) days thereafter. Grantor agrees that such one (1) year period of
time is reasonable and sufficient time for a borrower to investigate and act
upon any such claim or cause of action. The one (1) year period provided herein
shall not be waived, tolled or extended except by the specific written agreement
of Grantee. This provision shall survive any termination of this Security Deed
or any of the other Loan Documents.
1.30 Management. The management of the Property shall be by either: (a)
----------
Grantor or an entity affiliated with Grantor approved by Grantee for so long as
Grantor or said affiliated entity is managing the Property in a first class
manner; or (b) a professional property management company approved by Grantee.
Such management by an affiliated entity or a professional property management
company shall be pursuant to a written agreement approved by Grantee. In no
event shall any manager be removed or replaced or the terms of any management
agreement materially modified or materially amended without the prior written
consent of Grantee. In the event of default hereunder or under any management
contract then in effect, which default is not cured within any applicable grace
or cure period, Grantee shall have the right to terminate, or to direct Grantor
to terminate, such management contract upon thirty (30) days' notice and to
retain, or to direct Grantor to retain, a new management agent approved by
Grantee. All Rents and Profits generated by or derived from the Property shall
first be utilized solely for current expenses directly attributable to the
ownership and operation of the Property, including, without limitation, current
expenses relating to Grantor's liabilities and obligations with respect to this
Security Deed and the other Loan Documents, and none of the Rents and Profits
generated by or derived from
36
<PAGE>
EXHIBIT 10.2
the Property shall be diverted by Grantor and utilized for any other purposes
unless all such current expenses attributable to the ownership and operation of
the Property have been fully paid and satisfied.
1.31 Hazardous Waste and Other Substances.
------------------------------------
(a) Grantor hereby represents and warrants to Grantee that, as of the
date hereof: (i) to the best of Grantor's knowledge, information and belief, the
Property is not in direct or indirect violation of any local, state or federal
law, rule or regulation pertaining to environmental regulation, contamination or
clean-up (collectively, "ENVIRONMENTAL LAWS"), including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. (S)9601 et seq. and 40 CFR (S)302.1 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. (S)6901 et seq.)The Federal
Water Pollution Control Act (33 U.S.C. (S) 1251 et seq. and 40 CFR (S)116.1 et
seq. and the Hazardous Materials Transportation Act (49 U.S.C. (S)1801 et seq.),
the Georgia Hazardous Waste Management Act, as amended, O.C.G.A. (S) 12-8-60 et
seq., the Georgia Oil or Hazardous Materials Spills or Releases Act, as amended,
O.C.G.A. (S) 12-14-1 et seq., the Georgia Comprehensive Solid Waste Management
Act, as amended, O.C.G.A. (S) 12-8-20 et seq., the Georgia Asbestos Safety Act,
as amended, O.C.G.A. (S) 12-12-1 et seq., the Georgia Underground Storage Tank
Act, as amended, O.C.G.A. (S) 12-13-1 et seq., and regulations promulgated
pursuant thereto by the Georgia Department of Natural Resources Environmental
Protection Division and the regulations promulgated pursuant to said laws, all
as amended; (ii) no hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls, petroleum products, flammable explosives, radioactive
materials, infectious substances or raw materials which include hazardous
constituents) or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, "HAZARDOUS SUBSTANCES") are
located on or have been handled, generated, stored, processed or disposed of on
or released or discharged from the Property (including underground
contamination), except for those substances used by Grantor in the ordinary
course of its business and in compliance with all Environmental Laws; (iii) the
Property is not subject to any private or governmental lien or judicial or
administrative notice or action relating to Hazardous Substances; (iv) there are
no existing or closed underground storage tanks or other underground storage
receptacles for Hazardous Substances on the Property; (v) Grantor has received
no notice of, and to the best of Grantor's knowledge and belief, there exists no
investigation, action, proceeding or claim by any agency, authority or unit of
government or by any third party which could result in any liability, penalty,
sanction or judgment under any Environmental Laws with respect to any condition,
use or operation of the Property, nor does Grantor know of any basis for such a
claim; and (vi) Grantor has received no notice of and, to the best of Grantor's
knowledge and belief, there has been no claim by any party that any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property, nor does Grantor know of
any basis for such a claim.
37
<PAGE>
EXHIBIT 10.2
(b) Grantor shall keep or cause the Property to be kept free from
Hazardous Substances (except those substances used by Grantor in the ordinary
course of its business and in compliance with all Environmental Laws) and in
compliance with all Environmental Laws, shall not install or use any underground
storage tanks, shall expressly prohibit the use, generation, handling, storage,
production, processing and disposal of Hazardous Substances by all tenants of
space in the Improvements, and, without limiting the generality of the
foregoing, during the term of this Security Deed, shall not install in the
Improvements or permit to be installed in the Improvements asbestos or any
substance containing asbestos.
(c) Grantor shall promptly notify Grantee if Grantor shall become
aware of the possible existence of any Hazardous Substances on the Property or
if Grantor shall become aware that the Property is or may be in direct or
indirect violation of any Environmental Laws. Further, immediately upon receipt
of the same, Grantor shall deliver to Grantee copies of any and all orders,
notices, permits, applications, reports, and other communications, documents and
instruments pertaining to the actual, alleged or potential presence or existence
of any Hazardous Substances at, on, about, under, within, near or in connection
with the Property. Grantor shall, promptly and when and as required by Grantee,
at Grantor's sole cost and expense, take all actions as shall be necessary or
advisable, in Grantee's discretion, for the clean-up of any and all portions of
the Property or other affected property, including, without limitation, all
investigative, monitoring, removal, containment and remedial actions in
accordance with all applicable Environmental Laws (and in all events in a manner
satisfactory to Grantee) and shall further pay or cause to be paid, at no
expense to Grantee, all clean-up, administrative and enforcement costs of
applicable governmental agencies which may be asserted against the Property. In
the event Grantor fails to do so, Grantee may, but shall not be obligated to,
cause the Property or other affected property to be freed from any Hazardous
Substances or otherwise brought into conformance with Environmental Laws and any
and all costs and expenses incurred by Grantee in connection therewith, together
with interest thereon at the Default Interest Rate from the date incurred by
Grantee until actually paid by Grantor, shall be immediately paid by Grantor on
demand and shall be secured by this Security Deed and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.
Grantor hereby grants to Grantee and its agents and employees access to the
Property and a license to remove any items deemed by Grantee to be Hazardous
Substances and to do all things Grantee shall deem necessary to bring the
Property in conformance with Environmental Laws. Grantor covenants and agrees,
at Grantor's sole cost and expense, to indemnify, defend (at trial and appellate
levels, and with attorneys, consultants and experts acceptable to Grantee), and
hold Grantee harmless from and against any and all liens, damages, losses,
liabilities, obligations, settlement payments, penalties, assessments,
citations, directives, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses of any kind or of any nature
whatsoever (including, without limitation, attorneys', consultants' and experts'
fees and disbursements actually incurred in investigating, defending, settling
or prosecuting any claim, litigation or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded against Grantee or the
Property,
38
<PAGE>
EXHIBIT 10.2
and arising directly or indirectly from or out of: (i) the presence, release or
threat of release of any Hazardous Substances on, in, under or affecting all or
any portion of the Property or any surrounding areas, regardless of whether or
not caused by or within the control of Grantor; (ii) the violation of any
Environmental Laws relating to or affecting the Property, whether or not caused
by or within the control of Grantor; (iii) the failure by Grantor to comply
fully with the terms and conditions of this Section 1.31; (iv) the breach of any
-------------
representation or warranty contained in this Section 1.31; or (v) the
------------
enforcement of this Section 1.31, including, without limitation, the cost of
------------
assessment, containment and/or removal of any and all Hazardous Substances from
all or any portion of the Property or any surrounding areas, the cost of any
actions taken in response to the presence, release or threat of release of any
Hazardous Substances on, in, under or affecting any portion of the Property or
any surrounding areas to prevent or minimize such release or threat of release
so that it does not migrate or otherwise cause or threaten danger to present or
future public health, safety, welfare or the environment, and costs incurred to
comply with the Environmental Laws in connection with all or any portion of the
Property or any surrounding areas. The indemnity set forth in this Section
-------
1.31(c) shall also include any diminution in the value of the security afforded
- -------
by the Property or any future reduction in the sales price of the Property by
reason of any matter set forth in this Section 1.31(c). Grantee's rights under
------- -------
this Section shall survive payment in full of the indebtedness secured hereby
and shall be in addition to all other rights of Grantee under this Security
Deed, the Note and the other Loan Documents.
(d) Upon Grantee's request, at any time after the occurrence of a
default hereunder or at such other time as Grantee has reasonable grounds to
believe that Hazardous Substances are or have been released, stored or disposed
of on or around the Property or that the Property may be in violation of the
Environmental Laws, Grantor shall provide, at Grantor's sole cost and expense,
an inspection or audit of the Property prepared by a hydrogeologist or
environmental engineer or other appropriate consultant approved by Grantee
indicating the presence or absence of Hazardous Substances on the Property or an
inspection or audit of the Improvements prepared by an engineering or consulting
firm approved by Grantee indicating the presence or absence of friable asbestos
or substances containing asbestos on the Property. If Grantor fails to provide
such inspection or audit within thirty (30) days after such request, Grantee may
order the same, and Grantor hereby grants to Grantee and its employees and
agents access to the Property and a license to undertake such inspection or
audit. The cost of such inspection or audit, together with interest thereon at
the Default Interest Rate from the date incurred by Grantee until actually paid
by Grantor, shall be immediately due and payable by Grantor on demand and shall
be secured hereby and by all of the other Loan Documents securing all or any
part of the indebtedness evidenced by the Note.
(e) Grantor covenants and agrees to institute, within thirty (30)
days after the date hereof, an operations and maintenance program (the
"Maintenance Program") designed by an environmental consultant, reasonably
satisfactory to the Grantee, with respect to asbestos
39
<PAGE>
EXHIBIT 10.2
containing materials ("ACM's"), consistent with "Guidelines For Controlling
Asbestos-Containing Materials In Buildings" (USEPA, 1985) and other relevant
guidelines, and such Maintenance Program will hereafter continuously remain in
effect until the indebtedness secured hereby is repaid in full. In furtherance
of the foregoing, Grantor shall inspect and maintain all ACM's on a regular
basis and ensure that all ACM's shall be maintained in a condition that prevents
exposure of residents to ACM's at all times. Without limiting the generality of
the preceding sentence, Grantee may reasonably require (i) periodic notices or
reports to Grantee in form, substance and at such intervals as Grantee may
reasonably specify, (ii) an amendment to such Maintenance Program to address
changing circumstances, laws or other matters, (iii) at Grantor's sole expense,
supplemental examination of the Property by consultants reasonably specified by
Grantee, and (iv) variation of the Maintenance Program in response to the
reports provided by any such consultants.
1.32 Indemnification; Subrogation.
----------------------------
(a) Grantor shall indemnify, defend and hold Grantee harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Property or the secured indebtedness, and (ii)
any and all liability, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses (including Grantee's attorneys' fees, together with
appellate counsel fees, if any) of whatever kind or nature which may be asserted
against, imposed on or incurred by Grantee in connection with the secured
indebtedness, this Security Deed, the Property, or any part thereof, or the
exercise by Grantee of any rights or remedies granted to it under this Security
Deed; provided, however, that nothing herein shall be construed to obligate
Grantor to indemnify, defend and hold harmless Grantee from and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses enacted against, imposed on or incurred by Grantee by
reason of Grantee's willful misconduct or gross negligence.
(b) If Grantee is made a party defendant to any litigation or any
claim is threatened or brought against Grantee concerning the secured
indebtedness, this Security Deed, the Property, or any part thereof, or any
interest therein, or the construction, maintenance, operation or occupancy or
use thereof, then Grantor shall indemnify, defend and hold Grantee harmless from
and against all liability by reason of said litigation or claims, including
attorneys' fees (together with appellate counsel fees, if any) and expenses
incurred by Grantee in any such litigation or claim, whether or not any such
litigation or claim is prosecuted to judgment. If Grantee commences an action
against Grantor to enforce any of the terms hereof or to prosecute any breach by
Grantor of any of the terms hereof or to recover any sum secured hereby, Grantor
shall pay to Grantee its attorneys' fees (together with appellate counsel, fees,
if any) and expenses. The right to such attorneys' fees (together with appellate
counsel fees, if any) and expenses shall be deemed to have accrued on the
commencement of such action, and shall be enforceable whether or not such action
is prosecuted to judgment. If Grantor breaches any term of this Security Deed,
40
<PAGE>
EXHIBIT 10.2
Grantee may engage the services of an attorney or attorneys to protect its
rights hereunder, and in the event of such engagement following any breach by
Grantor, Grantor shall pay Grantee attorneys' fees (together with appellate
counsel fees, if any) and expenses incurred by Grantee, whether or not an action
is actually commenced against Grantor by reason of such breach. All references
to "attorneys" in this Subsection and elsewhere in this Security Deed shall
-----------
include, without limitation, any attorney or law firm engaged by Grantee and
Grantee's in-house counsel, and all references to "fees and expenses" in this
-------------------
Subsection and elsewhere in this Security Deed shall include, without
limitation, any fees of such attorney or law firm and any allocation charges and
allocation costs of Grantee's in-house counsel.
(c) A waiver of subrogation shall be obtained by Grantor from its
insurance carrier and, consequently, Grantor waives any and all right to claim
or recover against Grantee, its officers, employees, agents and representatives,
for loss of or damage to Grantor, the Property, Grantor's property or the
property of others under Grantor's control from any cause insured against or
required to be insured against by the provisions of this Security Deed.
1.33 Covenants with Respect to Indebtedness, Operations and Fundamental
------------------------------------------------------------------
Changes of Grantor. Grantor represents, warrants and covenants as of the date
- ---------- -------
hereof and until such time as the indebtedness secured hereby is paid in full,
that Grantor:
(a) will not dissolve or terminate or materially amend the terms of
its articles of organization or operating agreement;
(b) will not enter into any transaction of merger or consolidation,
or liquidate or dissolve itself (or suffer any liquidation or dissolution), or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any stock or other evidence of beneficial ownership of, any entity;
(c) has not and will not guarantee or otherwise become liable on or
in connection with any obligation of any other person or entity;
(d) does not own and will not own any encumbered asset other than (i)
the Property, and (ii) incidental personal property necessary for the operation
of the Property;
(e) is not engaged and will not engage, directly or indirectly, in
any business other than the ownership, management and operation of the Property;
(f) will not enter into any contract or agreement with any general
partner or member, principal or affiliate of Grantor or any affiliate of the
general partner or member of Grantor, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arms-length basis with third parties other than an affiliate;
41
<PAGE>
EXHIBIT 10.2
(g) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the indebtedness secured hereby, and (ii) affiliate advances or trade
payables or accrued expenses incurred in the ordinary course of business of
operating the Property; no other debt may be secured (senior, subordinate or
pari passu) by the Property;
(h) has not made and will not make any loans or advances to any third
party (including any affiliate);
(i) is and will be solvent and pay its debt from its assets as the
same shall become due;
(j) has done or caused to be done and will do all things necessary to
preserve its existence, and will not, nor will any partner, limited or general,
or shareholder thereof, amend, modify or otherwise change its partnership
certificate, partnership agreement, articles of incorporation or bylaws in a
manner which adversely affects Grantor's existence as a single purpose entity;
(k) will conduct and operate its business as presently conducted and
operated;
(l) will maintain books and records and bank accounts separate from
those of its affiliates, including its general partners;
(m) will be, and at all times will hold itself out to the public as,
a legal entity separate and distinct from any other entity (including any
affiliate thereof, including the general partner or any affiliate of the general
partner of the Grantor);
(n) will file its own tax returns;
(o) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
(p) will not seek the dissolution or winding up, in whole or in part,
of Grantor;
(q) will not commingle the funds and other assets of Grantor with
those of any general partner, any affiliate or any other person;
(r) has and will maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or identify its individual assets
from those of any affiliate or any other person;
42
<PAGE>
EXHIBIT 10.2
(s) does not and will not hold itself out to be responsible for the
debts or obligations of any other person;
(t) will not do any act which would make it impossible to carry on
the ordinary business of Grantor;
(u) will not possess or assign the Property or incidental personal
property necessary for the operation of the Property for other than a business
or company purpose;
(v) will not sell, encumber or otherwise dispose of all or
substantially all of the Property or incidental personal property necessary for
the operation of the Property;
(w) will not hold title to Grantor's assets other than in Grantor's
name;
(x) will not institute proceedings to be adjudicated bankrupt or
insolvent; or consent to the institution of bankruptcy or insolvency proceedings
against it; or file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy; or consent to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Grantor or a substantial part of Grantor's
property; or make any assignment for the benefit of creditors; or admit in
writing its inability to pay its debts generally as they become due; or take any
action in furtherance of any such action.
ARTICLE II
EVENTS OF DEFAULT
-----------------
2.1 Events of Default. The occurrence of any of the following events
-----------------
shall be a default hereunder:
(a) Grantor fails to punctually perform any covenant, agreement,
obligation, term or condition hereof which requires payment of any money to
Grantee (except those regarding payments to be made under the Note, which
failure is subject to any grace periods set forth in the Note).
(b) Grantor fails to provide insurance as required by Section 1.4
-----------
hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in Section 1. 15 or Section 1.31 hereof.
------------- ------------
(c) Grantor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein other than those otherwise
described in this Section 2.1 and, to the
-----------
43
<PAGE>
EXHIBIT 10.2
extent such failure or default is susceptible of being cured, the continuance of
such failure or default for thirty (30) days after written notice thereof from
Grantee to Grantor; provided, however, that if such default is susceptible of
cure but such cure cannot be accomplished with reasonable diligence within said
period of time, and if Grantor commences to cure such default promptly after
receipt of notice thereof from Grantee, and thereafter prosecutes the curing of
such default with reasonable diligence, such period of time shall be extended
for such period of time as may be necessary to cure such default with reasonable
diligence, but not to exceed an additional sixty (60) days.
(d) Any representation or warranty made herein, in or in connection
with any application or commitment relating to the loan evidenced by the Note,
or in any of the other Loan Documents to Grantee by Grantor, by any principal or
general partner in Grantor or by any indemnitor or guarantor under any indemnity
or guaranty executed in connection with the loan secured hereby is determined by
Grantee to have been false or misleading in any material respect at the time
made.
(e) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a security
interest in or other transfer or further encumbrancing of the Property, Grantor
or its general partners, or any portion thereof or any interest therein, in
violation of Section 1.13 hereof.
------------
(f) A default occurs under any of the other Loan Documents which has
not been cured within any applicable grace or cure period therein provided.
(g) Grantor, any principal or general partner in Grantor or any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby becomes insolvent, or shall make a transfer in
fraud of creditors, or shall make an assignment for the benefit of creditors,
shall file a petition in bankruptcy, shall voluntarily be adjudicated insolvent
or bankrupt or shall admit in writing the inability to pay debts as they mature,
shall petition or apply to any tribunal for or shall consent to or shall not
contest the appointment of a receiver, trustee, custodian or similar officer for
Grantor, for any such principal or general partner of Grantor or for any such
indemnitor or guarantor or for a substantial part of the assets of Grantor, of
any such principal or general partner of Grantor or of any such indemnitor or
guarantor, or shall commence any case, proceeding or other action under any
bankruptcy, reorganization, arrangement, readjustment or debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect.
(h) A petition is filed or any case, proceeding or other action is
commenced against Grantor, against any principal or general partner of Grantor
or against any indemnitor or guarantor under any indemnity or guaranty executed
in connection with the loan secured hereby seeking to have an order for relief
entered against it as debtor or seeking reorganization,
44
<PAGE>
EXHIBIT 10.2
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts or other relief under any law relating to bankruptcy, insolvency,
arrangement, reorganization, receivership or other debtor relief under any law
or statute of any jurisdiction, whether now or hereafter in effect, or a court
of competent jurisdiction enters an order for relief against Grantor, against
any principal or general partner of Grantor or against any indemnitor or
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby, as debtor, or an order, judgment or decree is entered
appointing, with or without the consent of Grantor, of any such principal or
general partner of Grantor or of any such indemnitor or guarantor, a receiver,
trustee, custodian or similar officer for Grantor, for any such principal or
general partner of Grantor or for any such indemnitor or guarantor, or for any
substantial part of any of the properties of Grantor, of any such principal or
general partner of Grantor or of any such indemnitor or guarantor, and if any
such event shall occur, such petition, case, proceeding, action, order, judgment
or decree shall not be dismissed within sixty (60) days after being commenced.
(i) The Property or any part thereof shall be taken on execution or
other process of law in any action against Grantor.
(j) Grantor abandons all or a portion of the Property.
(k) The holder of any lien or security interest on the Property
(without implying the consent of Grantee to the existence or creation of any
such lien or security interest), whether superior or subordinate to this
Security Deed or any of the other Loan Documents, declares a default and such
default is not cured within any applicable grace or cure period set forth in the
applicable document or such holder institutes foreclosure or other proceedings
for the enforcement of its remedies thereunder.
(l) The Property, or any part thereof, is subjected to actual or
threatened waste or to removal, demolition or material alteration so that the
value of the Property is materially diminished thereby and Grantee determines
(in its subjective determination) that it is not adequately protected from any
loss, damage or risk associated therewith.
(m) Any dissolution, termination, partial or complete liquidation,
merger or consolidation of Grantor, any of its principals or any general
partner.
(n) Grantor's failure to timely complete the Deferred Maintenance (as
defined in Exhibit D) in accordance with Exhibit D attached hereto and made a
part hereof.
ARTICLE III
REMEDIES
--------
45
<PAGE>
EXHIBIT 10.2
3.1 Remedies Available. If there shall occur a default under this
------------------
Security Deed, and such default has not been cured within any applicable grace
or cure period, then this Security Deed is subject to foreclosure as provided by
law and Grantee may, at its option and by or through a trustee, nominee,
assignee or otherwise, to the fullest extent permitted by law, exercise any or
all of the following rights, remedies and recourses, either successively or
concurrently:
(a) Acceleration. Accelerate the maturity date of the Note and
------------
declare any or all of the indebtedness secured hereby to be immediately due and
payable without any presentment, demand, protest, notice or action of any kind
whatever (each of which is hereby expressly waived by Grantor), whereupon the
same shall become immediately due and payable. Upon any such acceleration,
payment of such accelerated amount shall constitute a prepayment of the
principal balance of the Note and any applicable prepayment fee provided for in
the Note shall then be immediately due and payable.
(b) Entry on the Property. Either in person or by agent, with or
---------------------
without bringing any action or proceeding, or by a receiver appointed by a court
and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, without force or with such
force as is permitted by law and without notice or process or with such notice
or process as is required by law, unless such notice and process is waivable, in
which case Grantor hereby waives such notice and process, and do any and all
acts and perform any and all work which may be desirable or necessary in
Grantee's judgment to complete any unfinished construction on the Real Estate,
to preserve the value, marketability or rentability of the Property, to increase
the income therefrom, to manage and operate the Property or to protect the
security hereof, and all sums expended by Grantee therefor, together with
interest thereon at the Default Interest Rate, shall be immediately due and
payable to Grantee by Grantor on demand and shall be secured hereby and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.
(c) Collect Rents and Profits. With or without taking possession of
-------------------------
the Property, sue or otherwise collect the Rents and Profits, including those
past due and unpaid.
(d) Appointment of Receiver. Upon, or at any time prior or after,
-----------------------
initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application to a court of competent jurisdiction for appointment of a receiver
for all or any part of the Property, as a matter of strict right and without
notice to Grantor and without regard to the adequacy of the Property for the
repayment of the indebtedness secured hereby or the solvency of Grantor or any
person or persons liable for the payment of the indebtedness secured hereby, and
Grantor does hereby irrevocably consent to such appointment, waive any and all
notices of and defenses to such appointment and agrees not to oppose any
application therefor by Grantee, but nothing herein is to be construed to
deprive Grantee of any
46
<PAGE>
EXHIBIT 10.2
other right, remedy or privilege Grantee may now have under the law to have a
receiver appointed, provided, however, that the appointment of such receiver,
-------- -------
trustee or other appointee by virtue of any court order, statute or regulation
shall not impair or in any manner prejudice the rights of Grantee to receive
payment of the Rents and Profits pursuant to other terms and provisions hereof.
Any such receiver shall have all of the usual powers and duties of receivers in
similar cases, including, without limitation, the full power to hold, develop,
rent, lease, manage, maintain, operate and otherwise use or permit the use of
the Property upon such terms and conditions as said receiver may deem to be
prudent and reasonable under the circumstances as more fully set forth in
Section 3.3 below. Such receivership shall, at the option of Grantee, continue
- -----------
until full payment of all of the indebtedness secured hereby or until title to
the Property shall have passed by foreclosure sale under this Security Deed or
deed in lieu of foreclosure.
(e) Foreclosure. Immediately commence an action or
-----------
proceeding to foreclose this Security Deed or to specifically enforce
its provisions with respect to the indebtedness secured hereby, pursuant to the
statutes in such case made and provided, and sell the Property or cause the
Property to be sold in accordance with the requirements and procedures provided
by said statutes in a single parcel or in several parcels at the option of
Grantee.
(1) Should Grantee have elected to accelerate the indebtedness
secured hereby, Grantee may initiate foreclosure of the Property by
effectuating a non-judicial foreclosure sale. Grantee shall then sell, or
offer for sale, the Property at public sale in accordance with the laws of
the State of Georgia then in force and governing said sales of real
property and improvements under powers conferred by security deeds. Each
such sale shall be at the time, place and in the manner prescribed for
holding sherriff's sales of property of like kind, in the County where the
Property, or a part thereof, is located, after advertising said sale once
in each of the four consecutive weeks (without regard to the number of
days) immediately preceding the sale in the newspaper in which are
advertised sales by the sheriff of said County, all other notice being
hereby waived by Grantor. Grantor hereby constitutes and appoints Grantee
the agent and attorney-in-fact of Grantor to conduct such sale and to
execute in the name of Grantor a deed or deeds of conveyance to the
purchaser or purchasers, which deed or deeds shall contain full warranties
of title in the name of Grantor and shall recite default in payment,
advertisement and sale, which shall be conclusive evidence thereof, and
shall convey to the purchaser or purchasers good and sufficient titles to
the Property sold; and Grantee is authorized to be a bidder and purchaser
at all such sales. Any Grantee purchasing at any such sale shall have the
right to credit the secured indebtedness owing to such Grantee upon the
amount of its bid entered at such sale to the extent necessary to satisfy
such bid. Grantor binds himself to warrant and forever defend the title of
such purchaser or purchasers when so made by the Grantee, and agrees to
accept proceeds of said sale, if any, which are payable to Grantor as
provided herein. All acts of said Grantee as attorney-in-fact are hereby
ratified and confirmed. The power of sale referred to above and agency
hereby granted are coupled
47
<PAGE>
EXHIBIT 10.2
with an interest and are irrevocable by death or otherwise, are granted as
cumulative of the remedies provided hereby, and shall not be exhausted by
the exercise thereof, but may be exercised until full payment of the
indebtedness secured hereby.
(2) Should Grantee have not elected to accelerate the indebtedness
secured hereby, Grantee may nonetheless proceed with foreclosure in
satisfaction of such default, either through the courts or by conducting a
sale as hereinbefore provided, but without declaring the entire
indebtedness secured by this Security Deed due, and provided that if said
sale is made because of such default, such sale may be made subject to the
unmatured part of the secured indebtedness. Such sale, if so made, shall
not in any manner affect the unmatured part of the debt secured by this
Security Deed, but as to such unmatured part, this Security Deed shall
remain in full force as though no sale had been made. Several sales may be
made without exhausting the right of sale with respect to any unmatured
part of the secured indebtedness, it being the purpose and intent hereof to
provide for a foreclosure and the sale of the Property for any matured
portion of said secured indebtedness without exhausting the power of
foreclosure.
(3) In the event foreclosure proceedings are instituted by Grantee,
all expenses incident to such proceedings, including, but not limited to,
attorneys' and trustee's fees and costs, shall be paid by Grantor and
secured by this Security Deed and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note. The
secured indebtedness and all other obligations secured by this Security
Deed, including, without limitation, interest at the Default Interest Rate
(as defined in the Note), any prepayment charge, fee or premium required to
be paid under the Note in order to prepay principal (to the extent
permitted by applicable law), attorneys' and trustee's fees and any other
amounts due and unpaid to Grantee under the Loan Documents, may be bid by
Grantee in the event of a foreclosure sale hereunder.
(f) Judicial Remedies. Proceed by suit or suits, at law or in
-----------------
equity, instituted by Grantee, upon written request of Grantee, to enforce the
payment of the indebtedness secured hereby or the other obligations of Grantor
hereunder or pursuant to the Loan Documents, to foreclose the liens and security
interests of this Security Deed as against all or any part of the Property, and
to have all or any part of the Property sold under the judgment or decree of a
court of competent jurisdiction. This remedy shall be cumulative of any other
non-judicial remedies available to the Grantee with respect to the Loan
Documents. Proceeding with the request or receiving a judgment for legal relief
shall not be or be deemed to be an election of remedies or bar any available
non-judicial remedy of the Grantee.
(g) Other. Exercise any other right or remedy available hereunder,
-----
under any of the other Loan Documents or at law or in equity.
48
<PAGE>
EXHIBIT 10.2
3.2 Application of Proceeds. To the fullest extent permitted by law, the
-----------------------
proceeds of any sale under this Security Deed shall be applied, to the extent
funds are so available, to the following items in such order as Grantee in its
discretion may determine:
(a) To payment of the costs, expenses and fees of taking possession
of the Property, and of holding, operating, maintaining, using, leasing,
repairing, improving, marketing and selling the same and of otherwise enforcing
Grantee's right and remedies hereunder and under the other Loan Documents,
including, but not limited to, receivers' fees, court costs, attorneys',
accountants', appraisers', managers' and other professional fees, title charges
and transfer taxes.
(b) To payment of all sums expended by Grantee under the terms of any
of the Loan Documents and not yet repaid, together with interest on such sums at
the Default Interest Rate.
(c) payment of the secured indebtedness and all other obligations
secured by this Security Deed, including, without limitation, interest at the
Default Interest Rate and, to the extent permitted by applicable law, any
prepayment fee, charge or premium required to be paid under the Note in order to
prepay principal, in any order that Grantee chooses in its sole discretion.
(d) The remainder, if any, of such funds shall be disbursed to
Grantor or to the person or persons legally entitled thereto.
3.3 Right and Authority of Receiver or Grantee in the Event of Default;
-------------------------------------------------------------------
Power of Attorney. Upon the occurrence of a default hereunder, which default is
- -----------------
not cured within any applicable grace or cure period, and entry upon the
Property pursuant to Section 3.1(b) hereof or appointment of a receiver pursuant
--------------
to Section 3.1(b) hereof, and under such terms and conditions as may be prudent
--------------
and reasonable under the circumstances in Grantee's or the receiver's sole
discretion, all at Grantor's expense, Grantee or said receiver, or such other
persons or entities as they shall hire, direct or engage, as the case may be,
may do or permit one or more of the following, successively or concurrently: (a)
enter upon and take possession and control of any and all of the Property; (b)
take and maintain possession of all documents, books, records, papers and
accounts relating to the Property; (c) exclude Grantor and its agents, servants
and employees wholly from the Property; (d) manage and operate the Property; (e)
preserve and maintain the Property; (f) make repairs and alterations to the
Property; (g) complete any construction or repair of the Improvements, with such
changes, additions or modifications of the plans and specifications or intended
disposition and use of the Improvements as Grantee may in its sole discretion
deem appropriate or desirable to place the Property in such condition as will,
in Grantee's sole discretion, make it or any part thereof readily marketable or
rentable; (h) conduct a marketing or leasing program with respect to the
Property, or employ a marketing or leasing agent or agents to do so, directed to
the leasing or sale of the Property under such terms and conditions as Grantee
49
<PAGE>
EXHIBIT 10.2
may in its sole discretion deem appropriate or desirable; (i) employ such
contractors, subcontractors, materialmen, architects, engineers, consultants,
managers, brokers, marketing agents, or other employees, agents, independent
contractors or professionals, as Grantee may in its sole discretion deem
appropriate or desirable to implement and effectuate the rights and powers
herein granted; (j) execute and deliver, in the name of Grantee as attorney-in-
fact and agent of Grantor or in its own name as Grantee, such documents and
instruments as are necessary or appropriate to consummate authorized
transactions; (k) enter into such leases, whether of real or personal property,
or tenancy agreements, under such terms and conditions as Grantee may in its
sole discretion deem appropriate or desirable; (l) collect and receive the Rents
and Profits from the Property; (m) eject tenants or repossess personal property,
as provided by law, for breaches of the conditions of their leases or other
agreements; (n) sue for unpaid Rents and Profits, payments, income or proceeds
in the name of Grantor or Grantee; (o) maintain actions in forcible entry and
detainer, ejectment for possession and actions in distress for rent; (p)
compromise or give acquittance for Rents and Profits, payments, income or
proceeds that may become due; (q) delegate or assign any and all rights and
powers given to Grantee by this Security Deed; and (r) do any acts which Grantee
in its sole discretion deems appropriate or desirable to protect the security
hereof and use such measures, legal or equitable, as Grantee may in its sole
discretion deem appropriate or desirable to implement and effectuate the
provisions of this Security Deed. This Security Deed shall constitute a
direction to and full authority to any lessee, or other third party who has
heretofore dealt or contracted or may hereafter deal or contract with Grantor or
Grantee, at the request of Grantee, to pay all amounts owing under any lease,
contract, concession, license or other agreement to Grantee without proof of the
default relied upon. Any such lessee or third party is hereby irrevocably
authorized to rely upon and comply with (and shall be fully protected by Grantor
in so doing) any request, notice or demand by Grantee for the payment to Grantee
of any Rents and Profits or other sums which may be or thereafter become due
under its lease, contract, concession, license or other agreement, or for the
performance of any undertakings under any such lease, contract, concession,
license or other agreement, and shall have no right or duty to inquire whether
any default under this Security Deed or under any of the other Loan Documents
has actually occurred or is then existing. Grantor hereby constitutes and
appoints Grantee, its assignees, successors, transferees and nominees, as
Grantor's true and lawful attorney-in-fact and agent, with full power of
substitution in the Property, in Grantor's name, place and stead, to do or
permit any one or more of the foregoing described rights, remedies, powers and
authorities, successively or concurrently, and said power of attorney shall be
deemed a power coupled with an interest and irrevocable so long as any
indebtedness secured hereby is outstanding. Any money advanced by Grantee in
connection with any action taken under this Section 3.3, together with interest
-----------
thereon at the Default Interest Rate from the date of making such advancement by
Grantee until actually paid by Grantor, shall be a demand obligation owing by
Grantor to Grantee and shall be secured by this Security Deed and by every other
instrument securing the secured indebtedness.
50
<PAGE>
EXHIBIT 10.2
3.4 Occupancy After Foreclosure. In the event there is a foreclosure sale
---------------------------
hereunder and at the time of such sale, Grantor or Grantor's representatives,
successors or assigns, or any other persons claiming any interest in the
Property by, through or under Grantor (except tenants of space in the
Improvements subject to losses entered into prior to the date hereof), are
occupying or using the Property, or any part thereof, then, to the extent not
prohibited by applicable law, each and all shall, at the option of Grantee or
the purchaser at such sale, as the case may be, immediately become the tenant of
the purchaser at such sale, which tenancy shall be a tenancy from day-to-day,
terminable at the will of either landlord or tenant, at a reasonable rental per
day based upon the value of the Property occupied or used, such rental to be due
daily to the purchaser. Further, to the extent permitted by applicable law, in
the event the tenant fails to surrender possession of the Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Property in the appropriate
court of the county in which the Real Estate is located.
3.5 Notice to Account Debtors. Grantee may, at any time after a default
-------------------------
hereunder, which default is not cured within any applicable grace or cure
period, notify the account debtors and obligors of any accounts, chattel paper,
negotiable instruments or other evidences of indebtedness to Grantor included in
the Property to pay Grantee directly. Grantor shall at any time or from time to
time upon the request of Grantee provide to Grantee a current list of all such
account debtors and obligors and their addresses.
3.6 Cumulative Remedies. All remedies contained in this Security Deed are
-------------------
cumulative and Grantee shall also have all other remedies provided at law and in
equity or in any other Loan Documents. Such remedies may be pursued separately,
successively or concurrently at the sole subjective direction of Grantee and may
be exercised in any order and as often as occasion therefor shall arise. No act
of Grantee shall be construed as an election to proceed under any particular
provisions of this Security Deed to the exclusion of any other provision of this
Security Deed or as an election of remedies to the exclusion of any other remedy
which may then or thereafter be available to Grantee. No delay or failure by
Grantee to exercise any right or remedy under this Security Deed shall be
construed to be a waiver of that right or remedy or of any default hereunder.
Grantee may exercise any one or more of its rights and remedies at its option
without regard to the adequacy of its security.
3.7 Payment of Expenses. Grantor shall pay on demand all of Grantee's
-------------------
expenses incurred in any efforts to enforce any terms of this Security Deed,
whether or not any lawsuit is filed and whether or not foreclosure is commenced
but not completed, including, but not limited to, legal fees and disbursements,
foreclosure costs and title charges, together with interest thereon from and
after the date incurred by Grantee until actually paid by Grantor at the Default
Interest Rate, and the same shall be secured by this Security Deed and by all of
the other Loan Documents securing all or any part of the indebtedness evidenced
by the Note.
51
<PAGE>
EXHIBIT 10.2
ARTICLE IV
MISCELLANEOUS TERMS AND CONDITIONS
----------------------------------
4.1 Time of Essence. Time is of the essence with respect to all
---------------
provisions of this Security Deed.
4.2 Release of Security Deed. If all of the secured indebtedness be paid,
------------------------
then and in that event only, all rights under this Security Deed, except for
those provisions hereof which by their terms survive, shall terminate and the
Property shall become wholly clear of the liens, security interests, conveyances
and assignments evidenced hereby, which shall be released by Grantee in due form
at Grantor's cost. No release of this Security Deed or the lien hereof shall be
valid unless executed by Grantee.
4.3 Certain Rights of Grantee. Without affecting Grantor's liability for
-------------------------
the payment of any of the indebtedness secured hereby, Grantee may from time to
time and without notice to Grantor: (a) release any person liable for the
payment of the indebtedness secured hereby; (b) extend or modify the terms of
payment of the indebtedness secured hereby; (c) accept additional real or
personal property of any kind as security or alter, substitute or release any
property securing the indebtedness secured hereby; (d) recover any part of the
Property; (e) consent in writing to the making of any subdivision map or plat
thereof; (f) join in granting any easement therein; or (g) join in any extension
agreement of the Security Deed or any agreement subordinating the lien hereof.
4.4 WAIVER OF GRANTOR'S RIGHTS. BY EXECUTION OF THIS SECURITY DEED AND BY
--------------------------
INITIALING THIS PARAGRAPH 4.4, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT OF
GRANTEE TO ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE NOTE AND ANY OTHER
INDEBTEDNESS SECURED BY THIS SECURITY DEED AND THE POWER OF ATTORNEY GIVEN
HEREIN TO GRANTEE TO SELL THE PROPERTY BY NONJUDICIAL FORECLOSURE UPON AN EVENT
OF DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER
THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE
PROVISIONS OF THIS SECURITY DEED; (B) WAIVES ANY AND ALL RIGHTS WHICH GRANTOR
MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA (INCLUDING,
WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS
PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY
OTHER APPLICABLE LAW, (1) TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE
EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO GRANTEE, EXCEPT
SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE
PROVISIONS OF THIS SECURITY DEED AND (2) CONCERNING THE APPLICATION, RIGHTS OR
BENEFITS OF ANY STATUTE OF LIMITATION OR
52
<PAGE>
EXHIBIT 10.2
ANY MORATORIUM, REINSTATEMENT, MARSHALLING, FORBEARANCE, APPRAISEMENT,
VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS; (C)
ACKNOWLEDGES THAT GRANTOR HAS READ THIS SECURITY DEED AND ANY AND ALL QUESTIONS
OF GRANTOR REGARDING THE LEGAL EFFECT OF THIS SECURITY DEED AND ITS PROVISIONS
HAVE BEEN EXPLAINED FULLY TO GRANTOR, AND GRANTOR HAS CONSULTED WITH COUNSEL OF
GRANTOR'S CHOICE PRIOR TO EXECUTING THIS SECURITY DEED AND INITIALING THIS
PARAGRAPH 4.4; AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF
GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART
OF A BARGAINED FOR LOAN TRANSACTION AND THAT THIS SECURITY DEED IS VALID AND
ENFORCEABLE BY GRANTEE AGAINST GRANTOR IN ACCORDANCE WITH ALL THE TERMS AND
CONDITIONS HEREOF.
INITIALED BY GRANTOR:
-----------------
4.5 Notices. All notices, demands, requests or other communications to be
-------
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next business day
delivery, or by depositing the same in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, in any event addressed
to the intended addressee at its address set forth on the first page of this
Security Deed or at such other address as may be designated by such party as
herein provided. All notices, demands and requests to be sent to Grantee shall
be addressed to the attention of the Capital Markets Group. All notices,
demands and requests shall be effective upon such personal delivery, or one (1)
business day after being deposited with the private courier service, or two (2)
business days after being deposited in the United States mail as required above.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given as herein required shall be deemed
to be receipt of the notice, demand or request sent. By giving to the other
party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America.
4.6 Successors and Assigns. The terms, provisions, indemnities, covenants
----------------------
and conditions hereof shall be binding upon Grantor and the successors and
assigns of Grantor, including all successors in interest of Grantor in and to
all or any part of the Property, and shall inure to the benefit of Grantee, its
directors, officers, shareholders, employees and agents and
53
<PAGE>
EXHIBIT 10.2
their respective successors and assigns and shall constitute covenants running
with the land. All references in this Security Deed to Grantor or Grantee shall
be deemed to include all such parties' successors and assigns, and the term
"Grantee" as used herein shall also mean and refer to any lawful holder or
owner, including pledgees and participants, of any of the indebtedness secured
hereby. If Grantor consists of more than one person or entity, each will be
jointly and severally liable to perform the obligations of Grantor.
4.7 Severability. A determination that any provision of this Security
------------
Deed is unenforceable or invalid shall not affect the enforceability or validity
of any other provision, and any determination that the application of any
provision of this Security Deed to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
4.8 Gender. Within this Security Deed, words of any gender shall be held
------
and construed to include any other gender, and words in the singular shall be
held and construed to include the plural, and vice versa, unless the context
otherwise requires.
4.9 Waiver; Discontinuance of Proceedings. Grantee may waive any single
-------------------------------------
default by Grantor hereunder without waiving any other prior or subsequent
default. Grantee may remedy any default by Grantor hereunder without waiving
the default remedied. Neither the failure by Grantee to exercise, nor the delay
by Grantee in exercising, any right, power or remedy upon any default by Grantor
hereunder shall be construed as a waiver of such default or as a waiver of the
right to exercise any such right, power or remedy at a later date. No single or
partial exercise by Grantee of any right, power or remedy hereunder shall
exhaust the same or shall preclude any other or further exercise thereof, and
every such right, power or remedy hereunder may be exercised at any time and
from time to time. No modification or waiver of any provision hereof nor
consent to any departure by Grantor therefrom shall in any event be effective
unless the same shall be in writing and signed by Grantee, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose given. No notice to nor demand on Grantor in any case shall of itself
entitle Grantor to any other or further notice or demand in similar or other
circumstances. Acceptance by Grantee of any payment in an amount less than the
amount then due on any of the secured indebtedness shall be deemed an acceptance
on account only and shall not in any way affect the existence of a default
hereunder. In case Grantee shall have proceeded to invoke any right, remedy or
recourse permitted hereunder or under the other Loan Documents and shall
thereafter elect to discontinue or abandon the same for any reason, Grantee
shall have the unqualified right to do so and, in such an event, Grantor and
Grantee shall be restored to their former positions with respect to the
indebtedness secured hereby, the Loan Documents, the Property and otherwise, and
the rights, remedies, recourses and powers of Grantee shall continue as if the
same had never been invoked.
54
<PAGE>
EXHIBIT 10.2
4.10 Section Headings. The headings of the sections and paragraphs of this
----------------
Security Deed are for convenience of reference only, are not to be considered a
part hereof and shall not limit or otherwise affect any of the terms hereof.
4.11 GOVERNING LAW. THIS SECURITY DEED WILL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, PROVIDED THAT TO THE EXTENT
THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH
CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.
4.12 Counting of Days. The term "days" when used herein shall mean
----------------
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Real Estate is located, the
period shall be deemed to end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in Georgia, are
authorized by law to be closed.
4.13 Relationship of the Parties. The relationship between Grantor and
---------------------------
Grantee is that of a borrower and a lender only and neither of those parties is,
nor shall it hold itself out to be, the agent, employee, joint venturer or
partner of the other party.
4.14 Application of the Proceeds of the Note. To the extent that proceeds
---------------------------------------
of the Note are used to pay indebtedness secured by any outstanding lien,
security interest, charge or prior encumbrance against the Property, such
proceeds have been advanced by Grantee at Grantor's request and Grantee shall be
subrogated to any and all rights, security interests and liens owned by any
owner or holder of such outstanding liens, security interests, charges or
encumbrances, irrespective of whether said liens, security interests, charges or
encumbrances are released.
4.15 Unsecured Portion of Indebtedness. If any part of the secured
---------------------------------
indebtedness cannot be lawfully secured by this Security Deed or if any part of
the Property cannot be lawfully subject to the lien and security interest hereof
to the full extent of such indebtedness, then all payments made shall be applied
on said indebtedness first in discharge of that portion thereof which is
unsecured by this Security Deed.
4.16 Cross Default. A default hereunder which has not been cured within
-------------
any applicable grace or cure period shall be a default under each of the other
Loan Documents.
4.17 Interest After Sale. In the event the Property or any part thereof
-------------------
shall be sold upon foreclosure as provided hereunder, to the extent permitted by
law, the sum for which the same shall have been sold shall, for purposes of
redemption (pursuant to the laws of the state in which the Property is located),
bear interest at the Default Interest Rate.
55
<PAGE>
EXHIBIT 10.2
4.18 Inconsistency with Other Loan Documents. In the event of any
---------------------------------------
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions selected by Grantee in
its sole subjective discretion shall be controlling.
4.19 Construction of this Document. This document may be construed as a
-----------------------------
mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and security interests created hereby and the purposes and agreements
herein set forth.
4.20 No Merger. It is the desire and intention of the parties hereto that
---------
this Security Deed and the lien hereof do not merge in fee simple title to the
Property. It is hereby understood and agreed that should Grantee acquire any
additional or other interests in or to the Property or the ownership thereof,
then, unless a contrary intent is manifested by Grantee as evidenced by an
appropriate document duly recorded, this Security Deed and the lien hereof shall
not merge in such other or additional interests in or to the Property, toward
the end that this Security Deed may be foreclosed as if owned by a stranger to
said other or additional interests.
4.21 Rights With Respect to Junior Encumbrances. Any person or entity
------------------------------------------
purporting to have or to take a junior mortgage or other lien upon the Property
or any interest therein shall be subject to the rights of Grantee to amend,
modify, increase, vary, alter or supplement this Security Deed, the Note or any
of the other Loan Documents and to extend the maturity date of the indebtedness
secured hereby and to increase the amount of the indebtedness secured hereby and
to waive or forebear the exercise of any of its rights and remedies hereunder or
under any of the other Loan Documents and to release any collateral or security
for the indebtedness secured hereby, in each and every case without obtaining
the consent of the holder of such junior lien and without the lien or security
interest of this Security Deed losing its priority over the rights of any such
junior lien.
4.22 Grantee May File Proofs of Claim. In the case of any receivership,
--------------------------------
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Grantor or the principals or general partners in
Grantor, or their respective creditors or property, Grantee, to the extent
permitted by law, shall be entitled to file such proofs of claim and other
documents as may be necessary or advisable in order to have the claims of
Grantee allowed in such proceedings for the entire secured indebtedness at the
date of the institution of such proceedings and for any additional amount which
may become due and payable by Grantor hereunder after such date.
56
<PAGE>
EXHIBIT 10.2
4.23 Fixture Filing. This Security Deed shall be effective from the date
--------------
of its recording as a financing statement filed as a fixture filing with respect
to all goods constituting part of the Property which are or are to become
fixtures.
4.24 After-Acquired Property. All property acquired by Grantor after the
-----------------------
date of this Security Deed which by the terms of this Security Deed shall be
subject to the lien and the security interest created hereby, shall immediately
upon the acquisition thereof by Grantor and without further mortgage, conveyance
or assignment become subject to the lien and security interest created by this
Security Deed. Nevertheless, Grantor shall execute, acknowledge, deliver and
record or file, as appropriate, all and every such further mortgages, security
agreements, financing statements, assignments and assurances as Grantee shall
require for accomplishing the purposes of this Security Deed.
4.25 No Representation. By accepting delivery of any item required to be
-----------------
observed, performed or fulfilled or to be given to Grantee pursuant to the Loan
Documents, including, but not limited to, any officer's certificates balance
sheet, statement of profit and loss or other financial statement, survey,
appraisal or insurance policy, Grantee shall not be deemed to have warranted,
consented to, or affirmed the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or condition thereof, and such
acceptance of delivery thereof shall not be or constitute any warranty, consent
or affirmation with respect thereto by Grantee.
4.26 Counterparts. This Security Deed may be executed in any number of
------------
counterparts, each of which shall be effective only upon delivery and thereafter
shall be deemed an original, and all of which shall be taken to be one and the
same instrument, for the same effect as if all parties hereto had signed the
same signature page. Any signature page of this Security Deed may be detached
from any counterpart of this Security Deed without impairing the legal effect of
any signatures thereon and may be attached to another counterpart of this
Security Deed identical in form hereto but having attached to it one or more
additional signature pages.
4.27 Personal Liability. Notwithstanding anything to the contrary contained
------------------
in this Security Deed, the liability of Grantor and its general partners for the
indebtedness secured hereby and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Section 1.05 of the Note.
------------
4.28 Recording and Filing. Grantor will cause the Loan Documents and all
--------------------
amendments and supplements thereto and substitutions therefor to be recorded,
filed, re-recorded and re-filed in such manner and in such places as Grantee
shall reasonably request, and will pay on demand all such recording, filing, re-
recording and re-filing taxes, fees and other charges. Grantor shall reimburse
Grantee, or its servicing agent, for the costs incurred in obtaining a tax
service company to verify the status of payment of taxes and assessments on the
Property.
57
<PAGE>
EXHIBIT 10.2
4.29 Entire Agreement and Modification. This Security Deed and the other
---------------------------------
Loan Documents contain the entire agreements between the parties relating to the
subject matter hereof and thereof and all prior agreements relative hereto and
thereto which are not contained herein or therein are terminated. This Security
Deed and the other Loan Documents may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against which enforcement of the amendment,
revision, waiver, discharge, release or termination is asserted. Any alleged
amendment, revision, waiver, discharge, release or termination which is not so
documented shall not be effective as to any party.
4.30 Maximum Interest. The provisions of this Security Deed and of all
----------------
agreements between Grantor and Grantee, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid ("INTEREST"), to Grantee for the use, forbearance or retention of the money
loaned under the Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Grantor and Grantee shall, at the
time performance or fulfillment of such provision shall be due, exceed the limit
for Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then ipso facto the obligation to be performed or
fulfilled shall be reduced to such limit, and if, from any circumstance
whatsoever, Grantee shall ever receive anything of value deemed Interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive Interest shall be applied to the reduction of the principal balance
owing under the Note in the inverse order of its maturity (whether or not then
due) or at the option of Grantee be paid over to Grantor, and not to the payment
of Interest. All Interest (including any amounts or payments deemed to be
Interest) paid or agreed to be paid to Grantee shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
period until payment in full of the principal balance of the Note so that the
Interest thereon for such full period will not exceed the maximum amount
permitted by applicable law. This paragraph will control all agreements between
Grantor and Grantee.
4.31 Interest Payable by Grantor. Grantee shall cause funds in the
---------------------------
Replacement Reserve to be deposited into an interest bearing account of the type
customarily maintained by Grantee or its servicing agent for the investment of
similar reserves, which account may not yield the highest interest rate then
available. Interest payable on such amounts shall be computed based on the
daily outstanding balance in the Replacement Reserve. Such interest shall be
calculated on a simple, non-compounded interest basis based solely on
contributions made to the Replacement Reserve by Grantor. All interest earned
on amounts contributed to the Replacement Reserve shall be retained by Grantee
and added to the balance in the Replacement Reserve and shall be disbursed for
payment of the items for which other funds in the Replacement Reserve are to be
disbursed.
58
<PAGE>
EXHIBIT 10.2
4.32 Further Stipulations. The additional covenants, agreements and
--------------------
provisions set forth in Exhibit C and D attached hereto, if any, shall be a part
--------- -
of this Security Deed and shall, in the event of any conflict between such
further stipulations and any of the other provisions of this Security Deed, be
deemed to control.
4.33 Attorneys' Fees. Notwithstanding anything to the contrary contained
---------------
in this Security Deed, in the event Grantor has an obligation to pay attorneys'
fees or legal fees under this Security Deed or any of the other Loan Documents,
such obligation shall be in an amount equal to reasonable attorneys' fees
actually incurred.
59
<PAGE>
EXHIBIT 10.2
IN WITNESS WHEREOF, Grantor has executed this Security Deed under seal
as of September __, 1995.
Signed, sealed and delivered WASHINGTON TOWNE APARTMENTS, L.L.C.,
in the presence of a Georgia limited liability company
______________________ By: Washington Towne, Inc.,
UNOFFICIAL WITNESS a Georgia corporation,
Its: member
___________________ By: __/s/___________________
NOTARY PUBLIC Name:
Its:
Executed this __ day of
September, 1995.
My Commission Expires: Attest: __/s/________________
Name:
(NOTARY SEAL) Its:
(CORPORATE SEAL)
60
<PAGE>
EXHIBIT 10.2
EXHIBIT LIST
- ------------
Exhibit A - Legal Description
Exhibit B - Permitted Exceptions
Exhibit C - Grantor's Certificate
Exhibit D - Additional Stipulations
A-1
<PAGE>
EXHIBIT 10.2
EXHIBIT A
---------
Legal Description
A-2
<PAGE>
EXHIBIT 10.2
EXHIBIT B
---------
Permitted Exceptions
1. Easement from S.R. Young, J.H. Longino and G.F. Longino to Southern Bell
Telephone and Telegraph Company, dated October 26, 1936, recorded at Deed
Book 1750, page 295, Fulton County, Georgia Records.
2. Easement from S.R. Young, J.H. Longino and G.F. Longino to Southern Bell
Telephone and Telegraph Company dated November 16, 1936, recorded at Deed
Book 1622, page 393, Fulton County, Georgia Records.
3. Sewer Easement by and between I D S Corporation and George E. Hemperley to
the City of East Point, dated December 6, 1971, recorded at Deed Book 5499,
page 148.
B-1
<PAGE>
EXHIBIT 10.2
EXHIBIT C
---------
GRANTOR'S CERTIFICATE
---------------------
The undersigned is the _______________________, the ____________________ of
________________________________ (the "Grantor") and has made due investigation
as to the matters hereinafter set forth and does hereby certify the following to
induce FIRST UNION NATIONAL BANK OF NORTH CAROLINA, (the "Grantee") to advance
the aggregate sum of $_______________ (the "Disbursement") [from the Replacement
Reserve or Repair and Remediation Reserve] to the Grantor pursuant to the terms
of that certain Deed to Secure Debt and Security Agreement, dated as of _____
__, 199_, between the Grantee and the Grantor (together with any amendments,
modifications, supplements and replacements thereof or therefor, the "Security
Deed"), dated ______ __, 199_, pursuant to that certain Disbursement request
which is being submitted to the Grantee. (Capitalized terms used and not
otherwise define shall have the respective meanings given to them in the
Security Deed.)
1. No default beyond any applicable notice and/or grace period exists
under the Security Deed or under any of the other Loan Documents.
2. The [Repairs or Deferred Maintenance] relative to the Disbursement have
been delivered or provided to Grantor and are properly, completely and
permanently installed on or about the Property or otherwise properly completed,
as applicable.
3. All of the statements, invoices, receipts and information delivered in
connection with the Disbursement request being submitted to the Grantee in
connection herewith are true and correct as of the date hereof, and the amount
requested in said Disbursement request accurately reflects the precise amounts
due and payable during the period covered by such Disbursement request. All of
the funds to be received pursuant to such Disbursement request shall be used
solely for the purpose of reimbursing the Grantor for items previously paid.
4. Nothing has occurred subsequent to the date of the Security Deed which
has or may result in the creation of any lien, charge or encumbrance upon the
Real Estate or the Improvements or any part thereof, or anything affixed thereto
or used in connection therewith, or which has or may substantially and adversely
impair the ability of the Grantor to make any payments of principal and interest
on the Note or the ability of the Grantor to meet its obligations under the
Security Deed.
5. None of the labor, materials, overhead or other items of expense
specified in the Disbursement request submitted herewith has previously been the
basis of any Disbursement
C-1
<PAGE>
EXHIBIT 10.2
request by the Grantor or any payment by the Grantee and, when added to all sums
previously disbursed by Grantee on account of the [Deferred Maintenance or
Repairs], do not exceed the costs of all [Deferred Maintenance or Repairs]
services completed, installed and/or delivered, as applicable, to the date of
that certificate.
6. The amount remaining in the [Account] allocated to the payment of items
on the [Deferred Maintenance or Repairs] will be sufficient to pay in full the
entire remaining cost of [Deferred Maintenance or Repairs] required to be
completed in accordance with the Security Deed.
7. All work required permits and approvals required to complete the work
which work is now in process or was previously completed have been obtained.
8. All conditions to the Disbursement to be made in accordance with the
Disbursement request submitted herewith have been met in accordance with the
terms of the Security Deed.
By:___________________________
C-2
<PAGE>
EXHIBIT 10.2
EXHIBIT D
---------
Additional Stipulations
-----------------------
Repair and Remediation Reserve. Prior to the execution of this Deed to
------------------------------
Secure Debt and Security Agreement ("Security Deed"), Grantee has caused the
Property to be inspected and such inspection has revealed that the Property is
in need of certain maintenance, repairs and/or remedial or corrective work.
Contemporaneously with the execution hereof, Grantor has established with the
Grantee a reserve in the amount of $156,000 (the "REPAIR AND REMEDIATION
RESERVE") by depositing such amount with Grantee. Grantor shall cause each of
the items described in Exhibit D-1 attached hereto and made a part hereof and as
more particularly described in that certain Engineering Report entitled
Washington Towne Apartments Architectural Engineering Property Condition
Evaluation and Phase I Assessment prepared by Building Diagnostics, Ltd. dated
May 3, 1995 (the "ENGINEERING MAINTENANCE') to be completed, performed,
remediated and corrected to the satisfaction of Grantee and as necessary to
bring the Property into compliance with all applicable laws, ordinances, rules
and regulations on or before the expiration of 60 days after the effective date
hereof, as such time period may be extended by Grantee in its sole discretion.
Grantor shall cause each of the items described in Exhibit D-2 attached hereto
and made a part hereof (the "OTHER MAINTENANCE") to be completed, performed,
remediated and corrected to the satisfaction of Grantee and as necessary to
bring the Property into compliance with all applicable laws, environmental laws,
ordinances, rules and regulations on or before the expiration of 90 days after
the effective date hereof, as such time period may be extended by Grantee in its
sole discretion (the Engineering Maintenance and the Other Maintenance are
collectively, the "DEFERRED MAINTENANCE"). So long as no default hereunder or
under the other Loan Documents has occurred and is continuing, all sums in the
Repair and Remediation Reserve shall be held by Grantee in the Repair and
Remediation Reserve to pay the costs and expenses of completing the Deferred
Maintenance. So long as no default hereunder or under the other Loan Documents
has occurred and is continuing, Grantee shall, to the extent funds are available
for such purpose in the Repair and Remediation Reserve, disburse to Grantor the
amount paid or incurred by Grantor in completing, performing, remediating or
correcting the Deferred Maintenance upon (a) the receipt by Grantee of a written
request from Grantor for disbursement from the Repair and Remediation Reserve
and a certification by Grantor in the form annexed hereto as Exhibit C that the
applicable item of Deferred Maintenance has been completed in accordance with
the terms of this Security Deed, (b) delivery to Grantee of invoices, receipts
or other evidence satisfactory to Grantee verifying the costs of the Deferred
Maintenance to be reimbursed, (c) delivery to Grantee of a certification from an
inspecting architect, engineer or other consultant reasonably acceptable to
Grantee describing the completed work, verifying the completion of the work and
the value of the completed work and, if applicable, certifying that the Property
is, as a result of such work, in compliance with all applicable laws, ordinances
rules and regulations relating to the Deferred Maintenance so performed, (d)
delivery to Grantee of affidavits, lien waivers or other evidence
D-1
<PAGE>
EXHIBIT 10.2
reasonably satisfactory to Grantee showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished materials or labor to the
Property have been paid all amounts due for such labor and materials furnished
to the Property and (e) the receipt by Grantee of an administrative fee in the
amount of $150.00. Grantee shall not be required to make advances from the
Repair and Remediation Reserve more frequently than once in any ninety (90) day
period. In making any payment from the Repair and Remediation Reserve, Grantee
shall be entitled to rely on such request from Grantor without any inquiry into
the accuracy, validity or contestability of any such amount. Grantor hereby
grants to Grantee, as additional security for payment of the indebtedness
secured hereby, a security interest in the Repair and Remediation Reserve. In no
event may Grantee be entitled to reimbursement of any costs with respect to each
item of Deferred Maintenance in excess of the applicable amount set forth in
Exhibit D-1 attached hereto and made part hereof. The Repair and Remediation
Reserve shall not, unless otherwise explicitly required by applicable law, be or
be deemed to be escrow or trust funds, but at Grantee's option and in Grantee's
discretion, may either be held in a separate account or be commingled by Grantee
with the general funds of Grantee. No interest on the funds contained in the
Repair and Remediation Reserve shall be paid by Grantee to Grantor. The Repair
and Remediation Reserve is solely for the protection of Grantee and entails no
responsibility on Grantee's part beyond the payment of the costs and expenses
described in this paragraph in accordance with the terms hereof and beyond the
allowing of due credit for the sums actually received. In the event that the
amounts on deposit or available in the Repair and Remediation Reserve are
inadequate to pay the costs of the Deferred Maintenance, Grantor shall pay the
amount of such deficiency. Upon assignment of this Security Deed by Grantee, any
funds in the Repair and Remediation Reserve shall be turned over to the assignee
and any responsibility of Grantee, as assignor, with respect thereto shall
terminate. If there is a default under this Security Deed which is not cured
within any applicable grace or cure period, Grantee may, but shall not be
obligated to, apply at any time the balance then remaining in the Repair and
Remediation Reserve against the indebtedness secured hereby in whatever order
Grantee shall subjectively determine. No such application of the Repair and
Remediation Reserve shall be deemed to cure any default hereunder. Grantor
hereby grants to Grantee a power-of-attorney, coupled with an interest, to cause
the Deferred Maintenance to be completed, performed, remediated and corrected to
the satisfaction of Grantee upon Grantor's failure to do so in accordance with
the terms and conditions of this Security Deed, and to apply the amounts on
deposit in the Repair and Remediation Reserve to the costs associated therewith,
all as Grantee may determine in its sole and absolute discretion but without
obligation to do so. Upon the earlier to occur of full payment of the
indebtedness secured hereby in accordance with its terms, the completion of the
Deferred Maintenance to the satisfaction of the Grantee or at such earlier time
as Grantee may elect, the balance of the Repair and Remediation Reserve then in
Grantee's possession shall be paid over to Grantor and no other party shall have
any right or claim thereto.
D-2
<PAGE>
EXHIBIT 10.2
EXHIBIT D-1
GENERAL ARCHITECTURAL AND ENGINEERING REPAIRS
<TABLE>
<CAPTION>
=====================================================================
SCHEDULED REPAIRS ESTIMATED COST PAGE
- ---------------------------------------------------------------------
<S> <C> <C>
Asphalt $23,000 20
- ---------------------------------------------------------------------
Gutters $15,000 30
- ---------------------------------------------------------------------
Exterior Paint & Wood $60,000 29
- ---------------------------------------------------------------------
Play Area $ 2,000 26
- ---------------------------------------------------------------------
Down Unit $20,000 37
=====================================================================
</TABLE>
TOTAL: $120,000
D-3
<PAGE>
EXHIBIT 10.2
EXHIBIT D-2
1. Operations and Maintenance Program with respect
to asbestos-containing materials $ 625.00
2. Remediation of termites at property $4,880.00
D-4
<PAGE>
EXHIBIT 10.3
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS ASSIGNMENT OF LEASES AND RENTS (this "Assignment") made as of the 13th
day of September, 1995, is by WASHINGTON TOWNE APARTMENTS, L.L.C., a Georgia
limited liability company ("Assignor'), whose address is 2420 Heaton Drive, East
Point, Georgia in favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association ("Assignee"), whose address is One First Union
Center, TW-8, Charlotte, North Carolina 28288.
W I T N E S S E T H:
- - - - - - - - - -
THAT, WHEREAS, Assignor has executed that certain Promissory Note dated of
even date herewith (the "Note"), payable to the order of Assignee in the stated
principal amount of One Million Seven Hundred Fifty Thousand and No/100 Dollars
($1,750,000.00); and
WHEREAS, the Note is secured by that certain Deed to Secure Debt and
Security Agreement dated of even date herewith (the "Security Deed"), from
Assignor, as grantor, to Assignee, as grantee, encumbering that certain real
property situated in the City of East Point, County of Fulton, State of Georgia
as is more particularly described on Exhibit A attached hereto and incorporated
---------
herein this reference and all buildings and other improvements now or hereafter
located thereon (collectively, the "Improvements") (said real property and the
Improvements are hereinafter sometimes collectively referred to as the
"Property"); and
WHEREAS, Assignor is desirous of further securing to Assignee the
performance of the terms, covenants and agreements hereof and of the Note, the
Security Deed and each other document evidencing, securing, guaranteeing or
otherwise relating to the indebtedness evidenced by the Note (the Note, the
Security Deed and such other documents, as each of the foregoing may from time
to time be amended, consolidated, renewed or replaced, being collectively
referred to herein as the "Loan Documents").
NOW, THEREFORE, in consideration of the making of the loan evidenced by the
Note by Assignee to Assignor and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Assignor does hereby
irrevocably, absolutely and unconditionally transfer, sell, assign, pledge and
convey to Assignee, its successors and assigns, all of the right, title and
interest of Assignor in and to:
(a) any and all leases, licenses, rental agreements and occupancy
agreements of whatever form now or hereafter affecting all or any part of the
Property and any and all guarantees, extensions, renewals, replacements and
modifications thereof (collectively, the "Leases"); and
1
<PAGE>
EXHIBIT 10.3
(b) all deposits (whether for security or otherwise), rents, issues,
profits, revenues, royalties, accounts, rights, benefits and income of every
nature of and from the Property, including, without limitation, minimum rents,
additional rents, termination payments, forfeited security deposits, liquidated
damages following default and all proceeds payable under any policy of insurance
covering loss of rents resulting from untenantability due to destruction or
damage to the Property, together with the immediate and continuing right to
collect and receive the same, whether now due or hereafter becoming due, and
together with all rights and claims of any kind that Assignor may have against
any tenant, lessee or licensee under the Leases or against any other occupant of
the Property (collectively, the "Rents").
TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns,
forever, and Assignor does hereby bind itself, its successors and assigns to
WARRANT and FOREVER DEFEND the title to the Leases unto Assignee against every
person whomsoever lawfully claiming or to claim the same or any part thereof.
IT IS AGREED that, notwithstanding that this instrument is a present,
absolute and executed assignment of the Rents and of the Leases and a present,
absolute executed grant of the powers herein granted to Assignee, Assignor is
hereby permitted, at the sufferance of Assignee and at its discretion, and is
hereby granted a license by Assignee, to retain possession of the Leases and to
collect and retain the Rents unless and until there shall be a default under the
terms of any of the Loan Documents, which default has not been cured within any
applicable grace or cure period. In the event of such uncured default, the
aforementioned license granted to Assignor shall automatically terminate without
notice to Assignor, and Assignee may thereafter, without taking possession of
the Property, take possession of the Leases and collect the Rents. Further, from
and after such termination, Assignor shall be the agent of Assignee in
collection of the Rents, and any Rents so collected by Assignor shall be held in
trust by Assignor for the sole and exclusive benefit of Assignee and Assignor
shall, within one (1) business day after receipt of any Rents, pay the same to
Assignee to be applied by Assignee as hereinafter set forth. Furthermore, from
and after such uncured default and termination of the aforementioned license,
Assignee shall have the right and authority, without any notice whatsoever to
Assignor and without regard to the adequacy of the security therefor, to: (a)
make application to a court of competent jurisdiction for appointment of a
receiver for all or any part of the Property, as particularly set forth in the
Security Deed, (b) manage and operate the Property, with full power to employ
agents to manage the same; (c) demand, collect, receive and sue for the Rents,
including those past due and unpaid; and (d) do all acts relating to such
management of the Property, including, but not limited to, negotiation of new
Leases, making adjustments of existing Leases, contracting and paying for
repairs and replacements to the Improvements and to the fixtures, equipment and
personal property located in the Improvements or used in any way in the
operation, use and occupancy of the Property as in the sole subjective judgment
and discretion of Assignee may be necessary to maintain the same in a tenantable
condition, purchasing and paying for such additional furniture and equipment as
in the sole subjective judgment of Assignee may be necessary to maintain a
proper rental income from the Property, employing necessary
2
<PAGE>
EXHIBIT 10.3
managers and other employees, purchasing fuel, providing utilities and paying
for all other expenses incurred in the operation of the Property, maintaining
adequate insurance coverage over hazards customarily insured against and paying
the premiums therefor. Assignee may apply the Rents received by Assignor from
the Property, after deducting the costs of collection thereof, including,
without limitation, attorneys' fees and a management fee for any management
agent so employed, against amounts expended for repairs, upkeep, maintenance,
service, fuel, utilities, taxes, assessments, insurance premiums and such other
expenses as Assignee incurs in connection with the operation of the Property and
against interest, principal, required escrow deposits and other sums which have
or which may become due, from time to time, under the terms of the Loan
Documents, in such order or priority as to any of the items so mentioned as
Assignee, in its sole reasonable discretion, may determine. The exercise by
Assignee of the rights granted Assignee in this paragraph, and the collection of
the Rents and the application thereof as herein provided, shall not be
considered a waiver by Assignee of any default under the Loan Documents or
prevent foreclosure of any liens on the Property nor shall such exercise make
Assignee liable under any of the Leases, Assignee hereby expressly reserving all
of its rights and privileges under the Security Deed and the other Loan
Documents as fully as though this Assignment had not been entered into.
Without limiting the rights granted hereinabove, in the event Assignor
shall fail to make any payment or to perform any act required under the terms
hereof and such failure shall not be cured within any applicable grace or cure
period, then Assignee may, but shall not be obligated to, without prior notice
to or demand on Assignor, and without releasing Assignor from any obligation
hereof, make or perform the same in such manner and to such extent as Assignee
may deem necessary to protect the security hereof, including specifically,
without limitation, appearing in and defending any action or proceeding
purporting to affect the security hereof or the rights or powers of Assignee,
performing or discharging any obligation, covenant or agreement of Assignor
under any of the Leases, and, in exercising any of such powers, paying all
necessary costs and expenses, employing counsel and incurring and paying
attorneys' fees. Any sum advanced or paid by Assignee for any such purpose,
including, without limitation, attorneys' fees, together with interest thereon
at the Default Interest Rate (as defined in the Note) from the date paid or
advanced by Assignee until repaid by Assignor, shall immediately be due and
payable to Assignee by Assignor on demand and shall be secured by the Security
Deed and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.
IT IS FURTHER AGREED that this Assignment is made upon the following terms,
covenants and conditions:
1. This Assignment shall not operate to place responsibility for the
control, care, management or repair of the Property upon Assignee, nor for the
performance of any of the terms and conditions of any of the Leases, nor shall
it operate to make Assignee responsible or liable for any waste committed on the
Property by the tenants or any other party or for any dangerous or defective
condition of the Property or for any negligence in the management,
3
<PAGE>
EXHIBIT 10.3
upkeep, repair or control of the Property. Assignee shall not be liable for any
loss sustained by Assignor resulting from Assignee's failure to let the Property
or from any other act or omission of Assignee in managing the Property. Assignor
shall and does hereby indemnify and hold Assignee harmless from and against any
and all liability, loss, claim, demand or damage which may or might be incurred
by reason of this Assignment, including, without limitation, claims or demands
for security deposits from tenants of space in the Improvements deposited with
Assignor, and from and against any and all claims and demands whatsoever which
may be asserted against Assignee by reason of any alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in any of the Leases. Should Assignee incur any liability
by reason of this Assignment or in defense of any claim or demand for loss or
damage as provided above, the amount thereof, including, without limitation,
costs, expenses and attorneys' fees, together with interest thereof at the
Default Interest Rate from the date paid or incurred by Assignee until repaid by
Assignor, shall be immediately due and payable to Assignee by Assignor upon
demand and shall be secured by the Security Deed and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.
2. This Assignment shall not be construed as making Assignee a mortgagee
in possession.
3. Assignee is obligated to account to Assignor only for such Rents as
are actually collected or received by Assignee.
4. Assignor hereby further presently and absolutely assigns to Assignee
subject to the terms and provisions of this Assignment: (a) any award or other
payment which Assignor may hereafter become entitled to receive with respect to
any of the Leases as a result of or pursuant to any bankruptcy, insolvency or
reorganization or similar proceedings involving the tenants under such Leases;
and (b) any and all payments made by or on behalf of any tenant of any part of
the Property in lieu of Rent. Assignor hereby irrevocably appoints Assignee as
its attorney-in-fact to, from and after the occurrence of a default by Assignor
hereunder or under any of the other Loan Documents which has not been cured
within any applicable grace or cure period, appear in any such proceeding and to
collect any such award or payment, which power of attorney is coupled with an
interest by virtue of this Assignment and is irrevocable so long as any sums are
outstanding under the loan evidenced by the Note.
5. Assignor represents, warrants and covenants to and for the benefit of
Assignee: (a) that Assignor now is (or with respect to any Leases not yet in
existence, will be immediately upon the execution thereof) the absolute owner of
the landlord's interest in the Leases, with full right and title to assign the
same and the Rents due or to become due thereunder; (b) that, other than this
Assignment and those assignments, if any, specifically permitted in the Security
Deed, there are no outstanding assignments of the Leases or Rents; (c) that no
Rents have been anticipated, discounted, released, waived, compromised or
otherwise discharged except for prepayment of rent of not more than one (1)
month prior to the accrual thereof; (d) that to the
4
<PAGE>
EXHIBIT 10.3
best of Assignor's knowledge and belief, there are no material defaults now
existing under any of the Leases by the landlord or tenant, and there exists no
state of facts which, with the giving of notice or lapse of time or both, would
constitute a default under any of the Leases by the landlord or tenant, except
as disclosed in writing to Assignee; (e) that Assignor has and shall duly and
punctually observe and perform all covenants, conditions and agreements in the
Leases on the part of the landlord to be observed and performed thereunder and
(f) the Leases are in full force and effect and are the valid and binding
obligations of Assignor, and, to the knowledge of Assignor, are the valid and
binding obligations of the tenants thereto.
6. Assignor covenants and agrees that Assignor shall not, without the
prior written consent of Assignee, which consent shall not be unreasonably
withheld: (a) exclusive of security deposits, accept any payment of Rent or
installments of Rent for more than one month in advance; (b) enter into any
Lease having a term of less than six (6) months or in excess of one (1) year;
(c) cancel or terminate any Lease (other than for non-payment of Rent under) or
materially amend or materially modify any Lease; (d) take or omit to take any
action, right or option which would permit the tenant under any Lease to cancel
or terminate said Lease; (e) anticipate, discount, release, waive, compromise or
otherwise discharge any Rents payable or other obligations under the Leases; (f)
further pledge, transfer, Security Deed or otherwise encumber or assign the
Leases or future payments of Rents except as otherwise expressly permitted by
the terms of the Security Deed or incur any material indebtedness, liability or
other obligation to any tenant, lessee or licensee under the Leases; or (g)
permit any Lease to become subordinate to any lien other than the lien of the
Security Deed; provided, however, that Assignor may take any of the actions
------------------
described in subsection (c) or (e) above so long as such actions are taken by
Assignor in the ordinary course of business and are consistent with sound
customary leasing and management practices for similar properties.
7. Assignor covenants and agrees that Assignor shall, at its sole cost
and expense, appear in and defend any action or proceeding arising under,
growing out of, or in any manner connected with the Leases or the obligations,
duties or liabilities of the landlord or tenant thereunder, and shall pay on
demand all costs and expenses, including, without limitation, attorneys' fees,
which Assignee may incur in connection with Assignee's appearance, voluntary or
otherwise, in any such action or proceeding, together with interest thereon at
the Default Interest Rate from the date incurred by Assignee until repaid by
Assignor.
8. Upon an event of default or condition which, with the passage of time
would constitute an event of default under any of the Loan Documents, Assignee
may, at its option, notify any tenants or other parties of the existence of this
Assignment. Assignor does hereby specifically authorize, instruct and direct
each and every present and future tenant, lessee and licensee of the whole or
any part of the Property to pay all unpaid and future Rents to Assignee upon
receipt of demand from Assignee to so pay the same and Assignor hereby agrees
that each such present and future tenant, lessee and licensee may rely upon such
written demand from Assignee to so pay said Rents without any inquiry into
whether there exists a default hereunder or under the other Loan Documents or
whether Assignee is otherwise entitled to said Rents.
5
<PAGE>
EXHIBIT 10.3
Assignor hereby waives any right, claim or demand which Assignor may now or
hereafter have against any present or future tenant, lessee or licensee by
reason of such payment of Rents to Assignee, and any such payment shall
discharge such tenant's, lessee's or licensee's obligation to make such payment
to Assignor.
9. Assignee may take or release any security for the indebtedness
evidenced by the Note, may release any party primarily or secondarily liable for
the indebtedness evidenced by the Note, may grant extensions, renewals or
indulgences with respect to the indebtedness evidenced by the Note and may apply
any other security therefor held by it to the satisfaction of any indebtedness
evidenced by the Note without prejudice to any of its rights hereunder.
10. The acceptance of this Assignment and the collection of the Rents in
the event Assignor's license is terminated, as referred to above, shall be
without prejudice to Assignee. The rights of Assignee hereunder are cumulative
and concurrent, may be pursued separately, successively or together and may be
exercised as often as occasion therefor shall arise, it being agreed by Assignor
that the exercise of any one or more of the rights provided for herein shall not
be construed as a waiver of any of the other rights or remedies of Assignee, at
law or in equity or otherwise, so long as any obligation under the Loan
Documents remains unsatisfied.
11. All rights of Assignee hereunder shall inure to the benefit of its
successors and assigns; and all obligations of Assignor shall bind its
successors and assigns and any subsequent owner of the Property. All rights of
Assignee in, to and under this Assignment shall pass to and may be exercised by
any assignee of such rights of Assignee. Assignor hereby agrees that if Assignee
gives notice to Assignor of an assignment of said rights, upon such notice the
liability of Assignor to the assignee of the Assignee shall be immediate and
absolute. Assignor will not set up any claim against Assignee or any intervening
assignee as a defense, counterclaim or setoff to any action brought by Assignee
or any intervening assignee for any amounts due hereunder or for possession of
or the exercise of rights with respect to the Leases or the Rents.
12. It shall be a default hereunder (a) if any representation or warranty
made herein by Assignor is determined by Assignee to have been false or
misleading in any material respect at the time made, or (b) upon any failure by
Assignor to comply with the provisions of Paragraph 6 above or (c) upon any
failure by Assignor in the performance or observance of any other covenant or
condition hereof and, to the extent such failure described in this subsection
(c) is susceptible of being cured, the continuance of such failure for thirty
(30) days after written notice thereof from Assignee to Assignor; provided,
---------
however, that if such default is susceptible of cure but such cure cannot be
- -------
accomplished with reasonable diligence within said period of time, and if
Assignor commences to cure such default promptly after receipt of notice thereof
from Assignee, and thereafter prosecutes the curing of such default with
reasonable diligence, such period of time shall be extended for such period of
time as may be necessary to cure such default with reasonable diligence, but not
to exceed an additional sixty (60) days. Any such default not so cured shall be
a default under each of the other Loan
6
<PAGE>
EXHIBIT 10.3
Documents, entitling Assignee to exercise any or all rights and remedies
available to Assignee under the terms hereof or of any or all of the other Loan
Documents, and any default under any other Loan Document which is not cured
within any applicable grace or cure period shall be deemed a default hereunder
subject to no grace or cure period, entitling Assignee to exercise any or all
rights provided for herein.
13. Failure by Assignee to exercise any right which it may have hereunder
shall not be deemed a waiver thereof unless so agreed in writing by Assignee,
and the waiver by Assignee of any default hereunder shall not constitute a
continuing waiver or a waiver of any other default or of the same default on any
future occasion. No collection by Assignee of any Rents pursuant to this
Assignment shall constitute or result in a waiver of any default then existing
hereunder or under any of the other Loan Documents.
14. If any provision under this Assignment or the application thereof to
any entity, person or circumstance shall be invalid, illegal or unenforceable to
any extent, the remainder of this Assignment and the application of the
provisions hereof to other entities, persons or circumstances shall not be
affected thereby and shall be enforced to the fullest extent permitted by law.
15. This Assignment may not be amended, modified or otherwise changed
except by a written instrument duly executed by Assignor and Assignee.
16. This Assignment shall be in full force and effect continuously from
the date hereof to and until the Security Deed shall be released of record, and
the release of the Security Deed shall, for all purposes, automatically
terminate this Assignment and render this Assignment null and void and of no
effect whatsoever.
17. In case of a conflict between any provision of this Assignment and any
provision of the other Loan Documents, the provision selected by Assignee in its
sole subjective discretion shall prevail and be controlling.
18. All notices, demands, requests or other communications to be sent by
one party to the other hereunder or required by law shall be given and become
effective as provided in the Security Deed.
19. This Assignment shall be governed by and construed in accordance with
the laws of the State of Georgia, except to the extent that any of such laws may
now or hereafter be preempted by Federal law, in which case such Federal law
shall so govern and be controlling.
20. This Assignment may be executed in any number of counterparts, each of
which shall be effective only upon delivery and thereafter shall be deemed an
original, and all of which shall be taken to be one and the same instrument, for
the same effect as if all parties hereto had signed the same signature page. Any
signature page of this Assignment may be detached
7
<PAGE>
EXHIBIT 10.3
from any counterpart of this Assignment without impairing the legal effect of
any signatures thereon and may be attached to another counterpart of this
Assignment identical in form hereto but having attached to it one or more
additional signature pages.
21. In addition to, but not in lieu of, any other rights hereunder,
Assignee shall have the right to institute suit and obtain a protective or
mandatory injunction against Assignor to prevent a breach or default, or to
reinforce the observance, of the agreements, covenants, terms and conditions
contained herein, as well as the right to damages occasioned by any breach or
default by Assignor.
22. This Assignment shall continue and remain in full force and effect
during any period of foreclosure with respect to the Property.
23. Assignor hereby covenants and agrees that Assignee shall be entitled
to all of the rights, remedies and benefits available by statute, at law, in
equity or as a matter of practice for the enforcement and perfection of the
intents and purposes hereof. Assignee shall, as a matter of absolute right, be
entitled, upon application to a court of applicable jurisdiction, to the
appointment of a receiver to obtain and secure the rights of Assignee hereunder
and the benefits intended to be provided to Assignee hereunder.
24. Notwithstanding anything to the contrary contained in this Assignment,
the liability of Assignor and its general partners for the indebtedness secured
hereby and for the performance of the other agreements, covenants and
obligations contained herein and in the other Loan Documents shall be limited as
set forth in Section 1.05 of the Note.
8
<PAGE>
EXHIBIT 10.3
25. Notwithstanding anything to the contrary contained in this Assignment,
in the event Assignor has an obligation to pay attorneys' fees or legal fees
under this Assignment or any of the other Loan Documents, such obligation shall
be in an amount equal to reasonable attorneys' fees actually incurred.
9
<PAGE>
EXHIBIT 10.3
IN WITNESS WHEREOF, Assignor has executed this Assignment under seal as of
the day and year first above written.
Signed, sealed and delivered WASHINGTON TOWNE APARTMENTS, L.L.C., in the
presence of a Georgia limited liability company
____________________ By: Washington Towne, Inc.,
UNOFFICIAL WITNESS a Georgia corporation,
Its: member
____________________ By:____________________________
NOTARY PUBLIC Name:
Its:
Executed this __ day of
September, 1995.
My Commission Expires:
Attest:____________________________
Name:
Its
(NOTARY SEAL)
(CORPORATE SEAL)
10
<PAGE>
EXHIBIT 10.3
EXHIBIT A
LEGAL DESCRIPTION
-----------------
11
<PAGE>
EXHIBIT 10.4
INDEMNITY AND GUARANTY AGREEMENT
--------------------------------
THIS INDEMNITY AND GUARANTY AGREEMENT (this "Agreement"), made as of the
13th day of September, 1995, by UNIVERSITY REAL ESTATE PARTNERSHIP V, a
California limited partnership, ("Indemnitor"), whose address is c/o 200
Crescent Court, Suite 1300, Dallas Texas 75201 in favor of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association, whose address is One
First Union Center, TW-8, Charlotte, North Carolina 28288 ("Lender").
W I T N E S S E T H:
--------------------
WHEREAS, WASHINGTON TOWNE APARTMENTS, L.L.C. ("Borrower"), has obtained a
loan in the principal amount of One Million Seven Hundred Fifty Thousand and
00/100 ($1,750,000.00) Dollars (the "Loan") from Lender; and
WHEREAS, the Loan is evidenced by a Promissory Note dated of even date
herewith (the "Note"), executed by Borrower and payable to the order of Lender
in the stated principal amount of One Million Seven Hundred Fifty Thousand and
00/100 ($1,750,000.00) Dollars and is secured by a Deed to Secure Debt and
Security Agreement dated of even date herewith (the "Securing Deed") from
Borrower, as grantor, to Lender, as grantee, encumbering that certain real
property situated in the City of East Point, County of Fulton, State of Georgia,
as more particularly described on Exhibit A attached hereto and incorporated
herein by this reference, together with the buildings, structures and other
improvements now or hereafter located thereon (said real property, buildings,
structures and other improvements being hereinafter collectively referred to as
the "Property") and by other documents and instruments (the Note, the Security
Deed and such other documents and instruments, as the same may from time to time
be amended, consolidated, renewed or replaced, being collectively referred to
herein as the "Loan Documents") and
WHEREAS, as a condition to making the Loan to Borrower, Lender has required
that Indemnitor indemnify Lender from and against and
1
<PAGE>
EXHIBIT 10.4
guarantee payment to Lender of those items for which Borrower is personally
liable and for which Lender has recourse against Borrower under the terms of the
Note and the Security Deed; and
WHEREAS, the extension of the Loan to Borrower is of substantial benefit to
Indemnitor and, therefore, Indemnitor desires to indemnify Lender from and
against and guarantee payment to Lender of those items for which Borrower is
personally liable and for which Lender has recourse against Borrower under the
terms of the Note and the Security Deed.
NOW, THEREFORE, to induce Lender to extend the Loan to Borrower and in
consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:
1. Indemnity and Guaranty. Indemnitor hereby assumes liability for,
----------------------
hereby guarantees payment to Lender of, hereby agrees to pay, protect, defend
and save Lender harmless from and against, and hereby indemnifies Lender from
and against any and all liabilities, obligations, losses, damages, costs and
expenses (including, without limitation, attorneys' fees), causes of action,
suits, claims, demands and judgments of any nature or description whatsoever
(collectively, "Costs") which may at any time be imposed upon, incurred by or
awarded against Lender as a result of:
(a) Proceeds paid under any insurance policies (or paid as a result
of any other claim or cause of action against any person or entity) by reason of
damage, loss or destruction to all or any portion of the Security Property (as
defined in the Note), to the full extent of such proceeds not previously
delivered to Lender, but which, under the terms of the Loan Documents, should
have been delivered to Lender;
(b) Proceeds or awards resulting from the condemnation or other
taking in lieu of condemnation of all or any portion of the Security Property,
or any of them, to the full extent of such proceeds or awards not previously
delivered to Lender, but which, under the terms of the Loan Documents, should
have been delivered to Lender;
2
<PAGE>
Exhibit 10.4
(c) All tenant security deposits or other refundable deposits paid to
or held by Borrower or any other person or entity in connection with leases of
all or any portion of the Security Property which are not applied in accordance
with the terms of the applicable lease or other agreement;
(d) Rent and other payments received from tenants under leases of all
or any portion of the Security Property paid more than one month in advance;
(e) Rents, issues, profits and revenues of all or any portion of the
Security Property received or applicable to a period after any notice of default
from Lender under the Loan Documents in the event of any default by Borrower
thereunder which are not either applied to the ordinary and necessary expenses
of owning and operating the Security Property or paid to Lender;
(f) Waste committed on the Security Property, damage to the Security
Property as a result of the intentional misconduct or gross negligence of
Borrower or any of its principals, officers or general partners, or any agent or
employee of such persons, or any removal of the Security Property in violation
of the terms of the Loan Documents, to the full extent of the losses or damages
incurred by Lender on account of such damage or removal;
(g) Failure by Borrower to pay any valid taxes, assessments,
mechanic's liens, materialmen's liens or other liens which could create liens on
any portion of the Security Property which would be superior to the lien or
security title of the Security Deed or the other Loan Documents;
(h) All obligations and indemnities of Borrower under the Loan
Documents relating to hazardous or toxic substances or compliance with
environmental laws and regulations to the full extent of any losses or damages
(including those resulting from diminution in value of any Security Property)
incurred by Lender as a result of the existence of such hazardous or toxic
substances or failure to comply with environmental laws or regulations; and
(i) Fraud or material misrepresentation by Borrower or any of its
principals, officers or general partners, any guarantor, any indemnitor or any
agent, employee or other person authorized or apparently authorized to make
statements or representations on
3
<PAGE>
EXHIBIT 10.4
behalf of Borrower, any principal, officer or partner of Borrower, or any
guarantor or any indemnitor, to the full extent of any losses, damages and
expenses of Lender on account thereof.
This is a guaranty of payment and performance and not of collection.
The liability of Indemnitor under this Agreement shall be direct and immediate
and not conditional or contingent upon the pursuit of any remedies against
Borrower or any other person (including, without limitation, other guarantors,
if any), nor against the collateral for the Loan. Indemnitor waives any right to
require that an action be brought against Borrower or any other person or to
require that resort be had to any collateral for the Loan or to any balance of
any deposit account or credit on the books of Lender in favor of Borrower or any
other person. In the event, on account of the Bankruptcy Reform Act of 1978, as
amended, or any other debtor relief law (whether statutory, common law, case law
or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which
may be or become applicable, Borrower shall be relieved of or fail to incur any
debt, obligation or liability as provided in the Loan Documents, Indemnitor
shall nevertheless be fully liable therefor. In the event of a default under the
Loan Documents which is not cured within any applicable grace or cure period,
Lender shall have the right to enforce its rights, powers and remedies
(including, without limitation, foreclosure of all or any portion of the
collateral for the Loan) thereunder or hereunder, in any order, and all rights,
powers and remedies available to Lender in such event shall be non-exclusive and
cumulative of all other rights, powers and remedies provided thereunder or
hereunder or by law or in equity. If the indebtedness and obligations guaranteed
hereby are partially paid or discharged by reason of the exercise of any of the
remedies available to Lender, this Agreement shall nevertheless remain in full
force and effect, and Indemnitor shall remain liable for all remaining
indebtedness and obligations guaranteed hereby, even though any rights which
Indemnitor may have against Borrower may be destroyed or diminished by the
exercise of any such remedy.
2. Indemnification Procedures.
--------------------------
(a) If any action shall be brought against Lender based upon any of
the matters for which Lender is indemnified hereunder, Lender shall notify
Indemnitor in writing thereof and Indemnitor shall promptly assume the defense
thereof, including, without
4
<PAGE>
EXHIBIT 10.4
limitation, the employment of counsel acceptable to Lender and the negotiation
of any settlement; provided, however, that any failure of Lender to notify
Indemnitor of such matter shall not impair or reduce the obligations of
Indemnitor hereunder. Lender shall have the right, at the expense of Indemnitor
(which expense shall be included in Costs), to employ separate counsel in any
such action and to participate in the defense thereof. In the event Indemnitor
shall fail to discharge or undertake to defend Lender against any claim, loss or
liability for which Lender is indemnified hereunder, Lender may, at its sole
option and election, defend or settle such claim, loss or liability. The
liability of Indemnitor to Lender hereunder shall be conclusively established by
such settlement, provided such settlement is made in good faith, the amount of
such liability to include both the settlement consideration and the costs and
expenses, including, without limitation, attorneys' fees and disbursements,
incurred by Lender in effecting such settlement. In such event, such settlement
consideration, costs and expenses shall be included in Costs and Indemnitor
shall pay the same as hereinafter provided. Lender's good faith in any such
settlement shall be conclusively established if the settlement is made on the
advice of independent legal counsel for Lender.
(b) Indemnitor shall not, without the prior written consent of
Lender: (i) settle or compromise any action, suit, proceeding or claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to Lender of a full and
complete written release of Lender (in form, scope and substance satisfactory to
Lender in its sole discretion) from all liability in respect of such action,
suit, proceeding or claim and a dismissal with prejudice of such action, suit,
proceeding or claim; or (ii) settle or compromise any action, suit, proceeding
or claim in any manner that may adversely affect Lender or obligate Lender to
pay any sum or perform any obligation as determined by Lender in its sole
discretion.
(c) All Costs shall be immediately reimbursable to Lender when and as
incurred and, in the event of any litigation, claim or other proceeding, without
any requirement of waiting for the ultimate outcome of such litigation, claim or
other proceeding, and Indemnitor shall pay to Lender any and all Costs within
ten (10) days after written notice from Lender itemizing the amounts thereof
incurred to the date of such notice. In addition to any
5
<PAGE>
EXHIBIT 10.4
other remedy available for the failure of Indemnitor to periodically pay such
Costs, such Costs, if not paid within said ten-day period, shall bear interest
at the Default Interest Rate (as defined in the Note).
3. Reinstatement of Obligations. If at any time all or any part of any
----------------------------
payment made by Indemnitor or received by Lender from Indemnitor under or with
respect to this Agreement is or must be rescinded or returned for any reason
whatsoever (including, but not limited to, the insolvency, bankruptcy or
reorganization of Indemnitor or Borrower), then the obligations of Indemnitor
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence, notwithstanding such previous payment made by
Indemnitor, or receipt of payment by Lender, and the obligations of Indemnitor
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such payment, all as though such previous payment by Indemnitor had never
been made.
4. Waivers by Indemnitor. To the extent permitted by law, Indemnitor
---------------------
hereby waives and agrees not to assert or take advantage of:
(a) Any right to require Lender to proceed against Borrower or any
other person or to proceed against or exhaust any security held by Lender at any
time or to pursue any other remedy in Lender's power or under any other
agreement before proceeding against Indemnitor hereunder;
(b) The defense of the statute of limitations in any action
hereunder;
(c) Any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or persons or the failure of
Lender to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other person or persons;
(d) Demand, presentment for payment, notice of nonpayment, intent to
accelerate, acceleration, protest, notice of protest and all other notices of
any kind, or the lack of any thereof, including, without limiting the generality
of the foregoing, notice of the existence, creation or incurring of any
6
<PAGE>
EXHIBIT 10.4
new or additional indebtedness or obligation or of any action or non-action on
the part of Borrower, Lender, any endorser or creditor of Borrower or of
Indemnitor or on the part of any other person whomsoever under this or any other
instrument in connection with any obligation or evidence of indebtedness held by
Lender;
(e) Any defense based upon an election of remedies by Lender;
(f) Any right or claim or right to cause a marshalling of the assets
of Indemnitor;
(g) Any principle or provision of law, statutory or otherwise, which
is or might be in conflict with the terms and provisions of this
Agreement;
(h) Any duty on the part of Lender to disclose to Indemnitor any
facts Lender may now or hereafter know about Borrower or the Property,
regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Indemnitor intends to assume or
has reason to believe that such facts are unknown to Indemnitor or has a
reasonable opportunity to communicate such facts to Indemnitor, it being
understood and agreed that Indemnitor is fully responsible for being and keeping
informed of the financial condition of Borrower, of the condition of the
Property and of any and all circumstances bearing on the risk that liability may
be incurred by Indemnitor hereunder;
(i) Any lack of notice of disposition or of manner of disposition
of any collateral for the Loan;
(j) Any invalidity, irregularity or unenforceability, in whole or in
part, of any one or more of the Loan Documents;
(k) Any lack of commercial reasonableness in dealing with the
collateral for the Loan;
(l) Any deficiencies in the collateral for the Loan or any deficiency
in the ability of Lender to collect or to obtain performance from any persons or
entities now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;
7
<PAGE>
EXHIBIT 10.4
(m) An assertion or claim that the automatic stay provided by 11
U.S.C. (S)362 (arising upon the voluntary or involuntary bankruptcy proceeding
of Borrower) or any other stay provided under any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of Lender to enforce any of its rights, whether now or hereafter
required, which Lender may have against Indemnitor or the collateral for the
Loan;
(n) Any modifications of the Loan Documents or any obligation of
Borrower relating to the Loan by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise; and
(o) Any action, occurrence, event or matter consented to by
Indemnitor under Section 5(h) hereof, under any other provision hereof, or
otherwise.
5. General Provisions.
------------------
(a) Fully Recourse. All of the terms and provisions of this
--------------
Agreement are recourse obligations of Indemnitor and not restricted by any
limitation on personal liability,
(b) Unsecured Obligations. Indemnitor hereby acknowledges that
---------------------
Lender's appraisal of the Property is such that Lender is not willing to accept
the consequences of the inclusion of Indemnitor's indemnity set forth herein
among the obligations secured by the Security Deed and the other Loan Documents
and that Lender would not make the Loan but for the unsecured personal liability
undertaken by Indemnitor herein.
(c) Survival. This Agreement shall be deemed to be continuing in
--------
nature and shall remain in full force and effect and shall survive the exercise
of any remedy by Lender under the Security Deed or any of the other Loan
Documents, including, without limitation, any foreclosure or deed in lieu
thereof, even if, as a part of such remedy, the Loan is paid or satisfied in
full.
8
<PAGE>
EXHIBIT 10.4
(d) No Subrogation; No Recourse Against Lender. Notwithstanding the
------------------------------------------
satisfaction by Indemnitor of any liability hereunder, Indemnitor shall not have
any right of subrogation, contribution, reimbursement or indemnity whatsoever or
any right of recourse to or with respect to the assets or property of Borrower
or to any collateral for the Loan. In connection with the foregoing, Indemnitor
expressly waives any and all rights of subrogation to Lender against Borrower,
and Indemnitor hereby waives any rights to enforce any remedy which Lender may
have against Borrower and any right to participate in any collateral for the
Loan. In addition to and without in any way limiting the foregoing, Indemnitor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Indemnitor to all indebtedness of Borrower to Lender, and agrees with Lender
that Indemnitor shall not demand or accept any payment of principal or interest
from Borrower, shall not claim any offset or other reduction of Indemnitor's
obligations hereunder because of any such indebtedness and shall not take any
action to obtain any of the collateral from the Loan. Further, Indemnitor shall
not have any right of recourse against Lender by reason of any action Lender may
take or omit to take under the provisions of this Agreement or under the
provisions of any of the Loan Documents.
(e) Reservation of Rights. Nothing contained in this Agreement shall
---------------------
prevent or in any way diminish or interfere with any rights or remedies,
including, without limitation, the right to contribution, which Lender may have
against Borrower, Indemnitor or any other party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (codified at
Title 42 U.S.C. (S)9601 et seq.), as it may be amended from time to time, or any
--------
other applicable federal, state or local laws, all such rights being hereby
expressly reserved.
(f) Financial Statements; Net Worth. Indemnitor hereby agrees, as a
-------------------------------
material inducement to Lender to make the Loan to Borrower, to furnish to Lender
promptly upon demand by Lender current and dated financial statements detailing
the assets and liabilities of Indemnitor certified by Indemnitor, in form and
substance acceptable to Lender. Indemnitor hereby agrees that at all times
during the term of the Loan it shall maintain a minimum net worth of no less
than that which is set forth in the financials delivered to Lender prior to the
date hereof. The failure by Indemnitor to maintain such net worth shall be
deemed an "Event of
9
<PAGE>
EXHIBIT 10.4
Default" under the Loan Documents entitling Lender to exercise any and all of
its remedies thereunder. Indemnitor hereby warrants and represents unto Lender
that any and all balance sheets, net worth statements and other financial data
which have heretofore been given or may hereafter be given to Lender with
respect to Indemnitor did or will at the time of such delivery fairly and
accurately present the financial condition of Indemnitor.
(g) Rights Cumulative; Payments. Lender's rights under this
---------------------------
Agreement shall be in addition to all rights of Lender under the Note, the
Security Deed and the other Loan Documents. Further, payments made by
Indemnitor, under this Agreement shall not reduce in any respect Borrower's
obligations and liabilities under the Note, the Security Deed and the Other Loan
Documents.
(h) No Limitation on Liability. Indemnitor hereby consents and
--------------------------
agrees that Lender may at any time and from time to time without further consent
from Indemnitor do any of the following events, and the liability of Indemnitor
under this Agreement shall be unconditional and absolute and shall in no way be
impaired or limited by any of the following events, whether occurring with or
without notice to Indemnitor or with or without consideration: (i) any
extensions of time for performance required by any of the Loan Documents or
extension or renewal of the Note; (ii) any sale, assignment or foreclosure of
the Note, the Security Deed or any of the other Loan Documents or any sale or
transfer of the Property; (iii) any change in the composition of Borrower,
including, without limitation, the withdrawal or removal of Indemnitor from any
current or future position of ownership, management or control of Borrower; (iv)
the accuracy or inaccuracy of the representations and warranties made by
Indemnitor herein or by Borrower in any of the Loan Documents; (v) the release
of Borrower or of any other person or entity from performance or observance of
any of the agreements, covenants, terms or conditions contained in any of the
Loan Documents by operation of law, Lender's voluntary act or otherwise; (vi)
the release or substitution in whole or in part of any security for the Loan;
(vii) Lender's failure to record the Security Deed or to file any financing
statement (or Lender's improper recording or filing thereof) or to otherwise
perfect, protect, secure or insure any lien or security interest given as
security for the Loan; (viii) the modification of the terms of any one or more
of the Loan Documents; or (ix) the taking or failure to take any action of any
10
<PAGE>
EXHIBIT 10.4
type whatsoever. No such action which Lender shall take or fail to take in
connection with the Loan Documents or any collateral for the Loan, nor any
course of dealing with Borrower or any other person, shall limit, impair or
release Indemnitor's obligations hereunder, affect this Agreement in any way or
afford Indemnitor any recourse against Lender. Nothing contained in this Section
shall be construed to require Lender to take or refrain from taking any action
referred to herein.
(i) Entire Agreement; Amendment; Severability. This Agreement
-----------------------------------------
contains the entire agreement between the parties respecting the matters herein
set forth and supersedes all prior agreements, whether written or oral, between
the parties respecting such matters. Any amendments or modifications hereto, in
order to be effective, shall be in writing and executed by the parties hereto.
A determination that any provision of this Agreement is unenforceable or invalid
shall not affect the enforceability or validity of any other provision, and any
determination that the application of any provision of this Agreement to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
(j) Governing Law; Binding Effect; Waiver of Acceptance. This
---------------------------------------------------
Agreement shall be governed by and construed in accordance with the laws of the
State of Georgia, except to the extent that the applicability of any of such
laws may now or hereafter be preempted by Federal law, in which case such
Federal law shall so govern and be controlling. This Agreement shall bind
Indemnitor and the heirs, personal representatives, successors and assigns of
Indemnitor and shall inure to the benefit of Lender and the officers, directors,
shareholders, agents and employees of Lender and their respective heirs,
successors and assigns. Notwithstanding the foregoing, Indemnitor shall not
assign any of its rights or obligations under this Agreement without the prior
written consent of Lender, which consent may be withheld by Lender in its sole
discretion. Indemnitor hereby waives any acceptance of this Agreement by
Lender, and this Agreement shall immediately be binding upon Indemnitor.
(k) All notices, demands, requests or other communications to be
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have
11
<PAGE>
EXHIBIT 10.4
been validly given or served by delivery of the same in person to the intended
addressee, or by depositing the same with Federal Express or another reputable
private courier service for next business day delivery to the intended addressee
at its address set forth on the first page of this Agreement or at such other
address as may be designated by such party as herein provided, or by depositing
the same in the United States mail, postage prepaid, registered or certified
mail, return receipt requested, addressed to the intended addressee at its
address set forth on the first page of this Agreement or at such other address
as may be designated by such party as herein provided. All notices, demands and
requests to be sent to Lender shall be addressed to the attention of the Capital
Markets Group. All notices, demands and requests shall be effective upon such
personal delivery, or one (1) business day after being deposited with the
private courier service, or two (2) business days after being deposited in the
United States mail as required above. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
(l) No Waiver; Time of Essence; Business Day. The failure of any
----------------------------------------
party hereto to enforce any right or remedy hereunder, or to promptly enforce
any such right or remedy, shall not constitute a waiver thereof nor give rise to
any estoppel against such party nor excuse any of the parties hereto from their
respective obligations hereunder. Any waiver of such right or remedy must be in
writing and signed by the party to be bound. This Agreement is subject to
enforcement at law or in equity, including actions for damages or specific
performance. Time is of the essence hereof. The term "business day" as used
herein shall mean a weekday, Monday through Friday, except a legal holiday or a
day on which banking institutions in Georgia are authorized by law to be closed.
(m) Captions for Convenience. The captions and headings of the
------------------------
sections and paragraphs of this Agreement are for convenience of reference only
and shall not be construed in
12
<PAGE>
EXHIBIT 10.4
interpreting the provisions hereof.
(n) Attorneys' Fees. In the event it is necessary for Lender to
---------------
retain the services of an attorney or any other consultants in order to enforce
this Agreement, or any portion thereof, Indemnitors agree to pay to Lender any
and all costs and expenses, including, without limitation, reasonable attorneys'
fees actually incurred by Lender as a result thereof and such costs, fees and
expenses shall be included in Costs.
(o) Successive Actions. A separate right of action hereunder shall
------------------
arise each time Lender acquires knowledge of any matter indemnified or
guaranteed by Indemnitor under this Agreement. Separate and successive actions
may be brought hereunder to enforce any of the provisions hereof at any time and
from time to time. No action hereunder shall preclude any subsequent action,
and Indemnitor hereby waives and covenants not to assert any defense in the
nature of splitting of causes of action or merger of judgments.
(p) Reliance. Lender would not make the Loan to Borrower without
--------
this Agreement. Accordingly, Indemnitor intentionally and unconditionally
enters into the covenants and agreements as set forth above and understands
that, in reliance upon and in consideration of such covenants and agreements,
the Loan shall be made and, as part and parcel thereof, specific monetary and
other obligations have been, are being and shall be entered into which would not
be made or entered into but for such reliance.
(q) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
------------------------------------------------
(1) INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT
COUNSEL, (A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF GEORGIA OVER ANY
SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS
AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN FULTON COUNTY,
GEORGIA, (C) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (D) TO THE FULLEST
EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
LENDER TO
13
<PAGE>
EXHIBIT 10.4
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM). INDEMNITOR FURTHER
CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS
IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL,
POSTAGE PREPAID, TO THE INDEMNITOR AT THE ADDRESS FOR NOTICES DESCRIBED IN
SECTION 5(k) HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).
(2) LENDER AND INDEMNITOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THIS AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR
INDEMNITOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES,
AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR INDEMNITOR,
IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
(r) Waiver by Indemnitor. Indemnitor covenants and agrees that, upon
--------------------
the commencement of a voluntary or involuntary bankruptcy proceeding by or
against Borrower, Indemnitor shall not seek or cause Borrower or any other
person or entity to seek a supplemental stay or other relief, whether injunctive
or otherwise, pursuant to 11 U.S.C. (S) 105 or any other provision of the
Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law,
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, to
stay, interdict, condition, reduce or inhibit the ability of Lender to enforce
any rights of Lender against Indemnitor or the collateral for the Loan by virtue
of this Agreement or otherwise.
(s) No Petition. Indemnitor hereby covenants and agrees that it will
------------
not at any time institute against Borrower, or join in any institution against
Borrower of, any bankruptcy proceedings under any United States Federal or state
bankruptcy or similar law.
14
<PAGE>
EXHIBIT 10.4
IN WITNESS WHEREOF, Indemnitor has executed this Indemnity Agreement under
seal as of the day and year first above written.
Signed, sealed and delivered UNIVERSITY REAL ESTATE PARTNERSHIP V,
in the presence of a California limited partnership,
______________________ By: University Advisory Company,
UNOFFICIAL WITNESS a California general partnership, Its:
general partner
___________________ By: Southmark Investors, Inc.,
NOTARY PUBLIC a Nevada corporation
Its: general partner
Executed this __ day of
September, 1995 By: ______________________
Name:
My Commission Expires: Its:
(NOTARY SEAL) Attest: ______________________
Name:
Its:
(CORPORATE SEAL)
15
<PAGE>
EXHIBIT 10.4
Exhibit A
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 755,317
<SECURITIES> 0
<RECEIVABLES> 93,915
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 573,099
<PP&E> 18,965,001
<DEPRECIATION> 7,387,739
<TOTAL-ASSETS> 13,620,052
<CURRENT-LIABILITIES> 107,103
<BONDS> 10,584,921
0
0
<COMMON> 0
<OTHER-SE> 2,221,497
<TOTAL-LIABILITY-AND-EQUITY> 13,620,052
<SALES> 0
<TOTAL-REVENUES> 1,968,430
<CGS> 0
<TOTAL-COSTS> 1,764,395
<OTHER-EXPENSES> 121,518
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 836,448
<INCOME-PRETAX> (753,931)
<INCOME-TAX> 0
<INCOME-CONTINUING> (753,931)
<DISCONTINUED> 0
<EXTRAORDINARY> 75,000
<CHANGES> 0
<NET-INCOME> (678,931)
<EPS-PRIMARY> (19.51)
<EPS-DILUTED> 0
</TABLE>
