FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
(Amended by Exch. Act Rel. No. 312905, eff. 4/26/93.)
Commission file number 0-10831
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
(Exact name of registrant as specified in its charter)
California 94-2744492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
Registrant's telephone number (864) 239-1000
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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
September 30, December 31,
1998 1997
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 13,761 $ 8,691
Receivables and deposits 912 984
Restricted escrows 1,926 66
Other assets 1,185 383
Interest receivable on Master Loan 1,542 604
Investment in Master Loan 88,784 91,265
Less: allowance for impairment loss (17,417) (40,686)
71,367 50,579
Investment properties:
Land 3,564 3,620
Building and related personal property 34,306 31,715
37,870 35,335
Less accumulated depreciation (6,706) (5,014)
31,164 30,321
$121,857 $ 91,628
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 136 $ 164
Tenant security deposit liabilities 483 356
Accrued property taxes 46 --
Other liabilities 432 504
Mortgage note payable 27,409 4,448
28,506 5,472
Partners' (Deficit) Capital
General Partner (92) (364)
Limited Partners (199,052 units issued and
outstanding at September 30, 1998, and
December 31, 1997) 93,443 86,520
93,351 86,156
$121,857 $ 91,628
Note: The balance sheet at December 31, 1997, has been derived from the audited
financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $ 2,300 $ 2,060 $ 6,841 $ 5,767
Interest income on investment
in Master Loan to affiliate 1,543 644 4,727 2,064
Reduction of provision for
impairment loss -- -- 23,269 --
Interest income 153 99 308 330
Other income 164 157 476 448
Total revenues 4,160 2,960 35,621 8,609
Expenses:
Operating 1,106 1,198 3,730 3,768
Depreciation 598 475 1,700 1,329
General and administrative 142 92 449 306
Property taxes 146 138 483 418
Interest 106 81 266 244
Total expenses 2,098 1,984 6,628 6,065
Net income $ 2,062 $ 976 $28,993 $ 2,544
Net income allocated
to general partner (1%) $ 21 $ 9 $ 290 25
Net income allocated
to limited partners (99%) 2,041 967 28,703 2,519
$ 2,062 $ 976 $28,993 $ 2,544
Net income per Limited
Partnership Unit $ 10.26 $ 4.85 $144.20 $ 12.65
Operating distribution per
limited partnership $ -- $ -- $ 8.94 $ 9.94
Surplus distribution per
limited partnership unit $100.48 $ -- $100.48 $ --
Distributions per limited
partnership unit $100.48 $ -- $109.42 $ 9.94
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 200,342 $ 1 $200,342 $200,343
Partners' (deficit) capital at
December 31, 1996 199,052 $ (380) $ 84,968 $ 84,588
Distributions -- (20) (1,979) (1,999)
Net income for the nine months
ended September 30, 1997 -- 25 2,519 2,544
Partners' (deficit) capital at
September 30, 1997 199,052 $ (375) $ 85,508 $ 85,133
Partners' (deficit) capital at
December 31, 1997 199,052 $ (364) $ 86,520 $ 86,156
Distributions -- (18) (21,780) (21,798)
Net income for the nine months
ended September 30, 1998 -- 290 28,703 28,993
Partners' (deficit) capital at
September 30, 1998 199,052 $ (92) $93,443 $93,351
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net income $ 28,993 $ 2,544
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,747 1,349
Casualty loss 14 --
Gain on sale of land (19) --
Reduction of provision for impairment loss (23,269) --
Change in accounts:
Receivables and deposits 72 134
Other assets (311) (175)
Interest receivable on Master Loan (938) (644)
Accounts payable (28) (1,234)
Tenant security deposit liabilities 127 30
Accrued property taxes 46 47
Other liabilities (72) 113
Net cash provided by
operating activities 6,362 2,164
Cash flows from investing activities:
Net deposits to restricted escrows (1,860) (2)
Property improvements and replacements (2,613) (6,122)
Lease commissions paid (259) (165)
Proceeds from sale of securities available
for sale -- 3
Proceeds from sale of land 75 --
Principal receipts on Master Loan 2,481 2,031
Net cash used in (2,176) (4,255)
investing activities
Cash flows from financing activities:
Distributions to partners (21,798) (1,999)
Proceeds from mortgage note payable 23,000 --
Loan costs paid (279) --
Payments on notes payable (39) (37)
Net cash provided by (used in)
financing activities 884 (2,036)
Net increase (decrease) in cash and cash equivalents 5,070 (4,127)
Cash and cash equivalents at beginning of period 8,691 12,348
Cash and cash equivalents at end of period $ 13,761 $ 8,221
Supplemental disclosure of cash flow information:
Cash paid for interest $ 257 $ 234
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Institutional Properties (the "Partnership") 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 ConCap Equities, Inc. (the "General Partner"),
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
nine month periods ended September 30, 1998, are not necessarily indicative of
the results that may be expected for the fiscal year ending December 31, 1998.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the annual report on Form 10-K for the year ended
December 31, 1997 for the Partnership.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
PRINCIPLES OF CONSOLIDATION
The Partnership's financial statements include the accounts of Kennedy Boulevard
Associates, I, L.P., a Pennsylvania limited partnership ("KBA-I, L.P.") which is
99% owned by the Partnership, Kennedy Boulevard Associates II, L.P. a
Pennsylvania limited partnership ("KBA-II, L.P."), Kennedy Boulevard Associates
III, L.P. a Pennsylvania limited partnership ("KBA-III, L.P."), Kennedy
Boulevard Associates IV, L.P. a Pennsylvania limited partnership ("KBA-IV,
L.P.") and Kennedy Boulevard GP I, a Pennsylvania partnership. The general
partners of each of the affiliated limited and general partnerships are limited
liability corporations of which the Partnership is the sole member. The limited
partners of each of the affiliated limited and general partnerships are either
the Partnership or a limited liability corporation of which the Partnership is
the sole member. Therefore, the Partnership controls the affiliated limited and
general partnerships and consolidation is appropriate. KBA-I, L.P. holds title
to The Sterling Apartment Home and Commerce Center ("Sterling"). All
intercompany transactions have been eliminated.
NOTE B - RELATED PARTY TRANSACTIONS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership paid property management fees to affiliates of the General
Partner based upon collected gross rental revenues for property management
services as noted below for the nine month periods ended September 30, 1998 and
1997. The Partnership Agreement ("Agreement") also provides for reimbursement to
the General Partner and its affiliates for costs incurred in connection with the
administration of Partnership activities. The General Partner and its affiliates
received reimbursements as reflected in the following table:
Nine Months Ended
September 30,
1998 1997
(in thousands)
Property management fees (included in operating expenses) $362 $312
Reimbursement for services of affiliates
(included in operating, general and administrative
expenses, other assets and investment properties) (1) 337 476
(1) Included in "Reimbursement for services of affiliates" for the nine months
ended September 30, 1998 and 1997 is approximately $33,000 and $152,000,
respectively, in reimbursements for construction oversight costs. In
addition, approximately $66,000 and $164,000 of lease commissions are
included for the nine months ended September 30, 1998 and 1997
respectively. As well, approximately $35,000 in loan financing costs are
included for the nine months ended September 30, 1998.
For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner which receives payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations is not significant.
On July 30, 1998, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 50,000 of the outstanding units of
limited partnership interest in the Partnership, at $415 per Unit, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated July 30, 1998 (the "Offer to Purchase") and the related
Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2),
respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed
with the Securities and Exchange Commission on July 30, 1998. Because of the
existing and potential future conflicts of interest (described in the
Partnership's Statements on Schedule 14D-9 filed with the Securities and
Exchange Commission), neither the Partnership nor the General Partner expressed
any opinion as to the Offer to Purchase and made no recommendation as to whether
unit holders should tender their units in response to the Offer to Purchase. In
addition, because of these conflicts of interest, as a result of the Purchaser's
affiliation with various providers of property management services to the
Partnership's properties, the manner in which the Purchaser votes its limited
partner interests in the Partnership may not always be consistent with the best
interests of the other limited partners. The expiration date of this tender
offer has been extended to November 16, 1998.
On October 30, 1997, an affiliate of the General Partner (the "Purchaser")
commenced a tender offer for limited partnership interests in the Partnership.
The Purchaser offered to purchase up to 45,000 of the outstanding units of
limited partnership interest in the Partnership, at $400 per Unit, net to the
seller in cash. During December 1997 the Purchaser acquired 27,330 units
related to this tender offer. In February 1998 the Purchaser acquired an
additional 1570.5 units as a result of this tender offer.
NOTE C - NET INVESTMENT IN MASTER LOAN
The Partnership was formed for the benefit of its limited partners to lend funds
to Consolidated Capital Equity Partners ("CCEP"), a California general
partnership. The Partnership loaned funds to CCEP subject to a nonrecourse note
with a participation interest (the "Master Loan"). At September 30, 1998, the
recorded investment in the Master Loan was considered to be impaired under
Statement of Financial Accounting Standard No. 114 ("SFAS 114"), Accounting by
Creditors for Impairment of a Loan. The Partnership measures the impairment of
the loan based upon the fair value of the collateral due to the fact that
repayment of the loan is expected to be provided solely by the collateral. For
the nine months ended September 30, 1998, the Partnership recorded approximately
$23,269,000 in income based upon an increase in the fair value of the
collateral. For the nine months ended September 30, 1998 and 1997, the
Partnership recorded approximately $4,727,000 and $2,064,000, respectively, of
interest income based upon cash generated as a result of improved operations at
the properties which secure the loan.
The fair value of the collateral properties was determined using the net
operating income of the collateral properties capitalized at a rate deemed
reasonable for the type of property adjusted for market conditions, the physical
condition of the property and other factors. This methodology has not changed
from that used in prior calculations performed by the General Partner in
determining the fair value of the collateral properties. The approximate
$23,269,000 reduction in the provision for impairment loss that was recognized
during the three months ended June 30, 1998 is attributed to an increase in the
net realizable value of the collateral properties. The General Partner evaluates
the net realizable value on a semi-annual basis. The General Partner has seen a
consistent increase in the net realizable value of the collateral properties,
taken as a whole, over the past two years. The increase is deemed to be
attributable to major capital improvement projects and the strong effort to
complete deferred maintenance items that have been ongoing over the past few
years at the various properties. This has enabled the properties to increase
their respective occupancy levels or in some cases to maintain the properties'
high occupancy levels. The vast majority of this work was funded by cash flow
from the collateral properties themselves as no amounts have been borrowed on
the master loan or from other sources in the past few years.
Based upon the consistent increase in net realizable value of the collateral
properties the General Partner determined the increase to be permanent in nature
and accordingly reduced the allowance for impairment loss on the master loan
during the nine months ended September 30, 1998.
Interest, calculated on the accrual basis, due to the Partnership pursuant to
the terms of the Master Loan Agreement, but not recognized in the income
statements due to the impairment of the loan, totaled approximately $27,356,000
and $23,200,000 for the nine months ended September 30, 1998 and 1997,
respectively. Interest income is recognized on the cash basis as allowed under
SFAS 114. At September 30, 1998, and December 31, 1997, such cumulative
unrecognized interest totaling approximately $220,429,000 and $197,800,000 was
not included in the balance of the investment in Master Loan. In addition, six
of the properties are collateralized by first mortgages totaling approximately
$22,926,000 which are superior to the Master Loan. Accordingly this fact has
been taken into consideration in determining the fair value of the Master Loan.
During the nine months ended September 30, 1998, the Partnership made no
advances to CCEP as an advance on the Master Loan.
During the nine months ended September 30, 1998, the Partnership received
approximately $2,481,000 as principal payments on the Master Loan. Cash
received on certain investments by CCEP, which are required to be transferred to
the Partnership per the Master Loan Agreement, accounted for approximately
$79,000. Approximately $296,000 received was due to an "Excess Cash Flow"
payment received from CCEP as stipulated by the Master Loan Agreement.
Approximately $2,106,000 received was due to the sale of Northlake Quadrangle.
Such proceeds are required to be transferred to the Partnership per the Master
Loan Agreement. Approximately $3,789,000 of interest payments were also made
during the nine months ended September 30, 1998.
NOTE D - COMMITMENT
The Partnership is required by the Agreement to maintain working capital
reserves for contingencies of not less than 5% of Net Invested Capital, as
defined in the Agreement. In the event expenditures are made from this reserve,
operating revenue shall be allocated to such reserves to the extent necessary to
maintain the foregoing level. Reserves, including cash and cash equivalents and
tenant security deposits, totaling approximately $14,244,000, were greater than
the reserve requirement of approximately $6,261,000 at September 30, 1998.
NOTE E - SALE OF LAND
In July 1998, the Partnership sold approximately 55,000 square feet of land
(5.33% of the total land) at The Loft Apartments. The land was situated to the
side of the property. This resulted in a net gain of approximately $19,000 on
the sale.
NOTE F - FINANCING
In September 1998, the Partnership obtained financing for The Sterling Apartment
Homes and Commerce Center. The new indebtedness in the amount of $23,000,000
carries a stated interest rate of 6.77% per annum and is being amortized over 30
years with a balloon payment due October 1, 2008. Monthly payments of principal
and interest in the amount of $149,483 commence November 1, 1998.
Total loan costs of $279,000 relating to the new financing have been capitalized
and are being amortized over the term of the loan.
As a condition to the loan, the Partnership is required to make monthly deposits
of $17,490 into a Replacement Reserve Fund for the term of the loan to pay the
costs of replacements, tenant improvements and leasing commissions. The
Partnership was also required to deposit a sum of $1,796,743 into a Repair
Escrow Fund to pay for certain costs of repairs to the property to be completed
within the next two years.
NOTE G - TRANSFER OF CONTROL; SUBSEQUENT EVENT
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the General Partner. In addition, AIMCO also acquired approximately 51% of
the outstanding common shares of beneficial interest of Insignia Properties
Trust ("IPT"), the sole shareholder of the General Partner. Also, effective
October 1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger
pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of
AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders
of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of
the IPT Shares owned by it in favor of the IPT Merger and has granted an
irrevocable limited proxy to unaffiliated representatives of IPT to vote the
IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger.
As a result of AIMCO's ownership and its agreement, the vote of no other
holder of IPT is required to approve the merger. The General Partner does not
believe that this transaction will have a material effect on the affairs and
operations of the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Partnership's investment properties consist of two properties, The Loft and
The Sterling Apartment Homes and Commerce Center ("The Sterling"). The
Sterling is a multiple-use facility which consists of an apartment complex and
commercial space. The following table sets forth the average occupancies of the
properties for the nine months ended September 30, 1998 and 1997:
Average Occupancy
Property 1998 1997
The Loft Apartments 91% 95%
Raleigh, North Carolina
The Sterling Apartment Homes 91% 85%
The Sterling Commerce Center 82% 69%
Philadelphia, Pennsylvania
The General Partner attributes the increase in occupancy at The Sterling
Apartment Homes to recent renovations completed over the past year and to
changes in demographics. The increase in occupancy at The Sterling Commerce
Center is attributable to recent major capital improvements including exterior
renovations, elevator rehabilitation, and common area renovations. The decrease
in occupancy at The Loft Apartments is due to a declining market and increased
competition in the area.
Results of Operations
The Partnership's net income for the three and nine months ended September 30,
1998, was approximately $2,062,000 and $28,993,000, respectively, compared to
net income of approximately $976,000 and $2,544,000 for the corresponding
periods ended September 30, 1997. The increase in net income is due to an
increase in revenues, partially offset by an increase in expenses. Revenues
increased due to increases in rental income and interest income recorded on the
investment in Master Loan to affiliate and the reduction of provision for
impairment loss. Rental income increased due to an increase in occupancy at The
Sterling despite a decrease in occupancy at The Loft Apartments, as discussed
above. As discussed in "Item 1 - Financial Statements, Note C - Net Investment
in Master Loan", the Partnership recorded interest income of approximately
$4,727,000 and $2,064,000 for the nine months ended September 30, 1998 and 1997,
respectively, and recorded a reduction of allowance for impairment loss of
approximately $23,269,000 for the nine months ended September 30, 1998. The
increase in income recognized is due to an increase in the fair value of the
underlying collateral properties as a result of capital improvements and repairs
performed over the last few years, changing market conditions and due to
improved operations at such properties. Contributing to the increase in expenses
was an increase in depreciation expense, general and administrative expense,
property tax expense and interest expense. The increase in depreciation is due
to the major capital improvements and renovations to The Sterling over the past
year. The increase in general and administrative expense is due to an increase
in expense reimbursements and professional fees. Property tax expense increased
at The Sterling for the nine months ended September 30, 1998, compared to the
nine months ended September 30, 1997, due to a reassessment of the property.
Interest expense increased due to the financing of The Sterling in September
1998.
In the first quarter of 1998, there was a fire at The Lofts Apartments that was
contained to one unit. The upstairs was completely destroyed and the downstairs
endured water damage. A loss of approximately $14,000 related to this casualty
has been included in operating expense for the nine months ended September 30,
1998.
In July 1998, the Partnership sold approximately 55,000 square feet of land
(5.33% of the total land) at the Loft Apartments. The land was situated to the
side of the property. This resulted in a net gain of approximately $19,000 on
the sale which has been included in operating expense for the nine months ended
September 30, 1998.
Included in operating expense for the nine months ended September 30, 1998, is
approximately $313,000 of major repairs and maintenance comprised primarily of
expenses related to window coverings and interior building improvements.
Included in operating expense for the nine months ended September 30, 1997, is
approximately $330,000 of major repairs and maintenance comprised primarily of
major landscaping, window coverings and exterior and interior building
improvements.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expense. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 1998, the Partnership had cash and cash equivalents of
approximately $13,761,000 versus approximately $8,221,000 at September 30, 1997.
The net increase in cash and cash equivalents for the nine months ended
September 30, 1998, is approximately $5,070,000 compared to a net decrease of
approximately $4,127,000 for the nine months ended September 30, 1997. Net cash
provided by operating activities for the nine months ended September 30, 1998,
increased as a result of an increase in net income from operations, as discussed
above, along with a decrease in cash used to pay accounts payable. The decrease
in accounts payable for the nine months ended September 30, 1997, resulted from
the payment of invoices relating to the renovations at The Sterling. The
decrease in accounts payable for the nine months ended September 30, 1998,
results from the timing of the payment of invoices. Net cash used in investing
activities decreased due to an increase in principal receipts received on the
Master Loan and a decrease in property improvements and replacements, due to the
completion of most of the renovations at The Sterling. Net cash provided by
financing activities increased due to the proceeds received from the financing
of The Sterling.
In September 1998, the Partnership obtained financing for the Sterling Apartment
Homes and Commerce Center. The new indebtedness in the amount of $23,000,000
carries a stated interest rate of 6.77% per annum and is being amortized over 30
years with a balloon payment due October 1, 2008. The net proceeds from this
financing were distributed to limited partners during the third quarter of 1998.
Total loan costs of $279,000 relating to the new financing have been capitalized
and are being amortized over the life of the loan.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with federal,
state and local legal and regulatory requirements. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The General
Partner is currently assessing the need for capital improvements at each of the
Partnership's properties. To the extent that additional capital improvements
are required, the Partnership's distributable cash flow, if any, may be
adversely affected. The mortgage indebtedness of approximately $27,409,000
requires monthly principal and interest payments and requires balloon payments
on December 1, 2005 and October 1, 2008, respectively. The General Partner will
attempt to refinance such indebtedness or sell the properties prior to such
maturity date. If the properties cannot be refinanced or sold for a sufficient
amount, the Partnership will risk losing such properties through foreclosure.
Distributions of approximately $21,780,000 were made to the limited partners
during the nine months ended September 30, 1998 with a matching distribution of
approximately $18,000 made to the General Partner. Included in these amounts
are payments to the North Carolina Department of Revenue for withholding taxes
related to income generated by the Partnership's investment property located in
that state. Distributions of approximately $1,979,000 were made to the limited
partners during the nine months ended September 30, 1997 with a matching
distribution of approximately $20,000 made to the General Partner. Included in
these amounts are payments to the North Carolina Department of Revenue for
withholding taxes related to income generated by the Partnership's investment
property located in that state. Future cash distributions will depend on the
levels of net cash generated from operations, refinancings, property sales and
the availability of cash reserves. The Partnership's distribution policy will
be reviewed on a quarterly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations to permit
distributions to its partners in 1998 or subsequent periods.
The Partnership is required by the Partnership Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested Capital,
as defined by the Partnership Agreement. Reserves, including cash and cash
equivalents and tenant security deposits totaling approximately $14,244,000,
were greater than the reserve requirement of approximately $6,261,000 at
September 30, 1998.
CCEP Property Operations
For the nine months ended September 30, 1998, CCEP's net loss totaled
approximately $24,921,000 on total revenues of approximately $16,504,000. CCEP
recognizes interest expense on the New Master Loan Agreement obligation
according to the note terms, although payments to the Partnership are required
only to the extent of Excess Cash Flow, as defined therein. During the nine
months ended September 30, 1998, CCEP's statement of operations includes total
interest expense attributable to the Master Loan of approximately $27,356,000,
all but $3,789,000 of which represents interest accrued in excess of required
payments. CCEP is expected to continue to generate operating losses as a result
of such interest accruals and noncash charges for depreciation.
During the nine months ended September 30, 1998, the Partnership received
approximately $2,481,000 as principal payments on the Master Loan. Cash received
on certain investments by CCEP, which are required to be transferred to the
Partnership per the Master Loan Agreement, accounted for approximately $79,000.
Approximately $296,000 received was due to an "Excess Cash Flow" payment from
CCEP as described above. Approximately $2,106,000 received was due to the sale
of Northlake Quadrangle, as discussed below.
On April 16, 1998, CCEP sold Northlake Quadrangle to an unrelated third party
for a contract price of $2,325,000. The Partnership received net proceeds of
approximately $2,106,000 after payment of closing costs. The proceeds were
remitted to CCIP to pay down the Master Loan.
A loss on disposal of property of approximately $28,000 was the result of a re-
roofing project at Regency Oaks Apartments in June 1998 and is included in
operating expense at September 30, 1998. This loss was the result of the write-
off of the old roof that was not fully depreciated at the time of the write-off.
Transfer of Control; Subsequent Event
On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and
into Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control
of the General Partner. In addition, AIMCO also acquired approximately 51% of
the outstanding common shares of beneficial interest of Insignia Properties
Trust ("IPT"), the sole shareholder of the General Partner. Also, effective
October 1, 1998 IPT and AIMCO entered into an Agreement and plan of Merger
pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of
AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders
of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of
the IPT Shares owned by it in favor of the IPT Merger and has granted an
irrevocable limited proxy to unaffiliated representatives of IPT to vote the
IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger.
As a result of AIMCO's ownership and its agreement, the vote of no other holder
of IPT is required to approve the merger. The General Partner does not believe
that this transaction will have a material effect on the affairs and operations
of the Partnership.
Year 2000
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any computer programs or hardware
that have date-sensitive software or embedded chips may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Managing Agent has determined that it will be required to modify or replace
significant portions of its software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. The Managing Agent
presently believes that with modifications or replacements of existing software
and certain hardware, the Year 2000 Issue can be mitigated. However, if such
modifications and replacements are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Managing
Agent and the Partnership.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT
The Managing Agent's plan to resolve the Year 2000 Issue involves the following
four phases: assessment, remediation, testing and implementation. To date, the
Managing Agent has fully completed its assessment of all information systems
that could be significantly affected by the Year 2000, and has begun the
remediation, testing and implementation phase on both hardware and software
systems. Assessments are continuing in regards to embedded systems in operating
equipment. The Managing Agent anticipates having all phases complete by June 1,
1999.
In addition to the areas the Partnership is relying on the Managing Agent to
verify compliance with, the Partnership has certain operating equipment,
primarily at the property sites, which needed to be evaluated for Year 2000
compliance. The focus of the General Partner was to the security systems,
elevators, heating-ventilation-air-conditioning systems, telephone systems and
switches, and sprinkler systems. The General Partner is currently engaged in the
identification of all non-compliant operational systems, and is in the process
of estimating the costs associated with any potential modifications or
replacements needed to such systems in order for them to be Year 2000 compliant.
It is not expected that such costs would have a material adverse affect upon
the operations of the Partnership.
RISK ASSOCIATED WITH THE YEAR 2000
The General Partner believes that the Managing Agent has an effective program in
place to resolve the Year 2000 issue in a timely manner and has appropriate
contingency plans in place for critical applications that could affect the
Partnership's operations. To date, the General Partner is not aware of any
external agent with a Year 2000 issue that would materially impact the
Partnership's results of operations, liquidity or capital resources. However,
the General Partner has no means of ensuring that external agents will be Year
2000 compliant. The General Partner does not believe that the inability of
external agents to complete their Year 2000 resolution process in a timely
manner will have a material impact on the financial position or results of
operations of the Partnership. However, the effect of non-compliance by
external agents is not readily determinable.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In January 1998, a limited partner of the Partnership commenced an arbitration
proceeding against the General Partner claiming that the General Partner had
breached certain contractual and fiduciary duties allegedly owed to the
claimant. The General Partner believes the claim to be without merit and
intends to vigorously defend the claim.
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and entities which were, at
the time, affiliates of Insignia ("Insignia Affiliates") of interests in certain
general partner entities, past tender offers by Insignia Affiliates to acquire
limited partnership units, the management of partnerships by Insignia Affiliates
as well as a recently announced agreement between Insignia and AIMCO. The
complaint seeks monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the General Partner filed a
motion seeking dismissal of the action. In lieu of responding to the motion,
the plaintiffs have filed an amended complaint. The General Partner has filed
demurrers to the amended complaint which are scheduled to be heard on January 8,
1999. The General Partner believes the action to be without merit, and intends
to vigorously defend it.
On July 30, 1998 certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, County of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). The complaint names as defendants Insignia, several
Insignia Affiliates alleged to be managing partners of the defendant limited
partnerships, the Partnership and the General Partner. Plaintiffs allege that
they have requested from, but have been denied by each of the Subject
Partnerships, lists of their respective limited partners for the purpose of
making tender offers to purchase up to 4.9% of the limited partner units of each
of the Subject Partnerships. The complaint also alleges that certain of the
defendants made tender offers to purchase limited partner units in many of the
Subject Partnerships, with the alleged result that plaintiffs have been deprived
of the benefits they would have realized from ownership of the additional units.
The plaintiffs assert eleven causes of action, including breach of contract,
unfair business practices, and violations of the partnership statutes of the
states in which the Subject Partnerships are organized. Plaintiffs seek
compensatory, punitive and treble damages. The General Partner filed an answer
to the complaint on September 15, 1998. The General Partner believes the claims
to be without merit and intends to defend the action vigorously.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The General Partner believes that all such other
pending or outstanding litigation will be resolved without a material adverse
effect upon the business, financial condition, results of operations, or
liquidity of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K: Refer to Exhibit
Index in this report.
(b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
By: CONCAP EQUITIES, INC.
General Partner
By: /s/Patrick Foye
Patrick Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
(Duly Authorized Officer)
Date: November 12, 1998
EXHIBIT INDEX
S-K Reference
Number Description
10.18 Contract of Sale for Northlake Quadrangle, Tucker, Georgia,
Consolidated Capital Equity Partners, L.P. and SPIVLL
Management and Investment Company dated December 17, 1997,
filed in Form 10-Q for the quarter ended September 30, 1998.
10.19 First Amendment to Contract of Sale for Northlake
Quadrangle, Tucker, Georgia, between Consolidated Capital
Equity Partners, L.P., and SPIVLL Management and Investment
Company dated April 16, 1998, filed in Form 10-Q for the
quarter ended September 30, 1998.
10.20 Mortgage and Security Agreement between Kennedy Boulevard
Associates I, L.P., and Lehman Brothers Holdings Inc., dated
August 25, 1998, securing The Sterling Apartment Home and
Commerce Center filed in Form 10-Q for the quarter ended
September 30, 1998..
10.21 Repair Escrow Agreement between Kennedy Boulevard Associates
I L.P., and Lehman Brothers Holdings Inc. dated August 25,
1998, securing The Sterling Apartment Home and Commerce
Center filed in Form 10-Q for the quarter ended September
30, 1998.
10.22 Replacement Reserve and Security Agreement between Kennedy
Boulevard Associates I L.P., and Lehman Brothers Holding
Inc. dated August 25, 1998, securing The Sterling Apartment
Home and Commerce Center filed in Form 10-Q for the quarter
ended September 30, 1998.
27 Financial Data Schedule is filed as an exhibit to this
report.
99.1.1 Consolidated Capital Equity Partners, L.P., unaudited
financial statements for the nine months ended September 30,
1998 and 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Capital Institutional Properties 1998 Third Quarter 10-Q
and is qualified in its entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000352983
<NAME> CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,761
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 37,870
<DEPRECIATION> (6,706)
<TOTAL-ASSETS> 121,857
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 27,409
0
0
<COMMON> 0
<OTHER-SE> 93,351
<TOTAL-LIABILITY-AND-EQUITY> 121,857
<SALES> 0
<TOTAL-REVENUES> 35,621
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,628
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 266
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,993
<EPS-PRIMARY> 144.20<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
CONTRACT OF SALE
(NORTHLAKE QUADRANGLE, TUCKER, GEORGIA)
THIS CONTRACT OF SALE (this "Contract") is made and entered into by and
between CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P., a California limited
partnership ("Seller"), and SPIVILL MANAGEMENT AND INVESTMENT COMPANY, a
Tennessee corporation ("Purchaser").
ARTICLE I.
SALE OF THE PROPERTY
1.1 Property. For the consideration and upon and subject to the terms,
provisions and conditions of this Contract, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, Seller's respective rights, titles
and interests in and to all of the following described property (collectively,
the "Property"):
(a) All of Seller's rights, titles and interests in and to that
certain tract or parcel of land (the "Land") located in DeKalb County,
Georgia, more particularly described on Exhibit A attached hereto and made
a part hereof for all purposes, together with all improvements, structures
and fixtures, if any, located on the Land (the "Improvements"), and all
rights, titles and interests of Seller appurtenant to the Land and
Improvements, including, without limitation, appurtenant easements,
adjacent roads, highways and rights-of-way;
(b) All tangible personal property of any kind (the "Personalty")
owned by Seller and attached to or located on the Land or Improvements;
(c) All of Seller's rights, titles and interests under any leases or
other agreements demising space in or providing for the use or occupancy of
the Improvements or Land (the "Tenant Leases"), and all unapplied deposits,
whether security or otherwise ("Deposits"), paid by tenants ("Tenants")
under the Tenant Leases; and
(d) All of Seller's rights, titles and interests in and to all
service contracts, warranties, guaranties and bonds in effect at Closing
relating to the Land, the Improvements or the Personalty, to the extent the
same are assignable (the "Contracts").
ARTICLE II.
PURCHASE PRICE
2.1 Purchase Price. The total Purchase Price (herein so called) to be
paid by Purchaser to Seller for the Property shall be an amount equal to the sum
of (a) Two Million Three Hundred Twenty-Five Thousand and No/100 Dollars
($2,325,000.00) plus (b) the total amount of all Reimbursable Expenses (as
defined in Section 12.2) hereof. The Purchase Price shall be payable in cash or
Current Funds (defined below) at the Closing (hereinafter defined).
ARTICLE III.
EARNEST MONEY DEPOSIT
3.1 Amount and Timing. Within two (2) business days after the Effective
Date (hereinafter defined), Purchaser shall deliver to Chicago Title Insurance
Company, located at 7616 LBJ Freeway, Suite 300, Dallas, Texas 75251 (the "Title
Company"), Fifty Thousand and No/100 Dollars ($50,000.00) (the "Initial
Deposit") in cash or Current Funds, to be held by the Title Company in escrow to
be applied or disposed of by the Title Company as is provided in this Contract.
In the event Purchaser fails to deposit the Initial Deposit with the Title
Company as herein provided, Seller may, at its option, terminate this Contract,
in which event neither Seller nor Purchaser shall have any further obligations
hereunder except for provisions of this Contract which expressly survive the
termination of this Contract. Prior to the end of the Inspection Period (as
hereinafter defined), Purchaser shall deposit with the Title Company an
additional earnest money deposit in the amount of Fifty Thousand and No/100
Dollars ($50,000.00) (the "Subsequent Deposit") in cash or Current Funds to be
held by the Title Company in escrow to be applied or disposed of by the Title
Company as provided in this Contract. If the Purchaser does not terminate this
Contract pursuant to Section 5.2 hereof and fails to deposit the Subsequent
Deposit on or before the end of the Inspection Period, then Seller may, at its
option, terminate this Contract, in which event the Title Company shall pay the
Initial Deposit to Purchaser and thereafter neither Seller nor Purchaser shall
have any further obligations hereunder except for provisions of this Contract
which expressly survive the termination of this Contract. The term "Earnest
Money Deposit", as used in this Contract, shall mean (i) the Initial Deposit
prior to deposit of the Subsequent Deposit, and (ii) both the Initial Deposit
and the Subsequent Deposit combined after the deposit of the Subsequent Deposit.
As used in this Contract, the term "Current Funds" shall mean wire transfers,
certified funds or a cashier's check in a form acceptable to the Title Company
which would permit the Title Company to immediately disburse such funds.
3.2 Application and Interest. If the purchase and sale hereunder is
consummated, then the Earnest Money Deposit shall be applied to the Purchase
Price at Closing. In all other events, the Earnest Money Deposit shall be
disposed of by the Title Company as provided in this Contract. The Earnest
Money Deposit shall be invested in an interest-bearing account with a financial
institution and in a manner reasonably acceptable to Purchaser. All interest
earned on the Earnest Money Deposit is part of the Earnest Money Deposit, to be
applied or disposed of in the same manner as the Earnest Money Deposit under
this Contract.
ARTICLE IV.
TITLE AND SURVEY
4.1 Title Commitment. Not later than fifteen (15) days after the
Effective Date, Seller shall cause to be furnished to Purchaser, a current ALTA
Commitment for Title Insurance for the Land and Improvements (the "Title
Commitment") issued by the Title Company. The Title Commitment shall set forth
the state of title to the Property, including a list of conditions or exceptions
to title affecting the Property that would appear in an Owner's Policy of Title
Insurance, if one were issued. The Title Commitment shall contain the expressed
commitment of the Title Company to issue the Title Policy (hereinafter defined)
to Purchaser in the amount of the Purchase Price, insuring the title to the
Property specified in the Title Commitment. At such time as the Title
Commitment is furnished to Purchaser, the Title Company also shall furnish to
Purchaser copies of instruments or documents (the "Exception Documents") that
create or evidence conditions or exceptions to title affecting the Property, as
described in the Title Commitment.
4.2 Survey. Not later than fifteen (15) days after the Effective Date,
Seller shall provide to Purchaser a copy of a survey of the Land and
Improvements prepared by Watts & Browning Engineers, dated August 20, 1997 (the
"Survey"). If Seller's Survey is not satisfactory to the Title Company for it
to remove the general survey exception from the Title Policy to be delivered
pursuant to this Contract, then Seller shall pay the cost to update the Survey
so that it is satisfactory to the Title Company, and is certified to Seller,
Purchaser and the Title Company.
4.3 Review of Title and Survey. Purchaser shall have until ten (10) days
after receipt of the last of the Title Commitment, Exception Documents, and
Survey in which to notify Seller in writing (the "Title Objection Notice") of
any objections Purchaser has to any matters shown or referred to in the Title
Commitment, the Exception Documents or on the Survey; provided, that Purchaser
shall not object to current real estate taxes and assessments or to easements,
restrictions and exceptions affecting the Property which do not adversely affect
the value of the Property or its current use by Seller (as determined in
Purchaser's reasonable discretion), all of which shall be Permitted Exceptions
hereunder. Any title encumbrances, exceptions or other matters which are set
forth in the Title Commitment, the Exception Documents or on the Survey, and to
which Purchaser does not object within the aforementioned ten (10) day period,
shall be deemed to be permitted exceptions to the status of Seller's title (such
encumbrances, exceptions or other matters, together with such other matters
included pursuant to other provisions of this Contract, shall be referred to as
the "Permitted Exceptions").
4.4 Objections to Status of Title and Survey. If Purchaser properly
objects to any item shown or referred to in the Title Commitment, Exception
Documents or Survey within the ten (10) day period set forth in Section 4.3,
Seller shall be given until ten (10) days after receipt of the Title Objection
Notice to notify Purchaser whether or not Seller will cure, prior to Closing and
at Seller's option and sole discretion but without any obligation to do so, any
objection to the condition of title raised by Purchaser; provided, however, that
Seller will agree to cure any matters properly set forth in Purchaser's Title
Objection Notice to the extent that such matters may be cured by the payment of
money in an aggregate amount (with respect to all such matters) not to exceed
$10,000.00. If Seller notifies Purchaser that it elects not to cure any such
objections, then Purchaser may, at its option exercisable within five (5) days
following the date of receipt by Purchaser of written notice from Seller stating
that Seller is unable or unwilling to cure such objections, either (a) accept
such title as Seller can deliver, in which case all exceptions to title set
forth in the Title Commitment, Exception Documents and Survey which are not
removed shall be deemed to be Permitted Exceptions, or (b) terminate this
Contract by notice in writing to Seller in which event the Title Company shall
return the Earnest Money Deposit to Purchaser and neither party shall have any
further rights, duties or obligations hereunder, except for provisions of this
Contract which expressly survive termination of this Contract. In the event
Purchaser fails to notify Seller, within such five (5) day period, that
Purchaser has elected to proceed under either subpart (a) or (b) of the
immediately preceding sentence, Purchaser shall be deemed to have elected to
proceed under subpart (a), and this Contract shall remain in full force and
effect. If Seller notifies Purchaser that it elects to cure any such objections
but is unable to cure same by Closing or if Seller fails to notify Purchaser of
its intentions with respect to such objections and fails to cure same by
Closing, then Purchaser may, at its option, either (x) accept such title as
Seller can deliver in which case the parties shall proceed with Closing and all
exceptions to title set forth in the Title Commitment, Exception Documents and
Survey which are not removed shall be deemed to be Permitted Exceptions, or (y)
terminate this Contract by notice in writing to Seller at Closing, in which
event the Title Company shall return the Earnest Money Deposit to Purchaser and
neither party shall have any further rights, duties or obligations hereunder
except for provisions of this Contract which expressly survive termination of
this Contract.
4.5 Other Permitted Exceptions. The Permitted Exceptions shall include
those matters shown in the Title Commitment and the Survey which become
Permitted Exceptions pursuant to sections 4.3 and 4.4 above and, in addition,
the following: (a) the Tenant Leases; (b) taxes and assessments for the year in
which Closing occurs and subsequent years; (c) liens and encumbrances arising
after the date hereof to which Purchaser consents in writing; and (d) any liens
or encumbrances of a definite or ascertainable amount not exceeding $50,000.00,
provided that (i) Seller causes such liens or encumbrances to be insured or
bonded around such that same do not appear as an exception in the Title Policy
issued to Purchaser pursuant to the Commitment, and (ii) Seller agrees to
indemnify Purchaser from all losses incurred by Purchaser as a result of such
liens or encumbrances.
ARTICLE V.
INSPECTION BY PURCHASER
5.1 Inspection Period. Purchaser shall have a period of time commencing
on the Effective Date and expiring at 5:00 p.m., Atlanta, Georgia, time on the
forty-fifth (45th) day thereafter (the "Inspection Period") within which to
examine the Property and to conduct its feasibility study thereof. The
Inspection Period shall be inclusive of the Effective Date. Seller agrees that,
during the Inspection Period, Seller will allow Purchaser and Purchaser's agents
access to the Property during normal business hours to conduct soil and
engineering, hazardous waste, marketing, feasibility, zoning and other studies
or tests and to otherwise determine the feasibility of the Property for
Purchaser's intended use. Notwithstanding the foregoing, (a) the costs and
expenses of Purchaser's investigation shall be borne solely by Purchaser, (b)
prior to the expiration of the Inspection Period, Purchaser shall restore the
Property to the condition which existed prior to Purchaser's entry thereon and
investigation thereof to the extent the condition of the Property was affected
by or as a result of the actions of Purchaser or its agents, contractors or
representatives, (c) Purchaser shall not interfere, interrupt or disrupt the
operation of Seller's business on the Property and, further, such access by
Purchaser and/or its agents shall be subject to the rights of Tenants under
Tenant Leases, (d) in the event the transaction contemplated by this Contract
does not close for any reason, Purchaser shall deliver to Seller a descriptive
listing of all tests, reports and inspections conducted by Purchaser with
respect to the Property and deliver copies thereof to Seller, (e) Purchaser
shall not permit any mechanic's or materialman's liens or any other liens to
attach to the Property by reason of the performance of any work or the purchase
of any materials by Purchaser or any other party in connection with any studies
or tests conducted pursuant to this Section 5.1, (f) Purchaser shall give notice
to Seller a reasonable time prior to entry onto the Property and shall permit
Seller to have a representative present during all investigations and
inspections conducted with respect to the Property, and (g) Purchaser shall take
all reasonable actions and implement all protections necessary to ensure that
all actions taken in connection with the investigations and inspections of the
Property, and all equipment, materials and substances generated, used or brought
onto the Property pose no material threat to the safety of persons or the
environment and cause no damage to the Property or other property of Seller or
other persons. All information made available by Seller to Purchaser in
accordance with this Contract or obtained by Purchaser in the course of its
investigations shall be treated as confidential information by Purchaser, and,
prior to the purchase of the Property by Purchaser, Purchaser shall use its best
efforts to prevent its agents and employees from divulging such information to
any third parties except as reasonably necessary to third parties engaged by
Purchaser for the limited purpose of analyzing and investigating such
information for the purpose of consummating the transaction contemplated by this
Contract, including Purchaser's attorneys and representatives, prospective
lenders and engineers. Purchaser shall indemnify, defend and hold Seller
harmless for, from and against any and all claims, liabilities, causes of
action, damages, liens, losses, costs and expenses (including, without
limitation, attorneys' fees) incident to, resulting from or in any way arising
out of any of Purchaser's and its agents', contractors' and representatives'
activities on the Property, including, without limitation, any tests or
inspections conducted by Purchaser or its agents, contractors or representatives
on the Property. The agreements contained in this Section 5.1 shall survive the
Closing and not be merged therein and shall also survive any termination of this
Contract.
5.2 Approval of Inspections. If Purchaser determines at any time prior to
the expiration of the Inspection Period, that the Property is not satisfactory
to Purchaser, then Purchaser may deliver written notice to Seller within such
Inspection Period, given in accordance with the provisions of Section 13.1
hereof, in which event the Title Company shall return the Earnest Money Deposit
to Purchaser and neither party shall have any further rights, liabilities or
obligations hereunder, except for provisions of this Contract which by their
terms expressly survive the termination of this Contract. If Purchaser does not
timely deliver written notice of termination within such Inspection Period, the
conditions of this Section 5.2 shall be deemed satisfied, and Purchaser shall be
deemed to have approved the condition of the Property and may not thereafter
terminate this Contract pursuant to this Section 5.2.
5.3 Matters to be Delivered by Seller. No later than ten (10) days from
the Effective Date, Seller shall deliver to Purchaser the following items
(collectively, the "Submission Matters"):
(a) A current rent roll for the Property;
(b) A copy of all Tenant Leases with respect to the Property,
including all amendments thereto;
(c) Copies of any and all service, maintenance, management or other
contracts in Seller's possession relating to the ownership and operation of
the Property;
(d) Copies of the most recent real estate and personal property tax
statements in Seller's possession with respect to the Property; and
(e) Any environmental studies regarding the Property which Seller has
in its possession.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES; DISCLAIMERS AND WAIVERS
6.1 Representations and Warranties of Purchaser. Purchaser and each of
the persons executing this Contract on its behalf represents and warrants to
Seller as of the date hereof and as of the Closing Date as follows (which
representations and warranties shall survive the Closing for a period of 180
days): (a) Purchaser has full right and authority to enter into this Contract
and to consummate the transactions contemplated herein; and (b) this Contract
constitutes a valid and legally binding obligation of Purchaser, enforceable in
accordance with its terms.
6.2 Representations and Warranties of Seller. Seller represents and
warrants to Purchaser as of the date hereof and as of the Closing Date as
follows: (a) Seller is a limited partnership validly existing and duly
organized under the laws of the State of California; (b) Seller has full right
and authority to enter into this Contract and to consummate the transactions
contemplated herein; (c) each of the persons executing this Contract on behalf
of Seller is authorized to do so; (d) this Contract constitutes a valid and
legally binding obligation of Seller, enforceable in accordance with its terms;
(e) to Seller's current actual acknowledge, Seller has received no written
notice that any governmental authority or agency has determined, threatened to
determine, or has alleged that there is a presence, release or threat of release
of any Hazardous Substance (as such term is defined under the Resource
Conservation Recovery Act, 42 U.S.C. .6901 et seq.) on, in or from the Property
in violation of applicable laws; and (f) to Seller's current actual knowledge,
Seller has received no written notice that the Property is in violation of any
ordinance, code, law, rule or regulation applicable to the Property with respect
to zoning, parking or building requirements. The representations and warranties
of Seller hereunder shall survive the Closing for a period of one hundred eighty
(180) days.
As used herein, the term "Seller's current actual knowledge" shall mean and
refer to only the current actual knowledge of the Designated Representative (as
hereinafter defined) of the Seller and shall not be construed to refer to the
knowledge of any other partner, officer, director, agent, employee or
representative of the Seller, or any affiliate of the Seller, or to impose upon
such Designated Representative any duty to investigate the matter to which such
actual knowledge or the absence thereof pertains, or to impose upon such
Designated Representative any individual personal liability. As used herein,
the Term "Designated Representative" shall refer to James A. Gray, David
Huddleston, and Yvonne Strater.
6.3 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES OF SELLER. Purchaser
acknowledges and agrees that, except as expressly specified in this Contract or
the Deed to be delivered at Closing, Seller has not made, and Seller hereby
specifically disclaims, any warranty, guaranty or representation, oral or
written, past, present or future, of, as to, or concerning, (a) the nature and
condition of the Property, including, without limitation, the water, soil and
geology, and the suitability thereof and of the Property for any and all
activities and uses which Purchaser may elect to conduct thereon; (b) the
existence, nature and extent of any right-of-way, lease, right to possession or
use, lien, encumbrance, license, reservation, condition or other matter
affecting title to the Property; or (c) whether the use or operation of the
Property complies with any and all laws, ordinances or regulations of any
government or other regulatory body. Purchaser agrees to accept the Property
and acknowledges that the sale of the Property as provided for herein is made by
Seller, on an "as is, where is, and with all faults" basis. Purchaser expressly
acknowledges that except as otherwise expressly specified herein and except for
any warranty of title contained in the deed to be delivered by Seller to
Purchaser at Closing, Seller makes no representation or warranty of any kind,
oral or written, express or implied, or arising by operation of law, with
respect to the Property, including, but not limited to, any warranties or
representations as to habitability, merchantability, fitness for a particular
purpose, title (other than Seller's warranty of title to be set forth in the
deed), zoning, tax consequences, physical or environmental condition, utilities,
operating history or projections, valuation, governmental approvals, the
compliance of the Property with governmental laws, the truth, accuracy or
completeness of any information (including, without limitation, the Submission
Matters) provided by or on behalf of Seller to Purchaser, or any other matter or
thing regarding the Property. Purchaser acknowledges that except as expressly
specified in any written instrument delivered by Seller to Purchaser, Seller
makes no representation or warranty of any kind, oral or written, express or
implied, or arising by operation of law regarding or with respect to any such
information (including, without limitation, the Submission Matters) provided or
to be provided by Seller regarding the Property.
Further, and without in any way limiting any other provision of this
Contract, Seller has made and makes no representation, warranty or guaranty, and
hereby specifically disclaims any representation, warranty or guaranty, oral or
written, past, present or future, with respect to the presence or disposal on or
beneath the property (or any parcel in proximity thereto) of hazardous
substances or materials which are categorized as hazardous or toxic under any
local, state or federal law, statute, ordinance, rule or regulation pertaining
to environmental or substance regulation, contamination, cleanup or disclosure
(including, without limitation, asbestos) and shall have no liability to
Purchaser therefor. Without limitation of the preceding sentence, Seller
specifically disclaims any representation, warranty or guaranty regarding the
accuracy of any environmental reports which may be included within the
Submission Matters. By acceptance of this Contract and the deed to be delivered
by Seller at the Closing, Purchaser acknowledges that Purchaser's opportunity
for inspection and investigation of the Property (and other parcels in proximity
thereto) will be adequate to enable Purchaser to make Purchaser's own
determination with respect to the presence or disposal on or beneath the
Property (and other parcels in proximity thereto) of such hazardous substances
or materials, and Purchaser accepts the risk of the presence or disposal of any
such substances or materials. Purchaser agrees that should any cleanup,
remediation or removal of hazardous substances or other environmental conditions
on the Property be required after the date of Closing, then, as between Seller
and Purchaser, such clean-up, remediation or removal shall be the responsibility
of and shall be performed at the sole cost and expense of Purchaser.
Purchaser hereby fully releases and discharges Seller, its employees,
officers, directors, partners, representatives and agents, and their respective
personal representatives, heirs, successors and assigns from any cost, loss,
liability, damage, expense, demand, action or cause of action arising from or
related to any construction defects, errors, omission, or other conditions
affecting the Property; provided, that this shall not release Seller from claims
arising, if any, as a result of any written representation or warranty of Seller
being false when made. Purchaser further acknowledges and agrees that this
release shall be given full force and effect according to each of its expressed
terms and provisions, including, but not limited to, those relating to unknown
and suspected claims, damages and causes of action. This covenant releasing
Seller shall be binding upon Purchaser, its personal representatives, heirs,
successors and assigns.
The provisions of this Section 6.3 (including, without limitation, the
waiver and release of claims contained herein) shall survive the Closing or
earlier termination of this Contract.
6.4 [Intentionally Deleted]
6.5 Effect and Survival of Disclaimers. Seller has informed and hereby
does inform Purchaser that the compensation to be paid to Seller for the
Property has been decreased to take into account that the Property is being sold
subject to the provisions of this Article VI.
ARTICLE VII.
CONDITIONS PRECEDENT TO PURCHASER'S AND
SELLER'S PERFORMANCE
7.1 Conditions to Purchaser's Obligations. Purchaser's obligation under
this Contract to purchase the Property is subject to the fulfillment of each of
the following conditions (any or all of which may be waived by Purchaser):
(a) The representations and warranties of Seller contained herein
shall be true, accurate and correct as of the Closing Date;
(b) Seller shall be ready, willing and able to deliver title to the
Property in accordance with the terms and conditions of this Contract;
(c) The obligations of Seller specified in Section 7.3 hereof shall
have been satisfied; and
(d) Seller shall have delivered all the documents and other items
required pursuant to Section 8.2(a), and shall have performed, in all
material respects so that Purchaser shall have received the benefit of its
bargain hereunder, all other covenants, undertakings and obligations, and
complied with all conditions required by this Contract to be performed or
complied with by the Seller at or prior to the Closing.
7.2 Conditions to Seller's Obligations. Seller's obligation under this
Contract to sell the Property to Purchaser is subject to the fulfillment of each
of the following conditions (all or any of which may be waived by Seller):
(a) the representations and warranties of Purchaser contained herein
shall be true, accurate and correct as of the Closing Date; and
(b) Purchaser shall have delivered the funds required hereunder and
all the documents to be executed by Purchaser set forth in Section 8.2(b)
and shall have performed, in all material respects so that Seller shall
have received the benefit of its bargain hereunder, all other covenants,
undertakings and obligations, and complied with all conditions required by
this Contract to be performed or complied with by Purchaser at or prior to
Closing.
7.3 Estoppel Certificates. Seller shall use reasonable efforts to obtain
and deliver to Purchaser, not less than fifteen (15) days prior to Closing,
Estoppel Certificates (herein so called), in the form attached hereto as Exhibit
F, with such changes thereto as are reasonably acceptable to Purchaser, executed
by Tenants occupying at least sixty-six and two-thirds percent (66-2/3%) of the
leased area of the Property, in the aggregate, and from all Tenants which have
leases (i) for more than 2,000 rentable square feet in the Property and
(ii) with a remaining term of more than one (1) year after the Closing Date. If
any Tenants do not execute and deliver the Estoppel Certificates as contemplated
hereunder, then, at or prior to Closing, Seller shall provide Purchaser with a
certificate (herein called the "Seller's Certificate"), setting forth Seller's
certification that, with respect to each of the Tenant Leases for which a Tenant
did not deliver an Estoppel Certificate, (i) the copy of such Tenant Lease (and
all amendments and modifications thereto) previously provided by Seller to
Purchaser is true, correct and complete and is in full force and effect, (ii)
Seller has not received any rent thereunder for more than one month in advance,
(iii) Seller has neither received nor given any written notice of default under
such Tenant Lease (or, if so, describing the nature thereof), (iv) such Tenant
has not asserted in writing any counterclaim or right of setoff under such
Tenant Lease (or, if so, describing the nature thereof), and (v) such Tenant has
accepted the leased premises under such Tenant Lease. In the event that any
such Estoppel Certificates or Seller's Certificates reveal material differences
from the matters set forth in the Tenant Leases delivered to Purchaser pursuant
to Section 5.3 hereof or any default or right of setoff or counterclaim
thereunder, which differences would materially and adversely affect a reasonable
purchaser's decision whether or not to purchase the Property, then Purchaser may
terminate this Contract by delivery of written notice to Seller within five (5)
days after receipt of such Seller's Certificates or Estoppel Certificates, in
which event the Earnest Money Deposit shall be returned to Purchaser and neither
party shall have any further rights, liabilities or obligations hereunder,
except for provisions of this Contract which by their terms expressly survive
the termination of this Contract.
ARTICLE VIII.
CLOSING
8.1 Time and Place. The consummation of the purchase and sale of the
Property (the "Closing") shall take place at the office of the Title Company (it
being contemplated that the Closing will occur by the delivery of Closing
documents into escrow with the Title Company) on the forty-fifth (45th) day
after the end of the Inspection Period, or at such earlier date and time as
Purchaser and Seller may mutually agree (the "Closing Date").
8.2 Items to be Delivered at the Closing.
(a) Seller. At the Closing, Seller shall deliver, or cause to be
delivered, to the Title Company for recording or delivery to Purchaser, as
applicable, each of the following items:
(i) A standard form ALTA Owner Policy of Title Insurance dated
no earlier than the date of the filing of the deed described in
Section 8.2(a)(ii) hereof, issued by the Title Company, and insuring
Purchaser's title in the amount of the Purchase Price, subject only to
the Permitted Exceptions (the "Title Policy").
(ii) A Special Warranty Deed duly executed and acknowledged by
Seller in the form attached hereto as Exhibit B and made a part hereof
for all purposes (with such reasonable changes thereto as may be
required by the Title Company in order to comply with the laws of the
State of Georgia) sufficient to convey to Purchaser good and
indefeasible title to the Property free and clear of all liens and
encumbrances except for the Permitted Exceptions.
(iii) An Assignment and Assumption of Leases (the "Assignment
of Leases") duly executed and acknowledged by Seller in the form
attached hereto as Exhibit C and made a part hereof for all purposes.
(iv) A Blanket Conveyance, Bill of Sale and Assignment ("Bill of
Sale") duly executed by Seller in the form attached hereto as Exhibit
D and made a part hereof for all purposes.
(v) The Estoppel Certificates and/or Seller's Certificates as
required pursuant to Section 7.3 hereof, unless previously delivered
to Purchaser.
(vi) All original Tenant Leases that are in Seller's possession
together with letters addressed to the Tenants of the Property (the
"Notice Letters") in the form attached hereto as Exhibit G and made a
part hereof for all purposes, or in such other form as may be mutually
agreed upon by Seller and Purchaser. Additionally, Seller will
provide Purchaser with a list, certified by Seller, of (A) unpaid
leasing commissions due with respect of any lease terms which have
commenced under existing Tenant Leases, and (B) security deposits
which have been applied by Seller, as landlord, pursuant to the terms
of any existing Tenant Leases.
(vii) Original counterparts of all service contracts that are
in Seller's possession and which are to be assumed by Purchaser.
(viii) A Non-Foreign Affidavit in the form attached hereto as
Exhibit E and made a part hereof for all purposes.
(ix) All amounts owing to Purchaser by Seller under Article IX
hereof.
(x) Copies of receipts or such other proof of payment disbursed
by Seller in connection with the replacement of the roof on "building
one" situated on the Land and/or similar major capital improvements
performed at Seller's request to the Improvements.
(xi) Evidence satisfactory to Purchaser and the Title Company
that the person or persons executing this Contract and the closing
documents on behalf of Seller have full right, power and authority to
do so.
(xii) A rent roll prepared with respect to the Property in
the form attached hereto as Schedule 8.2(a)(xii) which shall be
certified, to Seller's knowledge, as being true and correct in all
material respects as of a date not more than five (5) business days
prior to Closing.
(xiii) Other items reasonably requested by the Title Company
for the sale of the Property in accordance with this Contract or for
administrative requirements for consummating the Closing.
(b) Purchaser. At the Closing, Purchaser shall deliver to the Title
Company, for recording or delivery to Seller, as applicable, each of
the following items:
(i) The Purchase Price in Current Funds.
(ii) The Assignment of Leases, duly executed and acknowledged by
Purchaser.
(iii) The Bill of Sale, duly executed by Purchaser.
(iv) Such additional funds in cash or Current Funds, as may be
necessary to cover Purchaser's share of the closing costs and
prorations hereunder.
(v) Evidence satisfactory to Seller and the Title Company that
the person or persons executing this Contract and the closing
documents on behalf of Purchaser have full right, power and authority
to do so.
(vi) The Notice Letters duly executed by Purchaser.
(vii) Other items reasonably requested by the Title Company
for the sale of the Property in accordance with this Contract or for
administrative requirements for consummating the Closing.
8.3 Costs of Closing. The escrow fees of the Title Company shall be paid
equally by Seller and Purchaser. Any and all recording costs shall be paid by
Purchaser. Except as otherwise herein provided, documentary stamp taxes, deed
taxes, transfer taxes or other similar taxes, fees or assessments, the cost of
obtaining the Survey (and updating same if required by Section 4.2 hereof), and
any and all costs relating to the Title Policy shall be paid by Seller. Any
costs, including, without limitation, recording costs, loan fees and attorneys'
fees, relating to (a) any financing obtained by the Purchaser for the purchase
of the Property, and/or (b) any documentary stamp taxes, deed taxes, transfer
taxes, intangible taxes, mortgage taxes or other similar taxes, fees or
assessments incurred in connection with any such financing shall be borne and
paid exclusively by Purchaser. All other expenses incurred by Seller and
Purchaser with respect to the Closing, including, but not limited to, the
attorneys' fees and costs and expenses incurred in connection with negotiating,
preparing and closing the transaction contemplated by this Contract, shall be
borne and paid exclusively by the party incurring same, unless otherwise
expressly provided in this Contract.
8.4 Prorations. All normal and customarily proratable items, including,
without limitation, rents, operating expenses and other expenses and fees, and
payments relating to any agreements affecting the Property which survive the
Closing, shall be prorated as of the Closing Date, Seller being charged and
credited for all of same attributable to the period up to the Closing Date (and
credited for any amounts paid by Seller attributable to the period on or after
the Closing Date) and Purchaser being responsible for, and credited or charged,
as the case may be, for all of same attributable to the period on and after the
Closing Date. All leasing commissions payable with respect to Existing Tenant
Leases for lease terms which have commenced (but excluding leasing commissions
which are payable with respect to renewal terms which have not yet commenced)
prior to the Closing Date shall be paid by Seller at or prior to Closing, and
Purchaser shall be responsible for all leasing commissions payable with respect
to renewal terms which have not commenced as of the Closing Date; provided,
however, that in the event any new Tenant Lease with a term which commences
after the end of the Inspection Period is approved by Purchaser, Purchaser shall
pay all leasing commissions with respect thereto. All unapplied Deposits under
Tenant Leases, if any, shall be transferred by Seller to Purchaser at the
Closing. Any real estate ad valorem or similar taxes for the Property, or any
installment of assessments payable in installments which installment is payable
in the year of Closing, shall be prorated to the date of Closing, based upon
actual days involved. In connection with the proration of real property taxes
or installments of assessments, such proration shall be based upon the assessed
valuation and tax rate figures for the year in which the Closing occurs to the
extent the same are available; provided, that in the event that actual figures
(whether for the assessed value of the Property or for the tax rate) for the
year of Closing are not available at the Closing Date, the proration shall be
made using figures from the preceding year for the figures which are unavailable
for the year of Closing. The proration shall be final and unadjustable except
as provided in the following paragraph. The provisions of this Section 8.4
shall survive the Closing.
If any of the items subject to proration under the foregoing provisions of
this Section 8.4 cannot be prorated at the Closing because of the unavailability
of the information necessary to compute such proration, or if any errors or
omissions in computing prorations at the Closing are discovered subsequent to
the Closing, then such item shall be reapportioned and such errors and omissions
corrected as soon as practicable after the Closing Date and the proper party
reimbursed, which obligation shall survive the Closing for a period (the
"Proration Period") from the Closing Date until one hundred twenty (120) days
after the Closing Date; provided, however, that the Proration Period with
respect to real and personal property taxes with respect to the Property shall
be from the Closing Date until December 31, 1998. In the event that there is
any subsequent adjustment to the real and personal property taxes with respect
to the Property as a result of a tax valuation protest, then the cost of such
protest shall be offset against the tax savings resulting therefrom prior to
prorating taxes pursuant to this Section 8.4. Neither party hereto shall have
the right to require a recomputation of a Closing proration or a correction of
an error or omission in a Closing proration unless within the Proration Period
one of the parties hereto (i) has obtained the previously unavailable
information or has discovered the error or omission, and (ii) has given notice
thereof to the other party together with a copy of its good faith recomputation
of the proration and copies of all substantiating information used in such
recomputation. The failure of a party to obtain any previously unavailable
information or discover an error or omission with respect to an item subject to
proration hereunder and to give notice thereof as provided above within the
Proration Period shall be deemed a waiver of its right to cause a recomputation
or a correction of an error or omission with respect to such item after the
Closing Date.
8.5 Possession and Closing. Possession of the Property shall be delivered
to Purchaser by Seller at the Closing, subject to the Permitted Exceptions and
the rights of the Tenants. Purchaser shall make its own arrangements for the
provision of public utilities to the Property and Seller shall terminate its
contracts with such utility companies that provide services to the Property.
8.6 Delinquent Rent.
(a) Application of Delinquent Rent. If on the Closing Date any
Tenant is in arrears in the payment of any rent under any Tenant Lease (the
"Delinquent Rent") payable by it, any Delinquent Rent received by Purchaser
and Seller from such Tenant after the Closing shall be applied to amounts
due and payable by such Tenant during the following periods in the
following order of priority: (A) first, to the period of time on or after
the Closing Date, and (B) second, to the period of time before the Closing
Date. If Delinquent Rent or any portion thereof received by Seller or
Purchaser after the Closing are due and payable to the other party by
reason of this allocation, the appropriate sum, less a proportionate share
of any reasonable attorneys' fees and costs and expenses expended in
connection with the collection thereof, shall be promptly paid to the other
party. The provisions of this Section 8.6(a) shall survive the Closing.
(b) Collection of Delinquent Rent. After the Closing, Seller shall
continue to have the right, in its own name, to demand payment of and to
collect Delinquent Rent owed to Seller by any Tenant, which right shall
include, without limitation, the right to continue legal actions or
proceedings against any Tenant, and the delivery of the Assignment of
Leases [as defined in Section 8.2(a)(iii)] shall not constitute a waiver by
Seller of such right; provided, however, that Seller may only continue
legal actions against Tenants with respect to which it has commenced legal
actions or sent a demand letter prior to the Closing Date; and provided,
further, that Seller will not commence any eviction actions subsequent to
the Closing Date, but that Seller may continue any such eviction actions
which it commenced prior to the Closing Date. Purchaser agrees to
cooperate with Seller to the extent reasonably necessary, but at no cost to
Purchaser, in connection with all efforts by Seller to collect such
Delinquent Rent and to take all steps, whether before or after the Closing
Date, as may be necessary to carry out the intention of the foregoing,
including, without limitation, the delivery to Seller, upon demand, of any
relevant books and records (including, without limitation, rent statements,
receipted bills and copies of tenant checks used in payment of such rent),
the execution of any and all consents or other documents, and the
undertaking of any act reasonably necessary for the collection of such
Delinquent Rent by Seller. The provisions of this Section 8.6(b) shall
survive the Closing.
8.7 Future Leasing Commissions. Seller hereby advises Purchaser that
Seller has been presented with lease proposals with respect to the prospective
tenants listed on Schedule 8.7 hereto (the "Prospective Tenants") from the
respective brokers or leasing agents listed on such Schedule 8.7; provided, that
Seller may amend such Schedule 8.7 at Closing to include additional Prospective
Tenants contacted by brokers or leasing agents between the Effective Date and
the Closing Date, and all references in this Contract to Schedule 8.7 shall mean
and refer to such Schedule 8.7 as the same may be amended by Seller at Closing;
provided, further, that in no event may Seller list on such Schedule 8.7 more
than five (5) Prospective Tenants associated with leasing agents or brokers
representing Seller. Purchaser agrees that in the event Purchaser leases any
portion of the Property to any of the Prospective Tenants within ninety (90)
days after the Closing occurs under this Contract, that Purchaser will pay to
the broker or leasing agent listed with respect to such Prospective Tenants on
Schedule 8.7 hereto the leasing commissions (if any) due to such brokers with
respect to the leases with such Prospective Tenants. Purchaser agrees to
indemnify, defend and hold Seller harmless for, from and against any and all
leasing commissions or other amounts due to such brokers or leasing agents with
respect to any leases with Prospective Tenants entered into by Purchaser or its
successors and assigns within ninety (90) days after the Closing Date.
Purchaser's obligations under this Section 8.7 shall apply with respect to
renewals of existing Tenant Leases, and expansions of space under existing
Tenant Leases, to the extent and only to the extent that such renewals and/or
expansions become effective within sixty (60) days after the Closing Date. In
no event shall Purchaser be or become obligated with respect to any leasing
commissions or brokerage fees owed to Seller's on-site leasing or management
agent at the Property pursuant to this Section 8.7, unless such agents are
specifically listed on Schedule 8.7 hereto with respect to specific Prospective
Tenants. The provisions of this Section 8.7 shall survive the Closing.
ARTICLE IX.
CONDEMNATION OR CASUALTY
9.1 Condemnation.
(a) In the event that all or any substantial portion of the Property
is condemned or taken by eminent domain or conveyed by deed in lieu
thereof, or if any condemnation proceeding is commenced for all or any
substantial portion of the Property, prior to Closing, either party may
elect to terminate this Contract by written notice thereof to the other
party within ten (10) days after (i) in the case of Seller, Seller becomes
aware of such condemnation, taking or deed in lieu, or institution of any
such condemnation proceeding, or (ii) in the case of Purchaser, Seller
notifies Purchaser of the condemnation, taking or deed in lieu or
institution of such condemnation proceeding. If neither party terminates
this Contract as aforesaid, then both parties shall proceed to close the
transaction contemplated herein pursuant to the terms hereof, in which
event Seller shall, except as limited in Section 9.1(b) hereof, at its
option deliver to Purchaser at the Closing any proceeds actually received
by Seller attributable to the Property from such condemnation, eminent
domain proceeding or deed in lieu thereof or assign its interest in and to
any such proceeds, and there shall be no reduction in the Purchase Price.
(b) For the purpose of this Section 9.1(a), a "substantial portion"
of the Property shall be deemed to be any portion of the Property with
either a fair market value or replacement cost in an amount equal to or
greater than $150,000.00. The foregoing provision shall survive the
Closing.
9.2 Casualty.
(a) In the event that all or any substantial portion of the Property
shall be damaged or destroyed by fire or other casualty prior to Closing,
either party may terminate this Contract by written notice thereof to the
other party within ten (10) days after (i) in the case of Seller, Seller
becomes aware of such casualty, or (ii) in the case of Purchaser, Seller
notifies Purchaser of the casualty. If neither party terminates this
Contract as aforesaid, then both parties shall proceed to close the
transaction contemplated herein pursuant to the terms hereof, in which
event Seller shall, except as limited in Section 9.2(b) hereof, deliver to
Purchaser at the Closing any insurance proceeds actually received by Seller
attributable to the Property from such casualty (except for proceeds
previously used to repair the Property), together with an amount equal to
the deductible amount applicable under Seller's insurance policy with
respect to such casualty loss (less any portion of such deductible paid by
Seller to complete repairs prior to Closing), and assign to Purchaser all
of Seller's right, title and interest in and to any claims which Seller may
have under the insurance policies covering the Property, and there shall be
no reduction in the Purchase Price. In the event less than a substantial
portion of the Property shall be damaged or destroyed by fire or other
casualty prior to Closing, then the parties shall proceed in accordance
with the second sentence in this Section 9.2(a).
(b) For the purposes of Section 9.2(a), a "substantial portion" of
the Property shall be deemed to be any portion of the Property with either
a fair market value or replacement cost in an amount equal to or greater
than $150,000.00. The foregoing provision shall survive the Closing.
ARTICLE X.
DEFAULTS AND REMEDIES
10.1 Default by Purchaser. If Seller shall not be in default hereunder and
Purchaser refuses or fails to consummate the Closing under this Contract for
reasons other than as expressly set forth in Section 4.4, Section 5.2 or Article
IX hereof or other than due to a failure of a condition precedent to Purchaser's
obligation to close as set forth in Section 7.1 hereof, Seller shall, as its
sole and exclusive remedy, terminate this Contract in which event neither party
shall have any further rights, duties, or obligations hereunder except for
provisions of this Contract which expressly survive the termination hereof, and
Seller shall be entitled to receive and retain the Earnest Money Deposit as
liquidated damages (Seller and Purchaser hereby acknowledging that the amount of
damages in the event of Purchaser's default is difficult or impossible to
ascertain but that such amount is a fair estimate of such damage).
Notwithstanding anything contained in this Section to the contrary, Seller shall
have any and all rights and remedies available at law or in equity by reason of
any indemnity obligation of Purchaser under this Contract which survives
Closing.
10.2 Default by Seller. If Purchaser shall not be in default hereunder and
if Seller refuses or fails to consummate the Closing under this Contract other
than due to a termination permitted hereunder or a failure of a condition
precedent to Seller's obligation to close as set forth in Section 7.2 hereof,
Purchaser may, at Purchaser's sole option, as its sole and exclusive remedies,
either (a) terminate this Contract in which event neither party shall have any
further rights, duties or obligations hereunder except for provisions of this
Contract which expressly survive the termination hereof, and Purchaser shall be
entitled to a refund of the Earnest Money Deposit, or (b) enforce specific
performance of this Contract against Seller. In no event shall Seller be liable
to Purchaser for any damages, including, without limitation, any actual,
punitive, speculative or consequential damages or damages for loss of
opportunity or lost profit. Notwithstanding the foregoing, Seller shall be
liable to Purchaser for any out-of-pocket costs and expenses incurred by
Purchaser in connection with the transaction contemplated by this Contract in
the event that Seller, while this Contract is in force and in default of
Seller's obligations hereunder, sells the Property to any person or entity other
than Purchaser and, as a result thereof, Purchaser is unable to purchase the
Property pursuant to this Contract; provided, that in no event shall Seller be
liable to Purchaser for costs and expenses incurred by Purchaser in excess of an
aggregate amount of $25,000.00. Further, Purchaser shall have any and all
rights and remedies available at law or in equity by reason of any indemnity
obligation of Seller under this Contract which survives the Closing.
10.3 Attorneys' Fees. If it shall be necessary for either Purchaser or
Seller to employ an attorney to enforce its rights pursuant to this Contract and
an action at law or in equity is filed in a court of competent jurisdiction as a
result thereof, the non-prevailing party shall reimburse the prevailing party
for its reasonable attorneys' fees incurred in such litigation.
ARTICLE XI.
BROKERAGE COMMISSIONS
11.1 Brokerage Commission. Seller and Purchaser represent each to the
other that each has had no dealings with any broker, finder or other party
concerning the purchase of the Property except Insignia Capital Advisors, Inc.
(the "Seller's Broker") and Spiva/Hill Management Co. (the "Purchaser's
Broker"). Seller hereby agrees to pay at Closing (i) all costs, expenses and
other amounts due to Seller's Broker arising out of any agreement executed by
Seller, and (ii) a brokerage commission in the amount of $100,000 to Purchaser's
Broker; provided, however, that Seller's obligation to pay, and Seller's
Broker's and Purchaser's Broker's right to receive, such costs, expenses,
commissions and other amounts with respect to this Contract or the Property is
expressly conditioned upon Closing the sale of the Property and Seller's receipt
of the Purchase Price under this Contract. Neither Seller's Broker nor
Purchaser's Broker shall have any right to receive any such costs, expenses,
commissions or other amounts with respect to this Contract or the Property
unless and until Closing shall be final and fully consummated and Seller shall
have received the Purchase Price as provided in this Contract. Seller agrees to
indemnify Purchaser and hold Purchaser harmless from any loss, liability,
damage, cost or expense (including, without limitation, reasonable attorneys'
fees) arising out of or paid or incurred by Purchaser by reason of any claim to
any broker's, finder's or other fee in connection with this transaction by any
party claiming by, through or under Seller (including, without limitation, the
Seller's Broker). Purchaser agrees to indemnify Seller and hold Seller harmless
from any loss, liability, damage, cost or expense (including, without
limitation, reasonable attorneys' fees, but excluding the $100,000 brokerage
commission to be paid by Seller to Purchaser's Broker hereunder) arising out of
or paid or incurred by Seller by reason of any claim to any broker's, finder's
or other fee in connection with this transaction by any party claiming by,
through or under Purchaser (including, without limitation, the Purchaser's
Broker). Notwithstanding anything to the contrary contained herein, the
indemnities set forth in this Article XI shall survive the Closing.
Purchaser hereby acknowledges that at the time of the execution of this
Contract, Purchaser is advised by this writing that Purchaser should have an
abstract covering the Property examined by an attorney of Purchaser's own
selection, or that Purchaser should be furnished with or obtain an owner policy
of title insurance.
ARTICLE XII.
OPERATION OF THE PROPERTY PRIOR TO THE CLOSING
12.1 Operations. Between the Effective Date and the Closing Date, Seller
shall (a) lease, operate, manage and enter into contracts with respect to the
Property, in the same manner done by Seller prior to the date hereof (provided,
however, that without the prior consent of Purchaser, (i) Seller shall not enter
into any service contract that cannot be terminated with thirty (30) days
notice, and (ii) after the Inspection Period, Seller shall not enter into any
Tenant Lease at less than the then prevailing market rates); (b) advise
Purchaser of the commencement of any litigation, condemnation or other judicial
or administrative proceedings affecting the Property of which Seller has current
actual knowledge; and (c) use commercially reasonable efforts to assist
Purchaser to obtain from Tenants, Subordination, Non-Disturbance and Attornment
Agreements in a form reasonably requested by Purchaser (provided, that failure
to obtain any such agreements shall not be a default under or breach of this
Contract by Seller).
12.2 Reimbursable Expenses. As used herein, the term "Reimbursable
Expenses" shall mean and include all amounts for which Purchaser is required to
reimburse Seller pursuant to the following subparts (a) and (b) of this Section
12.2:
(a) At Seller's sole discretion, Seller may, but shall not be obligated
to, repair and/or replace the roof on "building one" situated on the Land.
Purchaser agrees to reimburse Seller at Closing in an amount not to exceed
Twelve Thousand and No/100 Dollars ($12,000.00), for costs and expenses incurred
by Seller prior to the Closing for the repair and/or replacement of the roof on
such "building one", whether such costs and expenses are incurred before or
after the Effective Date of this Contract, it being understood that Seller has
already commenced the repair and replacement of the roof on such "building one"
prior to the Effective Date and the Purchaser shall be obligated to reimburse
Seller for the costs and expenses incurred in connection therewith.
(b) Purchaser agrees to reimburse Seller at Closing for any and all costs
and expenses incurred by Seller between the Effective Date of this Contract and
the Closing Date hereunder for any leasing commissions, leasehold improvement
costs, and other costs and expenses which are incurred by Seller in connection
with any lease executed with respect to any portion of the Property after the
Effective Date of this Contract and which is approved by Purchaser. If Seller
sends a written notice to Purchaser requesting that Purchaser approve any
proposed lease, Purchaser may approve or disapprove of such lease at its sole
discretion; provided, however, that in the event Purchaser does not approve or
disapprove of any such proposed lease within ten (10) days after Seller has sent
such notice to Purchaser, then Purchaser shall be deemed to have approved such
lease for all purposes under this Contract and Purchaser shall be required to
reimburse the Seller for all leasing commissions, leasehold improvement costs,
and other costs and expenses incurred by Seller as aforesaid. If Purchaser
shall disapprove of any such proposed lease, Seller may nonetheless enter into
such proposed lease but Purchaser shall not be obligated to reimburse Seller as
aforesaid with respect to such disapproved lease.
ARTICLE XIII.
MISCELLANEOUS
13.1 Notices. Any notice provided or permitted to be given under this
Contract must be in writing and may be served by (a) depositing same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, (b) delivering the same
in person to such party via a hand delivery service, Federal Express or any
other nationally recognized courier service that provides a return receipt
showing the date of actual delivery of same to the addressee thereof, or (c)
facsimile transmission with confirmation of receipt to the party sending same,
if a copy is deposited in the United States Mail as provided in 13.1(a) above.
Notice given in accordance herewith shall be effective upon receipt at the
address of the addressee. For purposes of notice, the addresses of the parties
shall be as follows:
If to Seller: Consolidated Capital Equity Partners, L.P.
One Insignia Financial Plaza
P.O. Box 1089
Greenville, South Carolina 29602
Attention: James A. Gray
Facsimile No.: 864/239-1066
Telephone No.: 864/239-1369
With a copy to: Liechty & McGinnis, P.C.
10440 North Central Expressway, Suite 1100
Dallas, Texas 75231
Attention: Lorne O. Liechty, Esq.
Facsimile No.: 214/265-0615
Telephone No.: 214/265-0008
If to Purchaser: Spivill Management and Investment Company
4121 Hillsboro Road, Suite 203
Nashville, Tennessee 37215
Attention: Nick Spiva
Facsimile No.: 615/385-5780
Telephone No.: 615/385-5449
With a copy to: White & Reasor
3305 West End Avenue
Nashville, Tennessee 37203
Attention: Charles B. Reasor, Jr., Esq.
Facsimile No.: 615/383-9390
Telephone No.: 615/383-3345
If to Title
Company: Chicago Title Insurance Company
7616 LBJ Freeway, Suite 300
Dallas, Texas 75251
Attention: Sharon M. Cooper
Facsimile No.: 972/404-8731
Telephone No.: 972/663-0419
13.2 GOVERNING LAW. This Contract is being executed and delivered, and is
intended to be performed in, the State of Georgia, and the laws of such state
shall govern the validity, construction, enforcement and interpretation of this
Contract.
13.3 Entirety and Amendments. This Contract embodies the entire agreement
between the parties and supersedes all prior agreements and understandings, if
any, relating to the transaction described herein, and may be amended or
supplemented only by an instrument in writing executed by the party against whom
enforcement is sought.
13.4 Parties Bound. Subject to the provisions of Section 13.5 hereof, this
Contract shall be binding upon and inure to the benefit of Seller and Purchaser,
and their respective heirs, personal representatives, successors and assigns.
13.5 Assignment. This Contract may be assigned by Purchaser to any entity
controlled by George N. Spiva, Nicholas L.E. Hill, G. Patrick Maxwell, and North
American Properties, Inc., a Tennessee corporation which is owned by George N.
Spiva and Nicholas L.E. Hill, without the prior written consent of Seller.
Except as provided in the immediately preceding sentence, this Contract may not
be assigned in whole or in part by Purchaser without the prior written consent
of Seller. Any assignment of this Contract by Purchaser other than as provided
foregoing shall, at Seller's option, be null and void and of no effect. In the
event Seller consents to an assignment of this Contract by Purchaser, Purchaser
shall not be released from any liability or obligations hereunder.
13.6 Headings. Headings used in this Contract are used for reference
purposes only and do not constitute substantive matter to be considered in
construing the terms of this Contract.
13.7 Survival. Except as otherwise expressly provided herein, no
representations, warranties, covenants, acknowledgments or agreements contained
in this Contract shall survive the Closing of this Contract and the delivery of
the Special Warranty Deed by Seller to Purchaser.
13.8 Interpretation. The parties acknowledge that each party and its
counsel have reviewed this Contract, and the parties hereby agree that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Contract or any amendments or exhibits hereto. In case any one or more
of the provisions contained in this Contract shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and this Contract
shall be construed as if such invalid, illegal or unenforceable provisions had
never been contained herein. When the context in which words are used in this
Contract indicates that such is the intent, words in the singular number shall
include the plural and vice versa, and words in the masculine gender shall
include the feminine and neuter genders and vice versa.
13.9 Exhibits. All references to "Exhibits" contained herein are
references to exhibits attached hereto, all of which are hereby made a part
hereof for all purposes.
13.10 Time of Essence. It is expressly agreed by the parties hereto
that time is of the essence with respect to this Contract and Closing hereunder.
13.11 Multiple Counterparts. This Contract may be executed in a number
of identical counterparts. If so executed, each of such counterparts is to be
deemed an original for all purposes, and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Contract,
it shall not be necessary to produce or account for more than one such
counterpart.
13.12 Risk of Loss. Risk of loss or damage to the Property, or any
part thereof, by fire or any other casualty from the date this Contract is fully
executed up to the time of delivering the Special Warranty Deed transferring
title to the Property to the Purchaser will be on the Seller and, thereafter,
will be on the Purchaser.
13.13 Effective Date. As used herein, the term "Effective Date" shall
mean for all purposes in this Contract the date on which the Title Company
acknowledges receipt of an original of the Contract executed by Purchaser and
Seller with all changes, if any, to the printed portion of this Contract
initialed by Purchaser and Seller.
13.14 Business Days. All references to "business days" contained
herein are references to normal working business days, i.e., Monday through
Friday of each calendar week, exclusive of federal and national bank holidays.
In the event that any event hereunder is to occur, or a time period is to
expire, on a date which is not a business day, such event shall occur, or such
time period shall expire, on the next succeeding business day.
13.15 No Recordation of Contract. In no event shall this Contract or
any memorandum hereof be recorded in the public records of the place in which
the Property is situated, and any such recordation or attempted recordation
shall constitute a breach of this Contract by the party responsible for such
recordation or attempted recordation.
ARTICLE XIV.
TAX FREE EXCHANGE
Purchaser and Seller agree that, at Purchaser's sole election, this transaction
shall be structured as an exchange of like-kind properties under Section 1031 of
the Internal Revenue Code of 1986, as amended, and the regulations and proposed
regulations thereunder. The parties agree that if Purchaser wishes to make such
election, it must notify Seller of such election not less than ten (10) days
prior to the date of Closing. If Purchaser so elects, Seller shall reasonably
cooperate with Purchaser, provided any such exchange is consummated pursuant to
an agreement that is mutually acceptable to Purchaser and Seller and which shall
be executed and delivered on or before the date of Closing. Purchaser shall in
all events be responsible for all costs and expenses related to the Section 1031
exchange and shall fully indemnify, defend and hold Seller harmless for, from
and against any and all liability, claims, damages, expenses (including, without
limitation, reasonable attorneys' fees), taxes, fees, proceedings and causes of
action of any kind or nature whatsoever arising out of, connected with or in any
manner related to such Section 1031 exchange that would not have been incurred
by Seller if the transaction were a purchase for cash. The provisions of the
immediately preceding sentence shall survive Closing and the transfer of title
to the Property to Purchaser. Any Section 1031 exchange shall be consummated in
such a manner that Seller shall not be required to acquire title to any real
property in connection therewith.
IN WITNESS WHEREOF, the undersigned have executed this Contract effective
as of the Effective Date.
SELLER:
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.,
a California limited partnership
By: ConCap Holdings, Inc., a Texas corporation,
its general partner
By: /s/ William H. Jarrard, Jr.
Its: President
Dated: January 7, 1998
PURCHASER:
SPIVILL MANAGEMENT AND INVESTMENT
COMPANY, a Tennessee corporation
By:/s/ George N. Spiva
Its: President
Dated: December 17, 1997
RECEIPT OF EARNEST MONEY DEPOSIT
AND AGREEMENT OF TITLE COMPANY
Chicago Title Insurance Company (the "Title Company"), located at 7616 LBJ
Freeway, Suite 300, Dallas, Texas 75251, hereby acknowledges the receipt of one
(1) fully signed and executed copy of this Contract.
Upon receipt, the Title Company agrees to hold the Earnest Money Deposit in
escrow as escrow agent for the benefit of Seller and Purchaser and to dispose of
the Earnest Money Deposit in strict accordance with the terms and provisions of
this Contract.
CHICAGO TITLE INSURANCE COMPANY
By: /s/ Sharon L. Cooper
Name: Sharon L. Cooper
Title: Escrow Officer
Dated: January 9, 1998
SCHEDULE 8.2(A)(XII)
FORM OF RENT ROLL
[Attached hereto]
SCHEDULE 8.7
PROSPECTIVE TENANTS
Name of Prospective Tenants Broker or Leasing Agent
EXHIBIT A
PROPERTY DESCRIPTION
[Attach legal description of the Property]
EXHIBIT B
Prepared by:
Lorne O. Liechty, Esq.
Liechty & McGinnis, P.C.
10400 North Central Expressway
Suite 1100
Dallas, Texas 75231
After Recording, Return To:
STATE OF GEORGIA
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DEKALB
SPECIAL WARRANTY DEED
THIS DEED, made as of this _______ day of _________________, 199___, by and
between CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P., a California limited
partnership (hereinafter called "Grantor"), whose mailing address is
_________________________________, and _______________________, a
__________________________________ (hereinafter called "Grantee"), whose address
is _________________________________________.
WITNESSETH, in consideration of the sum of TEN AND NO/100 DOLLARS ($10.00)
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Grantor has GRANTED, BARGAINED, SOLD, ALIENED, CONVEYED
and CONFIRMED, and does hereby GRANT, BARGAIN, SELL, ALIEN, CONVEY and CONFIRM
unto Grantee, its successors and assigns, with special warranty of title, that
certain parcel or parcels of land situated in DeKalb County, Georgia, and more
particularly described on Exhibit A attached hereto and made a part hereof for
all purposes (the "Land"), together with and including (a) all buildings and
improvements situated on the Land, (b) all right, title and interest of Grantor,
if any, in and to the land lying in the bed of any street or highway in front of
or adjoining the Land and to any unpaid award for any taking thereof by
condemnation, or any damage to the Land by reason of a change of grade of any
street or highway, and (c) the appurtenances and all the estate and rights of
Grantor in and to the Land and the buildings and improvements including, without
limitation, all appurtenant easements and rights-of-way, all oil, gas and other
minerals situated on, in or under the Land and the buildings or improvements,
and all air and subsurface rights appurtenant to the Land and the buildings and
improvements, including fixtures (the Land, together with all of the above
property and interests being hereinafter collectively referred to as the
"Property"), SUBJECT, HOWEVER, to the permitted title exceptions shown on
Exhibit B attached hereto and made a part hereof for all purposes (hereinafter
referred to as the "Permitted Exceptions").
TO HAVE AND TO HOLD said bargained Property, together with all and singular
the rights, members, appurtenances and hereditaments to the same being,
belonging or in anywise appertaining, to the use, benefit and behoof of Grantee,
its successors and assigns, forever, IN FEE SIMPLE. Grantor expressly covenants
that it is seized of the Property in good fee simple title and that it has the
full right, power and authority to convey the same; that the Property and
Grantor thereof are free and clear of any liens, claims or encumbrances whatever
whereby the title to the Property may in anywise be charged, changed, impaired
or defeated, subject only to the Permitted Exceptions, and that Grantor will
forever WARRANT and DEFEND the Property against the lawful claims of all persons
claiming by, through, or under it, except for claims arising under or by virtue
of the Permitted Exceptions.
Current ad valorem taxes on the Property having been prorated, Grantee
hereby assumes the payment thereof.
IN WITNESS WHEREOF, Grantor has hereunto caused the execution of this
Special Warranty Deed under seal as of the date first above written.
Signed, sealed and GRANTOR:
delivered in the presence of: ___________________________________
_________________________________
Unofficial Witness
By:________________________________
Name: ____________________________________
Its:_______________________________
_________________________________
Unofficial Witness Dated: _______________________________
ATTEST: ____________________________________
Name: _______________________________
Its: _______________________________
[CORPORATE SEAL]
_________________________________
Notary Public
My Commission Expires:
____________________
MAIL FUTURE TAX STATEMENTS TO:
________________________
________________________
________________________
EXHIBIT A
PROPERTY DESCRIPTION
[Attach legal description of the Property]
EXHIBIT B
PERMITTED EXCEPTIONS
[Attach list of Permitted Exceptions created
in accordance with the terms of the Contract]
EXHIBIT C
Prepared by:
Lorne O. Liechty, Esq.
Liechty & McGinnis, P.C.
10400 North Central Expressway
Suite 1100
Dallas, Texas 75231
After Recording, Return To:
STATE OF GEORGIA
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DEKALB
ASSIGNMENT AND ASSUMPTION OF LEASES
That CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P., a California limited
partnership ("Assignor"), for and in consideration of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, to Assignor in hand paid,
the receipt and legal sufficiency of which are hereby acknowledged, hereby
transfers, assigns and sets over unto ______________ ________________, a
__________________________ ("Assignee"), all of the right, title and interest of
Assignor in and to all leases of, and security deposits and prepaid rents
relating to space in (together, the "Leases") the real property described on
Exhibit A, attached hereto and made a part hereof for all purposes.
TO HAVE AND TO HOLD the Leases, together with any and all of the rights and
appurtenances thereto in anywise belonging to Assignor (excluding the right to
receive rents paid under the Leases which accrued before the date of this
Assignment), unto Assignee and Assignee's successors and assigns forever, and
Assignor does hereby bind Assignor and Assignor's legal representatives and
successors, to WARRANT AND FOREVER DEFEND all and singular the Leases unto
Assignee and Assignee's successors and assigns, against every person whomsoever
lawfully claiming or to claim the same or any part thereof, by, through or under
Assignor, but not otherwise.
In consideration of the foregoing assignment, Assignee hereby assumes, and
agrees to perform all of the obligations of Assignor under the Leases,
including, but not limited to, the obligation to refund any security deposits
and the payment of any deferred leasing commissions that become payable after
the date of this Assignment with respect to any of the Leases, and indemnifies
Assignor and holds Assignor harmless from all loss, cost, liability and expense
arising out of or in connection with the Leases to the extent the same arises on
or after the date hereof. Assignee takes the Leases subject to any existing
defaults thereunder, but, to the extent required by that certain Contract of
Sale dated _____________, 199__, between Assignor and ______________, shall pay
to Assignor monies collected from tenants who owe delinquent rents that have
accrued as of the date of this Assignment until all of such delinquent rents
have been paid. Assignor hereby agrees to indemnify and hold Assignee harmless
from all loss, cost, liability and expense arising out of or in connection with
the Leases to the extent the same arises prior to the date hereof.
Assignor hereby represents to Assignee that no leasing commissions are
payable with respect to any of the existing Leases assigned hereunder except
with respect to those Leases listed on Exhibit B hereto.
EXECUTED effective as of this _____ day of _________, 199__.
Signed, sealed and ASSIGNOR:
delivered in the presence of:
___________________________________
Unofficial Witness
By:_________________________________
Name: ___________________________________
Its:_______________________________
_________________________________
Unofficial Witness Dated: ___________________________________
ATTEST: __________________________________
Name: _____________________________
Its:______________________________
[CORPORATE SEAL]
_________________________________
Notary Public
My Commission Expires:
____________________
Signed, sealed and ASSIGNEE:
delivered in the presence of:
__________________________________
Unofficial Witness
By:_________________________________
Name: ___________________________
Its:_____________________________
_________________________________
Unofficial Witness Dated: _____________________________
ATTEST: __________________________________
Name: ____________________________
Its:_____________________________
[CORPORATE SEAL]
_________________________________
Notary Public
My Commission Expires:
____________________
EXHIBIT A
PROPERTY DESCRIPTION
[Attach legal description of the Property]
EXHIBIT B
LEASES WITH LEASING COMMISSIONS PAYABLE
[To be attached at Closing]
EXHIBIT D
BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT
STATE OF GEORGIA
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DEKALB
By a Special Warranty Deed (the "Deed") of even date with the date hereof,
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P., a California limited partnership
("Seller"), conveyed to ________________________, a _______________
("Purchaser"), the real property (the "Real Property") described on Exhibit A
attached hereto and made a part hereof for all purposes, together with all
improvements located thereon.
As consideration for (a) the conveyance of the Real Property, (b) the
conveyance of the personal property described herein, and (c) the assignments
contained herein, Purchaser has paid the sum of TEN AND NO/100 DOLLARS ($10.00)
and other good and valuable consideration to the Seller.
NOW, THEREFORE, for the consideration above specified, the receipt and
sufficiency of which are expressly acknowledged:
1. The Seller has GRANTED, CONVEYED, SOLD, TRANSFERRED, SET-OVER and
DELIVERED, and by these presents does hereby GRANT, CONVEY, SELL, TRANSFER, SET-
OVER and DELIVER unto the Purchaser, all of Seller's right, title and interest
in and to all items of tangible personal property located on or attached to the
Real Property including, without limitation, all items of personal property
described on Exhibit B hereto (all of the property described in this paragraph 1
is hereinafter referred to as the "Personal Property") (the Real Property and
Personal Property sometimes collectively referred to herein as the "Property").
2. The Seller has ASSIGNED, TRANSFERRED and SET-OVER, and by these
presents does ASSIGN, TRANSFER and SET-OVER unto the Purchaser (to the extent
they are assignable) all of its right, title and interest in and to all service
contracts listed on Exhibit C hereto, all bonds, warranties and guaranties in
Seller's possession which relate to the Real Property or Personal Property.
Purchaser hereby assumes and agrees to perform from the effective date
hereof forward all of the covenants and obligations contained in the contracts
assigned hereunder (to the extent such contracts are listed on Exhibit C hereto)
which are to be performed by Seller and hereby indemnifies Seller and agrees to
hold Seller harmless from and against all liability, cost, loss, damage or
expense, including reasonable attorneys' fees, suffered or incurred by Seller as
a result of any alleged failure of Purchaser to perform such covenants or
obligations. Seller hereby indemnifies Purchaser and agrees to hold Purchaser
harmless from and against all liability, cost, loss, damage or expense,
including reasonable attorneys' fees, suffered or incurred by Purchaser as a
result of any alleged failure of Seller to perform covenants or obligations
under the contracts listed on Exhibit C hereto and to the extent such covenants
or obligations were to be performed prior to Closing.
This Blanket Conveyance, Bill of Sale and Assignment is binding and shall
inure to the benefit of the parties hereto, and their respective successors and
assigns.
TO HAVE AND TO HOLD the Property unto Purchaser, its successors and assigns
forever, and Seller does hereby bind itself, its successors and assigns, to
forever WARRANT AND DEFEND the title to the Property unto Purchaser, its
successors and assigns, against any person whomsoever lawfully claiming, or to
claim the same or any part thereof, by, through or under Seller, but not
otherwise.
EXECUTED effective as of the ______ day of __________, 199__.
SELLER:
___________________________________________
By:________________________________________
Its:_________________________________
Dated:_____________________________________
PURCHASER:
___________________________________________
Dated:_____________________________________
EXHIBIT A
PROPERTY DESCRIPTION
[Attach legal description of the Property]
EXHIBIT E
NON-FOREIGN AFFIDAVIT
STATE OF SOUTH CAROLINA
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF GREENVILLE
On this date, CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P., a California
limited partnership ("Seller"), has sold and conveyed certain real property
situated in DeKalb County, Georgia, to _______________________, a ______________
("Purchaser"). Section 1445 of the Internal Revenue Code of 1986, as amended,
provides that a transferee of a U.S. Real Property Interest must withhold tax if
the transferor is a foreign person. To inform Purchaser that withholding of tax
is not required upon the disposition of a U.S. Real Property Interest by Seller,
the undersigned hereby certifies the following on behalf of Seller:
1. Seller is not a foreign corporation, foreign partnership, foreign
trust, or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);
2. Seller's U.S. Employer Identification Number is _________________; and
3. Seller's office address is _______________________________________
_______________________________________________________________.
Seller understands that this certification may be disclosed to the Internal
Revenue Service by Purchaser and that any false statement contained herein could
be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Seller.
Executed this ______ day of ______________, 199__.
SELLER:
__________________________________________
By:________________________________________
Its:_________________________________
Dated:____________________________________
_________________________________
Notary Public
My Commission Expires:
____________________
EXHIBIT F
TENANT ESTOPPEL CERTIFICATE
(PLEASE CALL DONNA HURD AT 615/783-1037 IF YOU HAVE ANY QUESTIONS OR IF ANY OF
THE UNDERLINED INFORMATION IS INACCURATE. WHERE YOU HAVE A CHOICE SUCH AS
"HAS____ (HAS NOT____)", PLACE AN "X" IN THE CORRECT BLANK.)
The undersigned __________________________, a ___________________
("Tenant"), hereby certifies as follows:
1. __________________________ ("Landlord"), as landlord, and Tenant, as
tenant, are parties to that certain lease dated _____________, 199__ (the
"Lease"), demising certain premises more fully described therein and designated
as Suite _______ in the building known as "__________________" and having an
address of _____________________________________, _____________, _____________
(the "Building"). Landlord is the current owner of the Premises and Tenant is
the current tenant under the Lease.
2. The Lease is in full force and effect and has not been modified,
amended or supplemented in any way, except as follows (insert dates of all
modifications, amendments or supplements; if none, write
"None"):______________________________________________________________________
______________________________________________________________________________
_____________________________________________________________________________.
3. There are no other representations, warranties, agreements,
commitments or understanding between Landlord and Tenant regarding the Premises
other than as set forth in the Lease or paragraph 2 above.
4. The initial term of the Lease commenced on ______________, 199__, will
expire on _______________, 199__. Tenant has ___________ options to renew the
initial term of the Lease, each for a period of _____________ years.
5. Fixed monthly rent is currently payable at the rate of $__________ per
month and, together with applicable sales tax, has been paid through
_____________, 199__. The current monthly billings for additional rent (common
area maintenance, and/or utilities, and/or taxes, and/or insurance as specified
in the Lease) payable by the Tenant are $________ per month plus applicable
sales tax. Tenant has ____ (has not ____) paid in full all other sums presently
due and payable under the lease.
6. No rent or additional rent which may become due or payable under the
Lease has been paid more than 30 thirty days in advance.
7. Tenant pays ____ (does not pay ____) percentage rent under the Lease
as follows:
______________________________________________________________________________
_____________________________________________________________________________.
8. Tenant has taken possession of and occupying the Premises. All work
required under the Lease to be performed by Landlord has been completed to the
satisfaction of Tenant, except as follows (insert description of any work to be
completed by Landlord; if none, write "None"):____
______________________________________________________________________________
_____________________________________________________________________________.
9. There are no defaults on the part of Tenant or, to the best of
Tenant's knowledge, Landlord under the Lease.
10. Tenant has paid to Landlord a security deposit of $__________.
Landlord has applied $________ from the security deposit to Tenant's obligations
under the Lease, leaving a balance of $____________ as the Tenant's unapplied
security deposit.
11. Tenant presently has no charge, lien, claim, defense, set-off or
counterclaim against Landlord or the performance of Tenant's obligations under
the lease.
12. Tenant has been advised that ___________________ or assignee thereof
("Buyer"), will acquire the Building, and that __________________________ (the
"Title Company"), will provide title insurance and _____________________________
("Lender") will provide financing to Buyer in connection therewith. Tenant
agrees that the foregoing certifications shall inure to the benefit of and may
be relied upon by Landlord, Buyer, the Title Company and Lender, and their
respective successors and assigns.
Date: ________________, 199__
TENANT:
_________________________________________,
a _________________
By:________________________________________
Name:_______________________________
Title:_______________________________
EXHIBIT G
TENANT NOTICE LETTER
_________________, 199____
____________________________
____________________________
____________________________
Re: Your lease (the "Lease") of space in Northlake Quadrangle located in
Tucker, DeKalb County, Georgia (the "Property")
Dear :
You are hereby notified that Consolidated Capital Equity Partners, L.P.
(the "Owner"), as owner of the Property and the current owner of the landlord's
interest under the Lease, has sold the Property to
("Purchaser") as of the date of this Notice Letter set forth above, and in
connection with such sale the Owner has assigned and transferred its interest in
the Lease and any and all unapplied security deposits thereunder or relating
thereto in its possession to Purchaser, and Purchaser has assumed and agreed to
perform all of the landlord's obligations under the Lease (including, but not
limited to, any obligations set forth in the Lease to repay or account for any
unapplied security deposits thereunder) from and after such date.
Accordingly, (a) all of your obligations under the Lease from and after the
date of this Notice Letter (including your obligation to pay rent) shall be
performable to and for the benefit of Purchaser and Purchaser's successor and
assigns, and (b) all of the obligations of the landlord under the Lease
(including, but not limited to, any obligations to repay or account for any
unapplied security deposits thereunder) from and after the date of this Notice
Letter shall be the binding obligations of Purchaser and Purchaser's successors
and assigns.
The address of Purchaser for all purposes under the Lease (including the
payments of rentals, and recoupment of any unapplied security deposits and the
giving of any notice provided for in the Lease) is
.
Very truly yours,
SELLER:
__________________________________________
By:_______________________________________
Its:_____________________________________
Dated:_____________________________________
PURCHASER:
__________________________________________
Dated:_____________________________________
FIRST AMENDMENT TO CONTRACT OF SALE
(NORTHLAKE QUADRANGLE, TUCKER, GEORGIA)
This First Amendment to Contract of Sale is entered into effective as of
April 8, 1998 (this "First Amendment"), by and between CONSOLIDATED CAPITAL
EQUITY PARTNERS, L.P., a California limited partnership ("Seller"), and
NORTHLAKE QUADRANGLE, LLC, a Georgia limited liability company ("Purchaser").
WHEREAS, Seller and Spivill Management and Investment Company, a Tennessee
corporation ("Spivill"), entered into that certain Contract of Sale with an
Effective Date of January 9, 1998 (the "Contract"), pursuant to which Seller has
agreed to sell, and Spivill has agreed to purchase from Seller, the Property
more particularly described in said Contract;
WHEREAS, Spivill has assigned all of its right, title and interest in and
to the Contract to Purchaser pursuant to the terms of Section 13.5 of the
Contract; and
WHEREAS, Seller and Purchaser have agreed to modify the Contract to extend
the Closing Date, all pursuant to the terms set forth in this First Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Purchaser hereby agree
as follows:
1. Unless otherwise defined in this First Amendment or the context
otherwise requires, each term used in this First Amendment with its initial
letter capitalized which has been defined in the Contract shall have the same
meaning herein as given to such term in the Contract.
2. Purchaser hereby acknowledges that the Inspection Period under the
Contract has expired by the terms of the Contract. Further, Purchaser
acknowledges that it has approved the status of the title to the Property
including, without limitation, the Title Commitment, Exception Documents, and
Survey delivered to Purchaser pursuant to the Contract, and that all Purchaser's
objections to the Title Commitment, Exceptions Documents and the Survey have
been satisfied. Purchaser acknowledges and agrees that it has no rights to
terminate the Contract and that Seller has performed all of its obligations
under the Contract which are to be performed on or prior to the date of this
First Amendment.
3. Section 8.1 of the Contract is hereby amended to read in its entirety as
follows:
8.1 Time and Place. The consummation of the purchase and sale of the
Property (the "Closing") shall take place at the office of the Title
Company (it being contemplated that the Closing will occur by the delivery
of Closing documents into escrow with the Title Company) on April 15, 1998,
or at such earlier date and time as Purchaser and Seller may mutually agree
(the "Closing Date").
4. Except as expressly amended by this First Amendment, no term or
provision of the Contract is or shall be amended, modified or supplemented.
5. This First Amendment may be executed in any number of identical
counterparts so long as each party hereto has signed one such counterpart. If
so executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall, collectively, constitute one
agreement, but in making proof of this First Amendment, it shall not be
necessary to produce or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
effective as of the date first set forth above.
SELLER:
CONSOLIDATED CAPITAL EQUITY PARTNERS,
L.P., a California limited partnership
By: ConCap Holdings, Inc.,
a Texas corporation,
its general partner
By:_________________________________
Name:____________________________
Its:_______________________________
Dated:____________________________________
PURCHASER:
NORTHLAKE QUADRANGLE, LLC,
a Georgia limited liability company
By:_______________________________________
Name:__________________________________
Its:___________________________________
Dated:____________________________________
ATTENTION: COUNTY CLERK -- THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO
BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR
RECORD IN THE RECORDS WHERE MORTGAGES AND DEEDS OF TRUST ON REAL ESTATE ARE
RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT
ONLY AS A MORTGAGE OR DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING
GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN.
THE MAILING ADDRESSES OF THE BORROWER (DEBTOR) AND LENDER (SECURED PARTY) ARE
SET FORTH IN THIS INSTRUMENT.
KENNEDY BOULEVARD ASSOCIATES I, L.P.,
a Pennsylvania limited partnership
(Borrower)
to
LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
a Delaware corporation
(Lender)
MORTGAGE AND
SECURITY AGREEMENT
Dated: As of September 23, 1998
Effective: As of September 25,1998
Location: The Sterling
Philadelphia, Pennsylvania
County: Philadelphia
PREPARED BY AND UPON
RECORDATION RETURN TO:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: Mitchell G. Williams, Esq.
Counsel's File No.: 16248-00352
Title Co: Commonwealth Land Title Insurance Company
Title No.: D202183CN
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument"), is
made as of the 23rd day of September, 1998 and effective as of the 25th day of
September, 1998, by KENNEDY BOULEVARD ASSOCIATES I, L.P., a Pennsylvania limited
partnership, having its principal place of business c/o Insignia Properties
Trust, One Insignia Financial Plaza, Greenville, South Carolina 29601, as
mortgagor ("Borrower"), to LEHMAN BROTHERS HOLDINGS INC. D/B/A LEHMAN CAPITAL, A
DIVISION OF LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation, having an
address at Three World Financial Center, 200 Vesey Street, New York, New York
10285, as mortgagee ("Lender").
W I T N E S E T H :
To secure the payment of an indebtedness in the principal sum of
TWENTY THREE MILLION AND 00/100 DOLLARS ($23,000,000.00), lawful money of the
United States of America, to be paid with interest according to a certain note
dated the date hereof made by Borrower to Lender (the note, together with all
extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") (said indebtedness, interest and all other sums due hereunder
and under the Note being collectively called the "Debt"), Borrower has
mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed,
confirmed, pledged, assigned and hypothecated and by these presents does
mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge,
assign, set over and hypothecate unto Lender, its successors and assigns the
real property described in Exhibit A attached hereto (the "Premises") and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and improvements now or hereafter located
thereon (the "Improvements");
TOGETHER WITH: all right, title, interest and estate of Borrower now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements together with the
following property, rights, interests and estates being hereinafter collectively
referred to as the "Property"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights
and powers, air rights and development rights, and all estates, rights,
titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating or
pertaining to the Premises and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the bed of any
street, road or avenue, opened or proposed, in front of or adjoining the
Premises, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy,
property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Premises and the Improvements and
every part and parcel thereof, with the appurtenances thereto;
(b) all machinery, equipment, fixtures (including but not limited to
all heating, air conditioning, plumbing, lighting, communications and
elevator fixtures) and other property of every kind and nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now
or hereafter located upon the Premises and the Improvements, or appurtenant
thereto, and usable in connection with the present or future management,
maintenance operation and occupancy of the Premises and the Improvements
and all building equipment, materials and supplies of any nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now
or hereafter located upon the Premises and the Improvements, or appurtenant
thereto, or usable in connection with the present or future management,
maintenance operation and occupancy of the Premises and the Improvements
(hereinafter collectively called the "Equipment"), and the right, title and
interest of Borrower in and to any of the Equipment which may be subject to
any security interests, as defined in the Uniform Commercial Code, as
adopted and enacted by the state or states where any of the Property is
located (the "Uniform Commercial Code"), superior in lien to the lien of
this Security Instrument;
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Property, whether from
the exercise of the right of eminent domain (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of said
right), or for a change of grade, or for any other injury to or decrease in
the value of the Property;
(d) all leases and other agreements affecting the use, enjoyment or
occupancy of the Premises and the Improvements heretofore or hereafter
entered into (the "Leases") and all right, title and interest of Borrower,
its successors and assigns therein and thereunder, including, without
limitation, cash or securities deposited thereunder to secure the
performance by the lessees of their obligations thereunder and all rents,
additional rents, revenues, issues and profits (including all oil and gas
or other mineral royalties and bonuses) from the Premises and the
Improvements (the "Rents") and all proceeds from the sale or other
disposition of the Leases and the right to receive and apply the Rents to
the payment of the Debt;
(e) all proceeds of, and any unearned premiums on, any insurance
policies covering the Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements
made in lieu thereof, for damage to the Property;
(f) the right, in the name and on behalf of Borrower, to appear in
and defend any action or proceeding brought with respect to the Property
and to commence any action or proceeding to protect the interest of Lender
in the Property;
(g) all contract rights, with respect to, or which may in any way
pertain to, the Premises or the business of the Borrower, including,
without limitation, all refunds, rebates, security deposits, or other
expectancy under or from any such account or contract right;
(h) all general intangibles with respect to, or which may in any way
pertain to, the Premises or the business of the Borrower, including without
limitation, any trade names, or other names under or by which the Premises
may at any time be operated or known, the good will of the Borrower in
connection therewith and the right of the Borrower to carry on business
under any or all such name or names and any variant or variants thereof,
insofar as the same may be transferable by the Borrower without breach of
any agreement pursuant to which the Borrower may have obtained its right to
use such name or names, and any and all trademarks, prints, labels,
advertising concepts and literature;
TO HAVE AND TO HOLD the above granted and described Property unto and to
the use and benefit of Lender, and the successors and assigns of Lender,
forever;
PROVIDED, HOWEVER, these presents are upon the express condition that, if
Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument and shall well and
truly abide by and comply with each and every covenant and condition set forth
herein and in the Note, these presents and the estate hereby granted shall
cease, terminate and be void;
AND Borrower represents and warrants to and covenants and agrees with
Lender as follows:
PART I
PROVISIONS OF GENERAL APPLICATION
1 Payment of Debt and Incorporation of Covenants, Conditions and
Agreements. Borrower will pay the Debt at the time and in the manner provided
in the Note and in this Security Instrument. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note including but not limited to the Assignment of
Leases and Rents (the "Assignment of Rents") between Borrower, as assignor and
Lender, as assignee (collectively, the "Other Security Documents"), are hereby
made a part of this Security Instrument to the same extent and with the same
force as if fully set forth herein.
2 Warranty of Title. Borrower warrants that Borrower has good title to
the Property and has the right to mortgage, give, grant, bargain, sell, alien,
enfeoff, convey, confirm, pledge, assign and hypothecate and grant a security
interest in the same and that Borrower possesses an unencumbered fee estate in
the Premises and the Improvements and that it owns the Property free and clear
of all liens, encumbrances and charges whatsoever except for those exceptions
shown in the title insurance policy insuring the lien of this Security
Instrument. Subject to such exceptions, Borrower shall forever warrant, defend
and preserve such title and the validity and priority of the lien of this
Security Instrument and shall forever warrant and defend the same to Lender
against the claims of all persons whomsoever.
3 Insurance. (a) Borrower will keep the Property insured against loss
or damage by fire, flood and such other hazards, risks and matters, as Lender
may from time to time reasonably require, including without limitation, rental
value insurance against the abatement in rent or business interruption insurance
for at least twelve (12) months and general public liability in an amount not
less than $1,000,000.00, including excess liability coverage and umbrella
liability insurance. Borrower shall pay the premiums for such insurance (the
"Insurance Premiums") as the same become due and payable. All policies of
insurance (the "Policies") shall (i) be issued under forms acceptable to Lender
(containing the standard New York mortgagee non-contribution clause naming the
Lender as the insured mortgagee and the person to which all payments made by the
Qualified Insurer (hereinafter defined) shall be paid); (ii) provide for at
least thirty (30) days prior written notice to the Lender of any cancellation,
reduction in an amount or change in insurance coverage; (iii) contain a
replacement cost endorsement for 100% of all replacement costs relating to the
Improvements (without deduction for depreciation); (iv) contain an "enforcement"
or "Law and Ordinance" endorsement in form and substance satisfactory to Lender;
and (v) be issued by insurers qualified under the laws of the State in which the
Property is located, duly authorized and licensed to transact insurance business
in such State and reflecting a claims-paying ability of A or better as
determined by Standard & Poors' Corporation ("S&P"), Duff and Phelps Credit
Rating Co. ("Duff"), if rated by Duff, Fitch Investors Service, Inc. ("Fitch"),
if rated by Fitch, and a claims paying ability of A2 as determined by Moody's
Investors Service, Inc. ("Moody's"), if rated by Moody's (each such insurer
hereinafter referred to as a "Qualified Insurer", collectively "Qualified
Insurers"). Notwithstanding the foregoing, Travelers/Aetna Casualty and Surety
("Aetna") is an acceptable insurance company to Lender provided that if Aetna
has a senior unsecured debt rating of less than A by each of the Rating Agencies
(hereinafter defined), then such insurer shall be replaced with a Qualified
Insurer or Qualified Insurers within thirty (30) days after written notice by
the Lender of the reduction of such rating. Such insurance shall not be
invalidated due to the use or occupancy of the Property for purposes more
hazardous than are permitted by the policy. The maximum amount deductible
permitted under each insurance policy shall be such as is customarily carried by
owners or managing agents operating first class mixed-use properties of similar
type and size of the Property of similar type, size and quality to the Property
as applicable. Borrower shall deliver the Policies, or duplicate originals of
the same, to Lender. Not later than forty-five (45) days prior to the expira-
tion date of each of the Policies, Borrower will deliver evidence satisfactory
to Lender of the renewal of each of the Policies. The Borrower shall not insure
the Property under any insurance policy other than as expressly set forth
herein.
(b) If the Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, Borrower shall give prompt notice thereof to Lender.
The net amount of all insurance proceeds received by Lender with respect to such
damage or destruction, shall be held in a segregated account (the "Net Proceeds
Account") and invested in an Eligible Investment (hereinafter defined). Lender
shall be entitled to deduct from such insurance proceeds all of its
administrative costs and expenses reasonably incurred in connection with the
investing and collection of such insurance proceeds, and the balance if any,
(the "Net Proceeds") shall be disbursed by Lender in accordance with the terms
and conditions set forth herein to pay for the costs and expenses of the
Restoration (hereinafter defined) provided (i) no Event of Default has occurred
and remains uncured under this Security Instrument, the Note or any of the Other
Security Documents, (ii) Borrower proceeds promptly after the insurance claims
are settled with the restoration, replacement, rebuilding or repair of the
Property as nearly as possible to the condition the Property was in immediately
prior to such fire or other casualty (the "Restoration"), (iii) the Restoration
shall be done in compliance with all applicable laws, rules and regulations,
and, following the Restoration, the Property shall be permitted under all
applicable zoning laws to be used for, and shall continue to be used for, the
same purposes as prior to such fire or other casualty, (iv) a set of the plans
and specifications in connection with the Restoration shall be submitted to
Lender and shall be acceptable to Lender in all respects, (v) all costs and
expenses incurred by Lender in connection with making the Net Proceeds available
for the Restoration of the Property including, without limitation, counsel fees
and inspecting engineer fees incurred by Lender, shall be paid by Borrower, (vi)
rental loss insurance is available to offset fully any abatement of rent to
which any tenant of the Property may be entitled or any rent loss arising out of
the cancellation of any Lease as a result of the casualty, throughout the
Restoration and a reasonable lease-up period following the Restoration, and
(vii) in Lender's judgment, the Restoration must be able to be completed within
one (1) year after the loss and at least one (1) year prior to the Maturity Date
of the Note. The term "Eligible Investment" shall mean any investment approved
by Lender in its sole discretion.
(c) The Net Proceeds shall be held in trust in the Net Proceeds Account.
The Net Proceeds shall be paid by Lender (or by a disbursing agent
("Depository") selected by Lender), to, or as directed by, Borrower from time to
time during the course of the Restoration, upon receipt of evidence, and
certification from Borrower, satisfactory to Lender, that (i) all materials
installed and work and labor performed (except to the extent they are to be paid
for out of the requested payment) in connection with the Restoration have been
paid for in full, (ii) no notices of intention, mechanics' or other liens or
encumbrances on the Property arising out of the Restoration exist, and (iii) the
balance of the Net Proceeds plus the balance of any deficiency deposits given by
Borrower to Lender or Depository pursuant to the provisions of this paragraph
hereinafter set forth shall be sufficient to pay in full the balance of the cost
of the Restoration. Borrower shall pay all fees and expenses of the Depository
in connection with the above.
(d) Notwithstanding anything to the contrary contained herein, if the Net
Proceeds shall be less than $50,000.00, only one disbursement shall be required
upon the completion of the Restoration to the satisfaction of Lender. If the
Net Proceeds shall be $50,000.00 or more, Lender shall disburse the Net Proceeds
as provided above, however, in no event shall Lender be required to disburse
such Net Proceeds, or any portion thereof, more often then once every thirty
(30) days. If at any time the Net Proceeds, or the undisbursed balance thereof,
shall not be sufficient to pay in full the balance of the cost of the
Restoration, Borrower shall deposit the deficiency with Lender or Depositary
before any further disbursement of the Net Proceeds shall be made.
(e) Any amount of the Net Proceeds received by Lender and not required to
be disbursed for the Restoration pursuant to the provisions of this paragraph
hereinabove set forth shall be retained and applied by Lender toward the payment
of the Debt whether or not then due and payable in such priority and proportions
as Lender in its discretion shall deem proper. Upon the receipt and retention
by Lender of such insurance proceeds, the lien of this Security Instrument shall
be reduced only by the amount thereof received and retained by Lender and
actually applied by Lender in reduction of the Debt.
(f) Notwithstanding anything to the contrary contained herein, Lender
shall not be obligated to make the Net Proceeds available for Restoration of the
Property unless the principal balance of the Note following the completion of
the Restoration (assuming the amount of Net Proceeds received by Lender in
excess of the cost of the Restoration (as estimated by Lender) is applied to the
prepayment of the Note) will be in an amount sufficient to cause (i) the Debt
Service Coverage Ratio (hereinafter defined) applicable to the Property
immediately following the Restoration to be not less than 1.2 to 1.0 and (ii) in
the event of any Restoration involving Net Proceeds of more than $250,000.00,
the ratio of (a) the then outstanding principal balance of the Note to (b) the
appraised value of the Property after completion of the Restoration (as
determined by an independent third-party appraiser holding an MAI designation
and having a national practice and at least ten (10) years real estate
experience appraising properties of a similar nature and type as the Property)
to be equal to or less than the Minimum Loan to Value Ratio (hereinafter
defined). The term "Minimum Loan to Value Ratio" means a ratio equal to the
lesser of (i) 0.8 to 1.0 or (ii) the ratio of (a) the then outstanding principal
balance of the Note to (b) the appraised value of the Property on the date
hereof. The fee for such appraisal shall be paid for by the Borrower.
4. Payment of Taxes, etc. Borrower shall pay all taxes, assessments,
water rates and sewer rents, now or hereafter levied or assessed or imposed
against the Property or any part thereof (the "Taxes") and all ground rents,
maintenance charges, other governmental impositions, and other charges,
including without limitation vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Premises, now or hereafter levied
or assessed or imposed against the Property or any part thereof (the "Other
Charges") as same become due and payable. Upon written request from Lender,
Borrower will deliver to Lender evidence satisfactory to Lender that the Taxes
and Other Charges have been so paid or are not then delinquent. Borrower shall
not suffer and shall promptly cause to be paid and discharged any lien or charge
whatsoever which may be or become a lien or charge against the Property, and
shall promptly pay for all utility services provided to the Property. Upon
written request from Lender, Borrower shall furnish to Lender receipts for the
payment of the Taxes, Other Charges and said utility services prior to the date
the same shall become delinquent.
Notwithstanding the above, after prior written notice to Lender, Borrower,
at its own expense, may contest by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application in whole or in part of any of the Taxes, provided that
(i) no Event of Default under the Note or this Security Instrument shall have
occurred and be continuing, (ii) Borrower is permitted to do so under the
provisions of any mortgage or deed of trust or deed to secure debt superior or
junior in lien to this Security Instrument, (iii) such proceeding shall suspend
the collection of the Taxes from Borrower and from the Property, (iv) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder, (v) neither the Property nor any part thereof
or interest therein will be in danger of being sold, forfeited, terminated,
canceled or lost, (vi) Borrower shall have set aside adequate reserves for the
payment of the Taxes, together with all interest and penalties thereon, and
(vii) Borrower shall have furnished such security as may be reasonably required
in the proceeding, or as may be requested by Lender to insure the payment of any
such Taxes, together with all interest and penalties thereon.
5. Escrow Fund. Upon (i) the occurrence of an Event of Default
(hereinafter defined), and for so long as such Event of Default shall be
continuing, or (ii) the transfer of the Property to any entity in accordance
with the terms of paragraph 9(c) hereof, Borrower shall pay to Lender upon
request on the fifteenth day of each calendar month thereafter (a) one-twelfth
of an amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, during the next ensuing twelve (12) months and (b) one-
twelfth of an amount which would be sufficient to pay the Insurance Premiums due
for the renewal of the coverage afforded by the Policies upon the expiration
thereof (the amounts set forth in (a) and (b) above hereinafter called the
"Escrow Fund"). The Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note shall be added together and shall be paid as
an aggregate sum by Borrower to Lender. Borrower hereby pledges to Lender any
and all monies now or hereafter deposited in the Escrow Fund as additional
security for the payment of the Debt. Lender will apply the Escrow Fund to
payments of Taxes and Insurance Premiums required to be made by Borrower
pursuant to paragraphs 3 and 4 hereof. If the amount of the Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to paragraphs 3
and 4 hereof, Lender shall credit such excess against future payments to be made
to the Escrow Fund. In allocating such excess, Lender may deal with the person
shown on the records of Lender to be the owner of the Property. If the Escrow
Fund is not sufficient to pay the items set forth in (a) and (b) above, Borrower
shall promptly pay to Lender, upon demand, an amount which Lender shall estimate
as sufficient to make up the deficiency. Lender may apply any sums then present
in the Escrow Fund to the payment of the following items in any order in its
uncontrolled discretion:
(i)Taxes and Other Charges;
(ii)Insurance Premiums;
(iii)Interest on the unpaid principal balance of the Note;
(iv)Amortization of the unpaid principal balance of the Note;
(v)All other sums payable pursuant to the Note, this Security Instrument
and the Other Security Documents, including without limitation
advances made by Lender pursuant to the terms of this Security
Instrument.
Until expended or applied as above provided, any amounts in the Escrow Fund
shall constitute additional security for the Debt. The Escrow Fund shall not
constitute a trust fund and may be commingled with other monies held by Lender.
No earnings or interest on the Escrow Fund shall be payable to Borrower.
6. Condemnation. (a) Borrower shall give Lender prompt notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. If less than 25% of the land constituting the
Property is taken, then the net amount of all awards and payments received by
Lender with respect to such taking shall be held in a segregated account (the
"Net Awards Account") and invested in an Eligible Investment. Lender shall be
entitled to deduct from the condemnation award all of its administrative costs
and expenses incurred in connection with investing and collecting such
condemnation award and the balance, if any, (hereinafter referred to as the "Net
Award"), will be disbursed by Lender to pay for the costs and expenses of the
Condemnation Restoration (hereinafter defined), provided (i) no Event of Default
has occurred and remains uncured under this Security Instrument, the Note or any
of the Other Security Documents, (ii) Borrower proceeds promptly after the
making of any award of payment for such taking with the restoration,
replacement, rebuilding or repair of the Property as nearly as possible to the
condition the Property was in immediately prior to such taking (the "Condemn-
ation Restoration"), (iii) the Condemnation Restoration shall be done in
compliance with all applicable laws, rules and regulations, and, following the
Condemnation Restoration, the Property shall be permitted under all applicable
zoning laws to be used for, and shall continue to be used for, the same purposes
as prior to such condemnation, (iv) a set of plans and specifications in
connection with the Condemnation Restoration shall be submitted to Lender and
shall be satisfactory to Lender in all respects, (v) Borrower shall have
reimbursed Lender for all costs and expenses incurred by Lender in connection
with making the Net Award available for the Condemnation Restoration of the
Property, including, without limitation, counsel fees, inspecting engineer fees
and appraisal fees incurred by Lender, (vi) rental loss proceeds are available
to offset in full any loss in rents throughout the Condemnation Restoration and
a reasonable lease-up period following the completion of the Condemnation
Restoration and (vii) in the opinion of Lender the Condemnation Restoration of
the Property can be completed within one (1) year after the taking and at least
one (1) year prior to the maturity date of the Note.
(b) The Net Award shall be held in trust by Lender in the Net Awards
Account and shall be paid by Lender or a Depository designated by Lender to, or
as directed by, Borrower from time to time during the course of the Condemnation
Restoration, upon receipt of evidence satisfactory to Lender, that (i) all
materials installed and work and labor performed (except to the extent they are
to be paid for out of the requested payment) in connection with the Condemnation
Restoration have been paid for in full, (ii) there exist no notices of
intention, mechanics' or other liens or encumbrances on the Property arising out
of the Condemnation Restoration, and (iii) the balance of the Net Award plus the
balance of any deficiency deposits given by Borrower to Lender or Depositary
pursuant to the provisions of this paragraph hereinafter set forth shall be
sufficient to pay in full the balance of the cost of the Condemnation
Restoration.
(c) Notwithstanding anything to the contrary contained herein, Lender
shall not be obligated to make the Net Award available for the Condemnation
Restoration of the Property unless the principal balance of the Note after the
completion of the Condemnation Restoration (assuming the amount of the Net Award
received by Lender in excess of the cost of the Condemnation Restoration as
estimated by Lender is applied to the prepayment of the Note) will be sufficient
to cause (i) the Debt Service Coverage Ratio applicable to the Property
immediately following the Condemnation Restoration to be not less than 1.2 to
1.0 and (ii) in the event of any Condemnation Restoration involving Net Award of
more than $250,000.00, the ratio of (a) the then outstanding principal balance
of the Note to (b) the appraised value of the Property after completion of the
Condemnation Restoration (as determined by an independent third-party appraiser
holding an MAI designation and having a national practice and at least ten (10)
years real estate experience appraising properties of a similar nature and type
as the Property) to be equal to or less than the Minimum Loan to Value Ratio.
The fee for the appraisal shall be paid for by Borrower.
(d) Notwithstanding anything to the contrary contained herein, if the Net
Award shall be less than $50,000.00, only one such disbursement shall be
required upon the completion of the Condemnation Restoration to the satisfaction
of Lender. If the Net Award shall be $50,000.00 or more, Lender shall disburse
the Net Award as provided above, however, in no event shall Lender be required
to disburse such Net Award, or any portion thereof, more often than once every
thirty (30) days. If at any time the Net Award, or the undisbursed balance
thereof, shall not in the opinion of Lender be sufficient to pay in full the
balance of the cost of Condemnation Restoration, Borrower shall deposit such
deficiency with Lender or Depository before any further disbursement of the Net
Award shall be made.
(e) Notwithstanding anything to the contrary contained herein, any taking
by any public or quasi public authority through eminent domain or otherwise
(including but not limited to any transfer made in lieu of or in anticipation of
the exercise of such taking), Borrower shall continue to pay the Debt at the
time and in the manner provided for in the Note and in this Security Instrument
and the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied in accordance with this paragraph 6. Lender
shall not be limited to the interest paid on the award by the condemning
authority but shall be entitled to receive out of the award interest at the rate
or rates provided herein and in the Note.
(f) Any amount of the Net Award received by Lender and not required to be
disbursed for the Condemnation Restoration pursuant to the provisions of this
paragraph hereinabove set forth may be retained and applied by Lender to the
discharge of the Debt, whether or not then due and payable, in such priority and
proportions as Lender in its discretion shall deem proper. If the Property is
sold through foreclosure or otherwise prior to the receipt by Lender of such
award or payment, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive
such award or payment or a portion thereof sufficient to pay the Debt, whichever
is less. Borrower shall file and prosecute its claim or claims for any such
award or payment in good faith and with due diligence and cause the same to be
collected and paid over to Lender, and Borrower hereby irrevocably authorizes
and empowers Lender, in the name of Borrower or otherwise, to collect and
receipt for any such award or payment and to file and prosecute such claim or
claims, and although it is hereby expressly agreed that the same shall not be
necessary in any event, Borrower shall upon demand of Lender make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such award or payment to Lender, free and clear of any
encumbrances of any kind or nature whatsoever.
7. Leases and Rents. (a) Lender is hereby granted and assigned by
Borrower the right to enter the Property for the purpose of enforcing its
interest in the Leases and the Rents, this Security Instrument constituting a
present, absolute assignment of the Leases and the Rents. Nevertheless, subject
to the terms of this paragraph 7, Lender grants to Borrower a revocable license
to operate and manage the Property and to collect the Rents. Borrower shall
hold the Rents, or a portion thereof sufficient to discharge all current sums
due on the Debt, for use in the payment of such sums. Upon or at any time after
an Event of Default, the license granted to Borrower herein may be revoked by
Lender, and Lender may enter upon the Property, and collect, retain and apply
the Rents toward payment of the Debt in such priority and proportions as Lender
in its discretion shall deem proper.
(b) With respect to the multifamily residential leases on the Property,
all Leases shall be written on the standard form of lease which has been
approved by Lender. Upon written request from Lender, Borrower shall furnish
Lender with executed copies of all Leases and all modifications thereto as soon
as may be practicable. No material changes may be made to the Lender-approved
standard forms except as may be required by applicable law. In addition, all
renewals of Leases and all proposed leases shall provide for rental rates
comparable to existing local market rates and shall be arms-length transactions.
Borrower shall not enter into any lease having a term of more than three (3)
years. All Leases shall provide that they are subordinate to this Security
Instrument and that the lessee agrees to attorn to Lender. Borrower (i) shall
observe and perform all the obligations imposed upon the lessor under the Leases
and shall not do or permit to be done anything to impair the value of the Leases
as security for the Debt; (ii) shall enforce all of the terms, covenants and
conditions contained in the Leases upon the part of the lessee thereunder to be
observed or performed; (iii) shall not collect any of the Rents more than one
(1) month in advance; (iv) shall not execute any other assignment of lessor's
interest in the Leases or the Rents; (v) shall not materially alter, modify or
change the terms of the Leases, or cancel or terminate the Leases or accept a
surrender thereof or convey or transfer or suffer or permit a conveyance or
transfer of the Premises or of any interest therein so as to effect a merger of
the estates and rights of, or a termination or diminution of the obligations of,
lessees thereunder, except that Borrower may terminate any Lease in exercising
its rights as landlord thereunder upon a default by the tenant under said Lease;
(vi) shall not alter, modify or change the terms of any guaranty of the Leases
or cancel or terminate such guaranty; (vii) shall not consent to any assignment
of or subletting under the Leases not in accordance with their terms; and (viii)
shall execute and deliver all such further assurances, confirmations and
assignments in connection with the Property as Lender shall from time to time
require.
(c) With respect to the commercial/retail leases on the Property and except
as otherwise consented to by Lender, all Leases shall be written on the standard
form of lease which shall have been approved by Lender. Upon request, Borrower
shall furnish Lender with executed copies of all Leases. No material changes
may be made to the Lender-approved standard lease without the prior written
consent of Lender, which approval shall not be unreasonably withheld,
conditioned, or delayed. In addition, all renewals of Leases and all proposed
leases shall provide for rental rates and terms comparable to existing local
market rates and terms and shall be arms-length transactions with bona fide,
independent third party tenants. All proposed leases and renewals of existing
Leases, other than Minor Leases (hereinafter defined), shall be subject to the
prior approval of Lender and its counsel, at Borrower's expense, which approval
shall not be unreasonably withheld, conditioned, or delayed if the proposed
Lease or renewal Lease (i) is on the Lender-approved form, subject only to
commercially reasonable variations therefrom, (ii) is negotiated in an arms-
length transaction with an independent third party tenant and (iii) provides for
rental rates and terms comparable to existing local market terms. All Leases
entered into after the date hereof shall provide that they are subordinate to
this Security Instrument and that the lessee agrees to attorn to Lender, and,
with Lender's prior written consent (which consent shall be based upon standards
customarily followed by prudent institutional lenders in the context of secured
loans similar to the loan evidenced by the Note), subject to non-disturbance.
Borrower (i) shall observe and perform in all material respects all of the
obligations imposed upon the lessor under the Leases and shall not do or permit
to be done anything to impair the value of the Leases as security for the Debt;
(ii) shall promptly send copies to Lender of all notices of default which
Borrower shall send or receive thereunder; (iii) shall enforce all of the terms,
covenants and conditions contained in the Leases upon the part of the lessee
thereunder to be observed or performed, short of termination thereof; Borrower
may terminate, however, Minor Leases as the result of a default by lessee
thereunder; (iv) shall not collect any of the Rents more than one (1) month in
advance; (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (vi) except with respect to Minor Leases, shall not
alter, modify or change the terms of the Leases without the prior written
consent of Lender (which consent shall be based upon standards customarily
followed by prudent institutional lenders in the context of secured loans
similar to the loan evidenced by the Note), or cancel or terminate the Leases or
accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (vii) shall not alter, modify or change the
terms of any guaranty, letter of credit or other credit support with respect to
the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty
without the prior written consent of Lender; and (viii) shall consent only to
assignments or sublettings of Leases in accordance with the terms thereof, and
in all other cases, shall not consent to any assignment or subletting of Leases
without the prior written consent of Lender.
(d) Notwithstanding the provisions of Subsection 7(c) above, renewals of
existing commercial Leases and proposed leases for commercial/retail space shall
not be subject to the prior approval of Lender provided all of the following
conditions are satisfied: (i) the rental income pursuant to the renewal Lease or
proposed lease is not more than ten percent (10%) of the total commercial/retail
rental income for the Property, (ii) the renewal Lease or proposed lease covers
less than ten percent (10%) of the total net commercial/retail rentable space in
the Property, in the aggregate ((i) and (ii), "Minor Leases"), (iii) the renewal
Lease or proposed lease shall have a lease term not to exceed ten (10) years
including options to renew, (iv) the renewal Lease or proposed lease shall
provide for rental rates and terms comparable to existing local market rates and
terms, and (v) the renewal Lease or proposed lease shall be an arms-length
transaction with a bona fide, independent third party tenant. On each
anniversary of the date hereof during the term of the loan secured hereby,
Borrower shall deliver to Lender copies of all Leases which are entered into
during the preceding year pursuant to the preceding sentence together with
Borrower's certification that it has satisfied all of the conditions of the
preceding sentence.
(e) All security deposits of tenants, whether held in cash or any other
form, shall not be commingled with any other funds of Borrower and, if cash,
shall be deposited by Borrower at such commercial or savings bank or banks as
may be reasonably satisfactory to Lender. Borrower shall, upon request, provide
Lender with evidence reasonably satisfactory to Lender of Borrower's compliance
with the foregoing. Following the occurrence and during the continuance of any
Event of Default, Borrower shall, upon Lender's request, if permitted by any
applicable legal requirements, turn over to Lender the security deposits (and
any interest theretofore earned thereon) with respect to all or any portion of
the Property, to be held by Lender subject to the terms of the Leases.
8. Maintenance of Property. (a) Borrower shall cause the Property to be
maintained in a good and safe condition and repair. The Improvements and the
Equipment shall not be removed, demolished or materially altered (except for
normal replacement of the Equipment). Borrower shall promptly comply with all
laws, orders and ordinances affecting the Property, or the use thereof.
Borrower shall or shall cause the tenants on the Property to promptly repair,
replace or rebuild any part of the Property which may be destroyed by any
casualty, or become damaged, worn or dilapidated or which may be affected by any
proceeding of the character referred to in paragraph 6 hereof and shall or shall
cause the tenants on the Property to complete and pay for any structure at any
time in the process of construction or repair on the Premises. Borrower shall
not initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or otherwise changing the uses which may be made of the Property or any
part thereof. If under applicable zoning provisions the use of all or any
portion of the Property is or shall become a nonconforming use, Borrower will
not cause or permit such nonconforming use to be discontinued or abandoned
without the express written consent of Lender.
(b) Borrower hereby represents that all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Property and with respect to the use and occupancy of the same, including
but not limited to, certificates of occupancy and fire underwriter certificates,
have been made by or obtained from the appropriate governmental authorities.
Borrower hereby represents, warrants and covenants that it has obtained and will
maintain all permits and licenses required to operate the Property as a mixed-
use building. Borrower has and shall continue to comply in all material
respects with and make all payments required under all laws, ordinances,
regulations, covenants, conditions and restrictions now or hereafter affecting
the Property or any part thereof or the business or the activity conducted
thereon. Borrower will not commit, suffer, permit or allow any act to be done
in or upon the Property in violation of any law, ordinance or regulation.
Borrower is in material compliance and shall continue to comply in all material
respects with all existing and future requirements of all governmental
authorities having jurisdiction over the Property.
9. Transfer or Encumbrance of the Property. (a) Borrower acknowledges
that Lender has examined and relied on the creditworthiness of Borrower and the
experience of Borrower in owning properties such as the Property in agreeing to
make the loan secured hereby, and that Lender will continue to rely on
Borrower's ownership of the Property as a means of maintaining the value of the
Property as security for repayment of the Debt. Borrower acknowledges that
Lender has a valid interest in maintaining the value of the Property so as to
ensure that, should Borrower default in the repayment of the Debt, Lender can
recover the Debt by a sale of the Property. Except as otherwise provided in
subparagraph 9(c) hereof or in connection with a condemnation or a transfer in
lieu of condemnation, Borrower shall not sell, convey, alien, mortgage,
encumber, pledge or otherwise transfer the Property or any part thereof, or
permit the Property or any part thereof to be sold, conveyed, aliened,
mortgaged, encumbered, pledged or otherwise transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this paragraph 9 shall be deemed to include (i)
an installment sales agreement wherein Borrower agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (iii) if Borrower or any general partner of
Borrower is a corporation, the voluntary or involuntary sale, conveyance or
transfer of such corporation's stock or the creation or issuance of new stock by
which an aggregate of more than 49% of such corporation's stock shall be vested
in a party or parties who are not now stockholders, except for any sale,
conveyance or transfer of such corporation's stock to an Affiliate (hereinafter
defined) provided Lender shall have received prior written notice of such
transfer; (iv) if Borrower or any general partner of Borrower is a limited or
general partnership or joint venture, the change, removal or resignation of a
general partner or managing partner or the transfer of the partnership interest
of any general partner or managing partner, except for any transfer of such
partnership interest to an Affiliate, and excluding the removal or resignation
of any non-Affiliate or non-managing general partner where the managing general
partner shall remain following such removal or resignation, provided, in either
case, Lender shall have received prior written notice of such transfer
resignation or removal; (v) if Borrower or any general partner or member of
Borrower is a limited liability company, the change, removal or resignation of a
managing or sole member or the transfer of the membership interest of any
managing member or the voluntary or involuntary sale, conveyance, transfer or
pledge of membership interests except for any transfer of membership interest to
an Affiliate, (vi) any transfer of any interest by the Manager (hereinafter
defined) other than as permitted under paragraph 53; and (vii) any transfer of
the beneficial interest of any Borrower in any trust holding legal title to the
Property.
(c) Notwithstanding anything to the contrary contained herein:
(i) Upon sixty (60) days prior written notice to Lender, the Borrower
shall have the limited right to transfer legal title to the Property to a Single
Purpose Entity Transferee (hereinafter defined) provided (a) such Single Purpose
Entity Transferee assumes all of the obligations of the Borrower under this
Security Instrument, the Note and the Other Security Documents in a manner
satisfactory to Lender in all respects, including, without limitation, by
entering into an assumption agreement with Borrower and Lender in form and
substance reasonably satisfactory to Lender (an "Assumption Agreement"), (b) the
Single Purpose Entity Transferee shall have been newly formed exclusively and
solely for the purpose of owning and operating the Property and shall have been
engaged in no other business activities prior to the transfer of title to such
Single Purpose Entity Transferee and must be a "United States person" as defined
by Section 7701(a)(30) of the United States Internal Revenue Code of 1986, as
amended, (c) the Single Purpose Entity Transferee or the management agent it
employs to manage the Property shall have Adequate Real Estate Experience
(hereinafter defined), (d) the Single Purpose Entity Transferee shall deliver to
Lender evidence of the fulfillment of the requirements of subsection (b) above,
(e) the Single Purpose Entity Transferee shall deliver any and all
organizational documentation requested by Lender, which documentation shall be
reasonably satisfactory to Lender in all respects, and shall deliver an opinion
of counsel of the Single Purpose Entity Transferee covering the Assumption
Agreement in form and substance similar to the due execution, delivery and
enforcement opinions delivered by counsel to Borrower in connection with the
execution of this Security Instrument, (f) the Single Purpose Entity Transferee
shall deliver any certificates and opinions of counsel, enter into agreements
and covenants, or cause each of its general partners (or any other principal
thereof) to deliver certificates, enter into agreements and covenants, which
certificates, agreements, opinions of counsel and covenants shall be similar in
nature to those delivered, executed and made by Borrower or any general partner
of Borrower or any other principal thereof in connection with the execution of
this Security Instrument or the Securitization (hereinafter defined) relating to
the single purpose nature of the Single Purpose Entity Transferee or otherwise,
and (g) Borrower shall deliver, at its sole cost and expense, an endorsement to
the existing title policy insuring the Security Instrument as modified by the
Assumption Agreement as a valid first lien on the Property, naming the Single
Purpose Entity Transferee as owner of the fee estate of the Property, which
endorsement shall insure that, as of the date of the recording of the Assumption
Agreement, the Property shall not be subject to any additional exceptions or
liens other than those contained in the original title policy insuring the lien
of this Security Instrument and delivered in connection with the execution of
this Security Instrument. Any and all costs incurred in connection with the
above (including Lender's counsel's fees and disbursements and expenses and all
recording fees, mortgage or intangible taxes, and title insurance premiums),
shall be paid by Borrower. Lender shall respond to Borrower's request to
transfer legal title to the Property within forty-five (45) days of delivery of
all of the information required by subsections (a)-(g) above. The failure of
Lender to respond to such request shall not be deemed consent to the transfer.
For purposes of this Security Instrument, the term "Adequate Real
Estate Experience" shall mean an entity which owns or manages first
class mixed-use buildings or a combination of first class multi-family
residential complexes and commercial complexes of a type and size
similar to the Property, and which owns or manages in the aggregate no
less than 1,000 residential units and 200,000 square feet of leasable
retail and/or commercial space at the time of such transfer.
The term "Single Purpose Entity Transferee" shall mean an entity that:
A. shall not own any asset other than the Property;
B. shall not engage in any business other than those necessary
for the ownership, management or operation of the Property
and any such business transactions with any general partner,
member, principal or affiliate of the Single Purpose Entity
Transferee or any affiliate of the general partner of the
Single Purpose Entity Transferee shall be entered into 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
of the Single Purpose Entity Transferee or the general
partner or an affiliate of the general partner of the Single
Purpose Entity Transferee;
C. shall not incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other
than the Debt and any Affiliate Advance (hereinafter
defined);
D. shall not make any loans or advances to any third party
(including any affiliates of such Single Purpose Entity
Transferee or the general partner, member or an affiliate of
the general partner of such Single Purpose Entity
Transferee);
E. shall be solvent and pay its debts from its assets as the
same become due;
F. shall do or cause to be done all things necessary to
preserve its existence, and shall not amend, modify or
otherwise change its partnership certificate, partnership
agreement, articles of incorporation, by-laws, operating
agreement or certificate of formation, in a manner which
adversely affects such Single Purpose Entity Transferee's
existence as a single purpose entity;
G. shall maintain books and records and bank accounts separate
from those of its affiliates, including its general
partners;
H. shall be, and at all times shall 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
such Single Purpose Entity Transferee);
I. shall file its own tax returns;
J. shall 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;
K. shall not seek the dissolution or winding up, in whole or in
part, of the Single Purpose Entity Transferee or voluntarily
file, or consent to the filing of, a petition for
bankruptcy, reorganization, assignment for the benefit of
creditors or similar proceeding; and
L. shall not commingle its funds or other assets with any other
person or entity.
The term "Affiliate Advance" shall mean and be limited to a payment made by an
Affiliate to a third party on behalf of Borrower, the repayment of which remains
an unsecured obligation of the Borrower, provided: (i) such payment shall have
been made by the Affiliate to enable the Borrower to pay for its ordinary and
customary operating expenses or property or capital expense, (exclusive of any
payments of debt service under any loan made to Borrower, including, without
limitation, the Debt secured by this Security Instrument), (ii) upon an Event of
Default under the Note, this Security Instrument or the Other Security
Documents, no payments of or accrual of interest or principal shall be made or
required on or before the repayment of all sums due under the Note, this
Security Instrument or the Other Security Documents, and (iii) the obligation of
Borrower, whether written or otherwise, shall be (a) subordinate in lien and
payment to the Debt, (b) non-defaultable and non callable upon a default
(monetary or nonmonetary) or otherwise, prior to one year and a day from the
repayment of all sums due under the Note, this Security Instrument or the Other
Security Documents and (c) unsecured obligation of Borrower at all times.
(ii) [INTENTIONALLY OMITTED]
(iii)Borrower may sell, convey or transfer stock, partnership interest
or membership interest as described in subsections 9(b)(iii) through
(v) hereof by the Borrower or the general partner or sole member of
Borrower (but not by any subsequent Single Purpose Entity Transferee),
provided that:
1. No Event of Default shall have occurred and be continuing;
2. The Single Purpose Entity Transferee shall be a person, firm or
corporation whose character, financial strength, stability and
experience shall be similar to the existing Borrower and any
general partner of Borrower as of the date hereof and otherwise
reasonably satisfactory to Lender;
3. The Single Purpose Entity Transferee shall deliver such
organizational documentation and other material necessary to
establish the transfer; and
4. The Single Purpose Entity Transferee shall pay the costs and
expenses of Lender and Lender's counsel incurred in connection
with the review and approval of such stock, partnership or
membership transfer.
The term "Affiliate" shall mean a corporation or other entity which shall
(i) control, (ii) be controlled by, or (iii) be under common control with either
Borrower, any general partner of Borrower, Insignia Financial Group, Inc.,
Insignia Properties Trust, Apartment Investment Management Company, or a
corporation or other entity that would be considered an affiliate of Borrower
under the regulations promulgated by the United States Securities and Exchange
Commission.
The term "Debt Service Coverage Ratio" shall mean the ratio of (a) the NOI
(hereinafter defined) produced by the operation of the Property during the
twelve (12) calendar month period immediately preceding the calculation to (b)
the projected aggregate payments of interest and principal due under this
Security Instrument and the Note and any other subordinate loans affecting the
Property for the twelve (12) calendar month period immediately following the
calculation.
The term "Expenses" shall mean the aggregate of the following items: (a)
real estate taxes, general and special assessments or similar charges; (b)
sales, use and personal property taxes; (c) management fees and disbursements;
(d) wages, salaries, pension costs and all fringe and other employee-related
benefits and expenses; (e) insurance premiums; (f) cost of utilities, and all
other administrative, management, ownership, operating, leasing and maintenance
expenses incurred in connection with the operation of the Property; (g) cost of
necessary repair or replacement of existing improvements on the Property with
repairs or replacements of like kind and quantity or such kind or quality which
is necessary to maintain the Property to the same standards as competitive
rental properties of similar size and location of the Property; and (h) the cost
of such other maintenance materials, HVAC repairs, parts and supplies, other
decorating supplies, floor covering repairs, other decorating contracts, drapes
and equipment. The Expenses shall be based on the above-described items
actually incurred by Borrower during the period for which the calculation is
being made.
The term "general partner" shall include the sole member or the managing
member of Borrower or a general partner of Borrower if Borrower or any general
partner of Borrower is a limited liability company.
The term "NOI" shall mean the gross income derived from the operation of
the Property, less Expenses. NOI shall include only Rents, and such other
income, including any rent loss or business interruption insurance proceeds,
vending income, pet charges, late fees, forfeited security deposits and other
miscellaneous tenant charges, which are actually received during the period for
which the NOI is being calculated. NOI shall be calculated on a cash basis in
accordance with customary accounting principles applicable to real estate.
Notwithstanding the above, in no event shall the NOI include any rents from the
Property in excess of an amount which would be produced from the Property
assuming a 95% economic occupancy level on the Property at the time of such
calculation.
(d) Lender reserves the right to condition the consent required hereunder
upon such other conditions as Lender shall determine in its reasonable
discretion to be in the interest of Lender. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Debt immediately due and payable upon
Borrower's sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property without Lender's consent. This provision shall apply
to every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer
of the Property regardless of whether voluntary or not, or whether or not Lender
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property.
10. Estoppel Certificates. (a) After request by Lender, Borrower, within
ten (10) days, shall furnish Lender with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi)
that the Note and this Security Instrument are valid, legal and binding obliga-
tions and have not been modified or if modified, giving particulars of such
modification.
11. Changes in the Laws Regarding Taxation. If any law is enacted or
adopted or amended after the date of this Security Instrument which deducts the
Debt from the value of the Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Lender's interest in the
Property, Borrower will pay such tax, with interest and penalties thereon, if
any. In the event Lender is advised by counsel chosen by it that the payment of
such tax or interest and penalties by Borrower would be unlawful or taxable to
Lender or unenforceable or provide the basis for a defense of usury, then in any
such event, Lender shall have the option, by written notice of not less than
ninety (90) days, to declare the Debt immediately due and payable.
12. No Credits on Account of the Debt. Borrower will not claim or demand
or be entitled to any credit or credits on account of the Debt for any part of
the Taxes or Other Charges assessed against the Property, or any part thereof,
and no deduction shall otherwise be made or claimed from the assessed value of
the Property, or any part thereof, for real estate tax purposes by reason of
this Security Instrument or the Debt. In the event such claim, credit or
deduction shall be required by law, Lender shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.
13. Documentary Stamps. If at any time the United States of America, any
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Security Instrument, or impose
any other tax or charge on the same, Borrower will pay for the same, with
interest and penalties thereon, if any.
14. Usury Laws. This Security Instrument and the Note are subject to the
express condition that at no time shall Borrower be obligated or required to pay
interest on the Debt at a rate which could subject the holder of the Note to
either civil or criminal liability as a result of being in excess of the maximum
interest rate which Borrower is permitted by applicable law to contract or agree
to pay. If by the terms of this Security Instrument or the Note, Borrower is at
any time required or obligated to pay interest on the Debt at a rate in excess
of such maximum rate, the rate of interest under the same shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note.
15. Books and Records. Borrower shall keep adequate books and records of
account which accurately reflect the operations of, and income and expenses
attributable to, the Property and furnish to Lender the following statements,
all of which shall be in form and substance acceptable to Lender:
(i) an annual, or upon reasonable request by Lender, occupancy
statement listing each and every Lease, identifying the leased
premises, names of all tenants, monthly rental and all other
charges payable under the Lease, date to which paid, date of
occupancy, date of expiration, any and every special provision,
concession or inducement granted to tenants and such other
information as is reasonably requested by Lender, signed, dated
and certified as true and accurate by the general partner of
Borrower and Borrower;
(ii) an annual operating statement of the operation of the Property in
a form pre-approved by Lender and otherwise satisfactory to
Lender, showing in reasonable detail total revenues received and
total expenses, prepared and certified by the general partner of
Borrower and Borrower;
(iii) an annual balance sheet and profit and loss statement of
Borrower, prepared and certified by the general partner of
Borrower and Borrower within ninety (90) days after the close of
each fiscal year; and
(iv) such annual and monthly (including, without limitation, with
respect to the Reserve Account and the Capital Improvements
Account) balance sheets and profit and loss statements and other
financial statements as may, from time to time, be required by
Lender.
16. Performance of Other Agreements. Borrower shall observe and perform
each and every term to be observed or performed by Borrower pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Property.
17. Further Acts, etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Lender the property and rights hereby mortgaged, given, granted,
bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument.
Borrower on demand, will execute and deliver and hereby authorizes Lender to
execute in the name of Borrower or without the signature of Borrower to the
extent Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Lender in the Property. Borrower grants to Lender an irrevocable
power of attorney coupled with an interest for the purpose of perfecting any and
all rights and remedies available to Lender at law and in equity pursuant to the
terms of the Note, this Security Instrument or the Other Security Documents,
including without limitation such rights and remedies available to Lender
pursuant to this paragraph 17.
18. Recording of Security Instrument, etc. Borrower forthwith upon the
execution and delivery of this Security Instrument and thereafter, from time to
time, will cause this Security Instrument, and any security instrument creating
a lien or security interest or evidencing the lien hereof upon the Property and
each instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Lender in, the Property. Borrower will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Security Instrument, any
mortgage supplemental hereto, any security instrument with respect to the
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Security Instrument, any
mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, except where prohibited by law
so to do. Borrower shall hold harmless and indemnify Lender, its successors and
assigns, against any liability incurred by reason of the imposition of any tax
on the making and recording of this Security Instrument.
19. Prepayment. If permitted by the Note, the Debt may be prepaid in
accordance with the terms thereof.
20. Events of Default. The Lender may declare the Debt immediately due
and payable upon any one or more of the following events ("Event of Default"):
(a) if any portion of the Debt is not paid within five (5) days
after written notice is delivered by the Lender notifying Borrower
that the same is overdue;
(b) except as otherwise provided in paragraph 4 hereof, if any of
the Taxes or Other Charges is not paid when the same is due and
payable;
(c) if the Policies are not kept in full force and effect, or if the
Policies (or duplicate originals thereof) are not delivered to Lender
upon request;
(d) if Borrower violates or does not comply with any of the provi-
sions of paragraphs 7, 9, 34, 35 or 55 hereof;
(e) if any representation or warranty of Borrower made herein or in
any certificate, report, financial statement or other instrument or
document furnished to Lender shall have been false or misleading in
any material respect when made;
(f) if Borrower shall make an assignment for the benefit of creditors
or if Borrower shall generally not be paying its debts as they become
due;
(g) if a receiver, liquidator or trustee of Borrower shall be
appointed or if Borrower shall be adjudicated a bankrupt or insolvent,
or if any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by,
Borrower or if any proceeding for the dissolution or liquidation of
Borrower shall be instituted; however, if such appointment, adjudica-
tion, petition or proceeding was involuntary and not consented to by
Borrower, upon the same not being discharged, stayed or dismissed
within ninety (90) days;
(h) [INTENTIONALLY OMITTED]
(i) if Borrower shall be in default beyond any applicable cure period
under any other mortgage or security agreement covering any part of
the Property whether it be superior or junior in lien to this Security
Instrument;
(j) if the Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate
taxes and assessments not then due and payable and such lien shall
remain undischarged of record (by payment, bonding or otherwise) on
the earlier of (i) thirty (30) days after Borrower shall have notice
(written or oral) of such lien or (ii) following a judgment in favor
of the holder of such lien, one week prior to the date on which such
lien may be foreclosed;
(k) if Borrower fails to cure promptly any violations of laws or
ordinances affecting or which may be interpreted to affect the
Property; provided, however, after prior written notice to Lender,
Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with
due diligence, the validity or application of any building, fire or
zoning law or ordinance affecting the Property provided that (i) no
other Event of Default exists under the Note, this Security
Instrument, or the Other Security Documents, (ii) such proceeding
shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder, (iii) neither the Property
nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, canceled or lost, and (iv) if by the
terms of such law or ordinance, compliance therewith pending the
prosecution of any such proceeding may legally be delayed without
incurring any lien, charge or liability of any kind against the
Property, or any part thereof, and without subjecting the Borrower or
the Lender to any liability, civil or criminal, for failure to comply
therewith; or
(l) if Borrower shall continue to be in default under any of the
other terms, covenants or conditions of the Note, this Security
Instrument or the Other Security Documents for five (5) days after
notice from Lender in the case of any default which can be cured by
the payment of a sum of money or for thirty (30) days after notice
from Lender in the case of any other default, provided that if such
default cannot reasonably be cured within such thirty (30) day period
and Borrower shall have commenced to cure such default within such
thirty (30) day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period shall be
extended for so long as it shall require Borrower in the exercise of
due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of ninety (90) days.
21. Remedies of Lender. Upon the occurrence of an Event of Default, (a)
Borrower will pay, from the date of that Event of Default, interest on the
unpaid principal balance of the Note at the rate of (i) the greater of (A) five
percent (5%) over the Applicable Interest Rate (as defined in the Note) due
under the Note and (B) two percent (2%) over the Prime Rate (hereinafter
defined) as the same shall change from time to time or (ii) at the maximum
interest rate which Borrower may by law pay, whichever is lower (the "Default
Rate"), and (b) Lender shall have the right to exercise any and all rights and
remedies available at law and in equity. The term "Prime Rate" shall mean the
daily "Prime Rate" published in The Wall Street Journal from the date of the
default, as such "Prime Rate" shall change from time to time. In the event The
Wall Street Journal ceases to publish the prime rate or in the event such prime
rates are no longer generally published or are limited, regulated or
administered by a governmental or quasi-governmental body, a comparable interest
rate index shall be substituted therefor by Lender.
22. Sale of Property. If this Security Instrument is foreclosed, the
Property, or any interest therein, may at the discretion of Lender, be sold in
one or more parcels or in several interests or portions and in any order or
manner.
23. Right to Cure Defaults. Upon the occurrence of any Event of Default,
if Borrower fails to make any payment or perform any act as herein provided
Lender may, but without any obligation to do so and without notice to or demand
on Borrower and without releasing Borrower from any obligation hereunder, make
or do the same in such manner and to such extent as Lender may deem necessary to
protect the security hereof. Lender is authorized to enter upon the Property
for such purposes, or appear in, defend, or bring any action or proceeding
to protect its interest in the Property or to foreclose this Security Instrument
or collect the Debt, and the cost and expense thereof (including reasonable
attorneys' fees to the extent permitted by law), with interest as provided in
this paragraph 23, shall constitute a portion of the Debt and shall be due and
payable to Lender upon demand. All such costs and expenses incurred by Lender
in remedying such Event of Default or in appearing in, defending, or bringing
any such action or proceeding shall bear interest at the Default Rate, for the
period after notice from Lender that such cost or expense was incurred to the
date of payment to Lender. All such costs and expenses incurred by Lender
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by this Security Instrument and
the Other Security Documents and shall be immediately due and payable upon
demand by Lender therefor.
24. Late Payment Charge. If any portion of the Debt is not received by
Lender within five (5) days of the date on which it is due without taking into
account any applicable notice or grace period, Borrower shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of such unpaid portion
of the Debt or the maximum amount permitted by applicable law, to defray the
expense incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment, and
such amount shall be secured by this Security Instrument and the Other Security
Documents.
25. Prepayment After Event of Default. If following the occurrence of any
Event of Default, Borrower shall tender payment of an amount sufficient to
satisfy the Debt in whole or in part at any time prior to a foreclosure sale of
the Property, such tender shall be deemed to be a voluntary prepayment of the
principal balance of the Note and Borrower shall, in addition to the entire
Debt, also pay to Lender a sum equal to the interest which would have accrued on
the principal balance of the Note at the Applicable Interest Rate as defined in
the Note from the date of such tender to the earlier of (i) the Maturity Date as
defined in the Note or to (ii) the first day of the period during which
prepayment of the principal balance of the Note would have been permitted
together with a prepayment consideration equal to the prepayment consideration
which would have been payable as of the first day of the period during which
prepayment would have been permitted. If at the time of such tender prepayment
of the principal balance of the Note is permitted, such tender by Borrower shall
be deemed to be a voluntary prepayment of the principal balance of the Note, and
Borrower shall, in addition to the entire Debt, also pay to Lender the
applicable prepayment consideration specified in the Note and this Security
Instrument, if any.
26. Right of Entry. Lender and its agents shall have the right to enter
and inspect the Property at all reasonable times subject to the rights of the
tenants under the Leases.
27. Appointment of Receiver. The holder of this Security Instrument, upon
the occurrence of an Event of Default or in any action to foreclose this
Security Instrument or upon the actual or threatened waste to any part of the
Property, shall be entitled to the appointment of a receiver without notice and
without regard to the value of the Property as security for the Debt, or the
solvency or insolvency of any person liable for the payment of the Debt.
28. Reasonable Use and Occupancy. In addition to the rights which Lender
may have herein, upon the occurrence of any Event of Default, Lender, at its
option, may require Borrower to pay monthly in advance to Lender, or any
receiver appointed to collect the Rents, the fair and reasonable rental value
for the use and occupation of such part of the Property as may be occupied by
Borrower or may require Borrower to vacate and surrender possession of the
Property to Lender or to such receiver and, in default thereof, Borrower may be
evicted by summary proceedings or otherwise.
29. Security Agreement. This Security Instrument is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Borrower in
the Property. Borrower by executing and delivering this Security Instrument has
granted and hereby grants to Lender, as security for the Debt, a security
interest in the Property to the full extent that the Property may be subject to
the Uniform Commercial Code (said portion of the Property so subject to the
Uniform Commercial Code being called in this paragraph 29 the "Collateral"). If
an Event of Default shall occur, Lender, in addition to any other rights and
remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default
under the Uniform Commercial Code, including, without limiting the generality of
the foregoing, the right to take possession of the Collateral or any part
thereof, and to take such other measures as Lender may deem necessary for the
care, protection and preservation of the Collateral. Upon request or demand of
Lender, Borrower shall at its expense assemble the Collateral and make it
available to Lender at a convenient place acceptable to Lender. Borrower shall
pay to Lender on demand any and all reasonable expenses, including legal
expenses and attorneys' fees, incurred or paid by Lender in protecting the
interest in the Collateral and in enforcing the rights hereunder with respect to
the Collateral. Any notice of sale, disposition or other intended action by
Lender with respect to the Collateral sent to Borrower in accordance with the
provisions hereof at least five (5) days prior to such action, shall constitute
commercially reasonable notice to Borrower unless otherwise required by law.
The proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Lender to the payment of the Debt in such priority and proportions as
Lender in its discretion shall deem proper.
30. Actions and Proceedings. Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its discretion, decides should be brought to protect their interest in the
Property. Lender shall, at its option, be subrogated to the lien of any deed of
trust, mortgage or other security instrument discharged in whole or in part by
the Debt, and any such subrogation rights shall constitute additional security
for the payment of the Debt.
31. Waiver of Counterclaim. Borrower hereby waives the right to assert a
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against it by Lender, and waives trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim asserted by Lender against Borrower, or in any matters whatsoever
arising out of or in any way connected with this Security Instrument, the Note,
any of the Other Security Documents or the Debt.
32. Recovery of Sums Required To Be Paid. Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of Lender
thereafter to bring an action of foreclosure, or to bring any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
33. Marshalling and Other Matters. Borrower hereby waives, to the extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Property or any part
thereof or any interest therein. Further, Borrower hereby expressly waives any
and all rights of redemption from sale under any order or decree of foreclosure
of this Security Instrument on behalf of Borrower, and on behalf of each and
every person acquiring any interest in or title to the Property subsequent to
the date of this Security Instrument and on behalf of all persons to the extent
permitted by applicable law.
34. Hazardous Materials. Borrower represents and warrants that, except as
otherwise disclosed in that certain environmental report delivered by Borrower
to Lender in connection with the origination of this Security Instrument, to the
best of Borrower's knowledge, after due inquiry and investigation, (a) there are
no Hazardous Materials (hereinafter defined) on the Property, except those in
compliance with all applicable federal, state and local laws, ordinances, rules
and regulations, and (b) neither Borrower nor, to the best of Borrower's
knowledge, any prior owner or prior or current occupant of the Property has
received any notice or advice from any governmental agency or any source
whatsoever with respect to Hazardous Materials on, from or affecting the
Property. Borrower covenants that the Property shall be kept free of Hazardous
Materials, and neither Borrower nor any occupant of the Property shall use,
transport, store, dispose of or in any manner deal with Hazardous Materials on
the Property, except in compliance with all applicable federal, state and local
laws, ordinances, rules and regulations. Borrower shall comply with, and ensure
compliance by all occupants of the Property with, all applicable federal, state
and local laws, ordinances, rules and regulations, and shall keep the Property
free and clear of any liens imposed pursuant to such laws, ordinances, rules or
regulations. At any time after the occurrence of an Event of Default and the
continuance thereof, Lender may enter upon the Property and conduct such
environmental tests and studies as Lender shall require. The cost and expense
of such tests and studies shall be borne by Borrower and such amounts shall be
secured by this Security Instrument. In the event that Borrower receives any
notice or advice from any governmental agency or any source whatsoever with
respect to Hazardous Materials on, from or affecting the Property, Borrower
shall immediately notify Lender. Borrower shall conduct and complete all
investigations, studies, sampling, and testing, and all remedial actions neces-
sary to clean up and remove all Hazardous Materials from the Property as
required by, and in accordance with, all applicable federal, state, and local
laws, ordinances, rules and regulations. The term "Hazardous Materials" as used
in this Security Instrument shall include, without limitation, gasoline,
petroleum products, explosives, radioactive materials, polychlorinated biphenyls
or related or similar materials, or any other substance or material defined as a
hazardous or toxic substance or material by any applicable federal, state or
local law, ordinance, rule, or regulation, but excluding Asbestos, as defined in
paragraph 35 hereof. The obligations and liabilities of Borrower under this
paragraph 34 shall survive any entry of a judgment of foreclosure or the
delivery of a deed in lieu of foreclosure of this Security Instrument.
35. Asbestos. Borrower represents and warrants that, except as otherwise
disclosed in that certain asbestos survey (the "Asbestos Survey") delivered by
Borrower to Lender in connection with the origination of this Security
Instrument, to the best of Borrower's knowledge, after due inquiry and
investigation, there is no asbestos or material containing asbestos ("Asbestos")
on the Property, and that neither Borrower nor to the best of Borrower's
knowledge, any prior owner or prior or current occupant of the Property has
received any notice or advice from any governmental agency or any source
whatsoever with respect to Asbestos on, affecting or installed on the Property.
Borrower covenants that, except as otherwise disclosed in the Asbestos Survey,
the Property shall be kept free of Asbestos, and neither Borrower nor any
occupant of the Property shall install, or permit to be installed, Asbestos on
the Property. Borrower shall comply with, and ensure compliance by all
occupants of the Property with, all applicable federal, state and local laws,
ordinances, rules and regulations with respect to Asbestos, and shall keep the
Property free and clear of any liens imposed pursuant to such laws, ordinances,
rules or regulations. In the event that Borrower receives any notice or advice
from any governmental agency or any source whatsoever with respect to Asbestos
on, affecting or installed on the Property, Borrower shall immediately notify
Lender. Borrower shall conduct and complete all investigations, studies,
sampling, and testing, and all remedial actions necessary to manage and remove
all Asbestos from the Property as required by, and in accordance with, all
applicable federal, state and local laws, ordinances, rules and regulations. The
obligations and liabilities of Borrower under this paragraph 35 shall survive
any entry of a judgment of foreclosure, or delivery of a deed in lieu of
foreclosure of this Security Instrument.
36. INDEMNIFICATION. BORROWER SHALL PROTECT, DEFEND, INDEMNIFY AND SAVE
HARMLESS LENDER FROM AND AGAINST ALL LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES,
PENALTIES, CAUSES OF ACTION, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION
REASONABLE ATTORNEYS' FEES AND EXPENSES), IMPOSED UPON OR INCURRED BY OR
ASSERTED AGAINST LENDER (EXCEPT ANY LIABILITY, OBLIGATION, CLAIM, DAMAGE,
PENALTY, CAUSE OF ACTION, COST OR EXPENSE IMPOSED UPON OR INCURRED BY LENDER BY
REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER) BY REASON OF (A)
OWNERSHIP OF THIS SECURITY INSTRUMENT, THE PROPERTY OR ANY INTEREST THEREIN
ARISING PURSUANT TO THE TERMS OF THIS SECURITY INSTRUMENT OR RECEIPT OF ANY
RENTS; (B) ANY ACCIDENT, INJURY TO OR DEATH OF PERSONS OR LOSS OF OR DAMAGE TO
PROPERTY OCCURRING IN, ON OR ABOUT THE PROPERTY OR ANY PART THEREOF OR ON THE
ADJOINING SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT PARKING AREAS, STREETS
OR WAYS; (C) ANY USE, NONUSE OR CONDITION IN, ON OR ABOUT THE PROPERTY OR ANY
PART THEREOF OR ON THE ADJOINING SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT
PARKING AREAS, STREETS OR WAYS; (D) ANY FAILURE ON THE PART OF BORROWER TO
PERFORM OR COMPLY WITH ANY OF THE TERMS OF THIS SECURITY INSTRUMENT; (E)
PERFORMANCE OF ANY LABOR OR SERVICES OR THE FURNISHING OF ANY MATERIALS OR OTHER
PROPERTY IN RESPECT OF THE PROPERTY OR ANY PART THEREOF; (F) THE FAILURE OF ANY
PERSON TO FILE TIMELY WITH THE INTERNAL REVENUE SERVICE AN ACCURATE FORM 1099-B,
STATEMENT FOR RECIPIENTS OF PROCEEDS FROM REAL ESTATE, BROKER AND BARTER
EXCHANGE TRANSACTIONS, WHICH MAY BE REQUIRED IN CONNECTION WITH THIS SECURITY
INSTRUMENT, OR TO SUPPLY A COPY THEREOF IN A TIMELY FASHION TO THE RECIPIENT OF
THE PROCEEDS OF THE TRANSACTION IN CONNECTION WITH WHICH THIS SECURITY
INSTRUMENT IS MADE; (G) THE PRESENCE, DISPOSAL, ESCAPE, SEEPAGE, LEAKAGE,
SPILLAGE, DISCHARGE, EMISSION, RELEASE, OR THREATENED RELEASE OF ANY HAZARDOUS
MATERIALS ON, FROM, OR AFFECTING THE PROPERTY OR ANY OTHER PROPERTY OR THE
PRESENCE OF ASBESTOS ON THE PROPERTY; (H) ANY PERSONAL INJURY (INCLUDING
WRONGFUL DEATH) OR PROPERTY DAMAGE (REAL OR PERSONAL) ARISING OUT OF OR RELATED
TO SUCH HAZARDOUS MATERIALS OR ASBESTOS; (I) ANY LAWSUIT BROUGHT OR THREATENED,
SETTLEMENT REACHED, OR GOVERNMENT ORDER RELATING TO SUCH HAZARDOUS MATERIALS OR
ASBESTOS; OR (J) THE FAILURE OF BORROWER TO COMPLY WITH TERMS OF THE O&M PLANS
(HEREINAFTER DEFINED); OR (K) ANY VIOLATION OF LAWS, ORDERS, REGULATIONS,
REQUIREMENTS, OR DEMANDS OF GOVERNMENT AUTHORITIES, WHICH ARE BASED UPON OR IN
ANY WAY RELATED TO SUCH HAZARDOUS MATERIALS OR ASBESTOS INCLUDING, WITHOUT
LIMITATION, THE COSTS AND EXPENSES OF ANY REMEDIAL ACTION REQUIRED BY SUCH
GOVERNMENTAL AUTHORITIES, ATTORNEY AND CONSULTANT FEES, INVESTIGATION AND
LABORATORY FEES, COURT COSTS, AND LITIGATION EXPENSES. ANY AMOUNTS PAYABLE TO
LENDER BY REASON OF THE APPLICATION OF THIS PARAGRAPH 36 SHALL BE SECURED BY
THIS SECURITY INSTRUMENT AND SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON
DEMAND AND SHALL BEAR INTEREST AT THE DEFAULT RATE COMMENCING ON THE FIFTH (5TH)
DAY FOLLOWING SUCH DEMAND UNTIL PAID. THE OBLIGATIONS AND LIABILITIES OF
BORROWER UNDER THIS PARAGRAPH 36 SHALL SURVIVE ANY TERMINATION, SATISFACTION,
ASSIGNMENT, ENTRY OF A JUDGMENT OF FORECLOSURE OR DELIVERY OF A DEED IN LIEU OF
FORECLOSURE OF THIS SECURITY INSTRUMENT.
37. Notices. Any notice, demand, statement, request or consent made
hereunder shall be effective and valid only if in writing and delivered
personally or by a reputable overnight courier service and shall be deemed given
when received at the address, as set forth above, of the party to whom such
notice is to be given, or to such other address as Borrower or Lender, as the
case may be, shall in like manner designate in writing. In the event delivery
is not accepted, notice shall be deemed given on the date such delivery is
refused.
38. Authority. (a) Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, give, grant, bargain, sell, alien,
enfeoff, convey, confirm, pledge, hypothecate, assign and grant a security
interest in the Property pursuant to the terms hereof and to keep and observe
all of the terms of this Security Instrument on Borrower's part to be performed.
(b) Borrower represents and warrants that Borrower is not a "foreign
person" within the meaning of 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
39. Waiver of Notice. Borrower shall not be entitled to any notices of
any nature whatsoever from Lender except with respect to matters for which this
Security Instrument specifically and expressly provides for the giving of notice
by Lender to Borrower and except with respect to matters for which Lender is
required by applicable law to give notice, and Borrower hereby expressly waives
the right to receive any notice from Lender with respect to any matter for which
this Security Instrument does not specifically and expressly provide for the
giving of notice by Lender to Borrower.
40. Remedies of Borrower. In the event that a claim or adjudication is
made that Lender has acted unreasonably or unreasonably delayed acting in any
case where by law or under the Note, this Security Instrument or the Other
Security Documents, it has an obligation to act reasonably or promptly, Lender
shall not be liable for any monetary damages, and Borrower's remedies shall be
limited to injunctive relief or declaratory judgment.
41. Sole Discretion of Lender. Wherever pursuant to this Security
Instrument, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide that arrangements or terms are satis-
factory or not satisfactory shall be in the sole discretion of Lender, except as
may be otherwise expressly and specifically provided herein.
42. Non-Waiver. The failure of Lender to insist upon strict performance
of any term hereof shall not be deemed to be a waiver of any term of this
Security Instrument. Borrower shall not be relieved of Borrower's obligations
hereunder by reason of (a) the failure of Lender to comply with any request of
Borrower to take any action to foreclose this Security Instrument or otherwise
enforce any of the provisions hereof or of the Note or the Other Security
Documents, (b) the release, regardless of consideration, of the whole or any
part of the Property, or of any person liable for the Debt or any portion
thereof, or (c) any agreement or stipulation by Lender extending the time of
payment or otherwise modifying or supplementing the terms of the Note, this
Security Instrument or the Other Security Documents. Lender may resort for the
payment of the Debt to any other security held by Lender in such order and
manner as Lender, in its discretion, may elect. Lender may take action to
recover the Debt, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Lender thereafter to foreclose this Security
Instrument. The rights and remedies of Lender under this Security Instrument
shall be separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any other provision.
Lender shall not be limited exclusively to the rights and remedies herein stated
but shall be entitled to every right and remedy now or hereafter afforded at law
or in equity.
43. No Oral Change. This Security Instrument, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
44. Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. The foregoing sentence, however, is not intended to affect the limited
liability of any limited partner or stockholder or member of Borrower afforded
by applicable partnership, corporate or limited liability company law. This
Security Instrument shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns forever.
45. Inapplicable Provisions. If any term, covenant or condition of the
Note or this Security Instrument is held to be invalid, illegal or unenforceable
in any respect, the Note and this Security Instrument shall be construed without
such provision.
46. Headings, etc. The headings and captions of various paragraphs of
this Security Instrument are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
47. Duplicate Originals. This Security Instrument may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
48. Definitions. Unless the context clearly indicates a contrary intent
or unless otherwise specifically provided herein, words used in this Security
Instrument may be used interchangeably in singular or plural form and the word
"Borrower" shall mean "each Borrower and any subsequent owner or owners of the
Property or any part thereof or any interest therein," the word "Lender" shall
mean "Lender and any subsequent holder of the Note," "the word "Note" shall mean
"the Note and any other evidence of indebtedness secured by this Security
Instrument," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Property" shall include any
portion of the Property and any interest therein. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
49. CHOICE OF LAW. THIS SECURITY INSTRUMENT SHALL BE DEEMED TO BE A
CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND SHALL IN
ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, PROVIDED HOWEVER, THAT WITH RESPECT TO THE
CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIEN OF THIS SECURITY
INSTRUMENT, THE LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED SHALL APPLY.
50. Exculpation. Lender shall not enforce the liability and obligation of
Borrower to perform and observe the obligations contained in the Note or this
Security Instrument by any action or proceeding wherein a money judgment shall
be sought against Borrower or any general or limited partner or member of
Borrower (hereafter collectively referred to as the "Exculpated Parties"),
except that Lender may bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable Lender to
enforce and realize upon this Security Instrument, the Other Security Documents,
and the interest in the Property, the Rents and any other collateral given to
Lender created by this Security Instrument and the Other Security Documents;
provided, however, that any judgment in any such action or proceeding shall be
enforceable against the Exculpated Parties only to the extent of Borrower's
interest in the Property, in the Rents and in any other collateral given to
Lender. Lender, by accepting the Note and this Security Instrument, agrees that
it shall not sue for, seek or demand any deficiency judgment against the
Exculpated Parties in any such action or proceeding, under or by reason of or in
connection with the Note, the Other Security Documents or this Security
Instrument. The provisions of this paragraph shall not, however, (i) constitute
a waiver, release or impairment of any obligation evidenced or secured by the
Note, the Other Security Documents or this Security Instrument; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under this Security Instrument; (iii) affect the
validity or enforceability of any guaranty made in connection with the Note,
this Security Instrument, or the Other Security Documents; (iv) impair the right
of Lender to obtain the appointment of a receiver; (v) impair the enforcement of
the Assignment of Rents; (vi) impair the right of Lender to bring suit with
respect to fraud or intentional misrepresentation by the Exculpated Parties in
connection with the Note, this Security Instrument or the Other Security
Documents; (vii) impair the right of Lender to obtain the Rents received by any
of the Exculpated Parties after the occurrence of an Event of Default; (viii)
impair the right of Lender to bring suit with respect to the Exculpated Parties'
misappropriation of tenant security deposits or Rents collected in advance; (ix)
impair the right of Lender to obtain insurance proceeds or condemnation awards
due to Lender under this Security Instrument; (x) impair the right of Lender to
enforce the provisions of sub-paragraphs 36(g) through 36(k), inclusive and
paragraphs 34 and 35 of this Security Instrument against the Borrower (excluding
any general or limited partner or member thereof); or (xi) impair the right of
Lender to recover any part of the Debt from the Borrower (excluding the general
and limited partners and members of Borrower) following the breach of any
covenant contained in paragraph 9 or 55 hereof.
51. [INTENTIONALLY OMITTED]
52. Operations and Maintenance Plan. Borrower shall within thirty (30)
days of the date hereof deliver to Lender (i) an operation and maintenance plan
(the "Asbestos O&M Plan") with respect to the maintenance or removal of any
asbestos, hazardous and toxic wastes and substances, PCB's and storage tanks on
the Property, and (ii) an operation and maintenance plan with respect to the
maintenance or removal of any lead based paint on the Property (the .Lead Based
Paint O&M Plan., the Asbestos O&M Plan and the Lead Based Paint O&M Plan
hereinafter collectively known as the .O&M Plans.), which O&M Plans shall each
appoint an "Asbestos Program Manager" in charge of managing all O&M Plans
activities on the Property. Borrower shall (i) diligently perform and observe
all of the terms, covenants and conditions of the O&M Plans on the part of
Borrower to be performed and observed to the end that all things shall be done
which are necessary to keep unimpaired the rights of Borrower under the O&M
Plans and (ii) promptly notify Lender of the giving of any notice to Borrower of
any default by any Asbestos Program Manager in the performance or observance of
any of the terms, covenants or conditions of the O&M Plans on the part of any
Asbestos Program Manager to be performed and observed and deliver to Lender a
true copy of each such notice. Lender shall have the right to approve any O&M
Plans which may affect the Property.
53. Management Agreements. The Improvements have been operated under the
terms and conditions of that certain management agreement entered into between
Borrower and the manager (the "Manager") set forth therein delivered to, and
approved by, Lender (hereinafter, together with any renewals or replacements
thereof, being referred to as the "Management Agreement"). Borrower
acknowledges that Lender has examined and relied on the Manager's experience in
operating properties such as the Property in agreeing to make the loan secured
hereby, and that Lender will continue to rely on the Manager's management of the
Property as a means of maintaining the value of the Property as security for
repayment of the Debt. Borrower shall (i) diligently perform and observe all of
the terms, covenants and conditions of the Management Agreement on the part of
Borrower to be performed and observed to the end that all things shall be done
which are necessary to keep unimpaired the rights of Borrower under the
Management Agreement and (ii) promptly notify Lender of the giving of any notice
to Borrower of any default by Borrower in the performance or observance of any
of the terms, covenants or conditions of the Management Agreement on the part of
Borrower to be performed and observed and deliver to Lender a true copy of each
such notice. Borrower shall not surrender the Management Agreement, consent to
the absolute but not collateral assignment by the Manager of its rights and
obligations under the Management Agreement, or terminate or cancel the
Management Agreement or modify, change, supplement, alter or amend the
Management Agreement, in any material respect, either orally or in writing, and
Borrower hereby assigns to Lender as further security for the payment of the
Debt and for the performance and observance of the terms, covenants and
conditions of this Security Instrument, all the rights, privileges and
prerogatives of Borrower to surrender the Management Agreement or to terminate
or cancel, or materially modify, change, supplement, alter or amend the
Management Agreement in any respect, and any such surrender of the Management
Agreement or termination, cancellation, or any material modification, change,
supplement, alteration or amendment of the Management Agreement without the
prior consent of Lender shall be void and of no force and effect, provided,
however, that this provision shall not limit the Manager's right to assign any
or the Borrower's right to consent to any assignment by Manager of any revenues
deriving from the Management Agreement. If Borrower shall default in the
performance or observance of any material term, covenant or condition of the
Management Agreement on the part of Borrower to be performed or observed, then,
without limiting the generality of the other provisions of this Security
Instrument, and without waiving or releasing Borrower from any of its
obligations hereunder, Lender shall have the right, but shall be under no
obligation, to pay any sums and to perform any act or take any action as may be
appropriate to cause all the terms, covenants and conditions of the Management
Agreement on the part of Borrower to be performed or observed to be promptly
performed or observed on behalf of Borrower, to the end that the rights of
Borrower in, to and under the Management Agreement shall be kept unimpaired and
free from default. Lender and any person designated by Lender shall have, and
are hereby granted, the right to enter upon the Property at any time and from
time to time for the purpose of taking any such action. If the Manager under
the Management Agreement shall deliver to Lender a copy of any notice sent to
Borrower of default under the Management Agreement, such notice shall constitute
full protection to Lender for any action taken or omitted to be taken by Lender
in good faith, in reliance thereon. Borrower shall, from time to time, use its
best efforts to obtain from the Manager under the Management Agreement such
certificates of estoppel with respect to compliance by Borrower with the terms
of the Management Agreement as may be requested by Lender. Borrower shall
exercise each individual option, if any, to extend or renew the term of the
Management Agreement upon demand by Lender made at any time within one (1) year
of the last day upon which any such option may be exercised, and Borrower hereby
expressly authorizes and appoints Lender its attorney-in-fact to exercise any
such option in the name of and upon behalf of Borrower, which power of attorney
shall be irrevocable and shall be deemed to be coupled with an interest.
Notwithstanding anything to the contrary contained herein, Borrower
may replace the Manager or accept the resignation of the Manager or consent to a
transfer by the Manager, provided:
(1) No Event of Default shall have occurred and be continuing;
(2) the new manager or holder of the stock, partnership or
membership interest shall be a person, firm or corporation whose
character, financial strength, stability and experience shall be
similar to the existing Manager and otherwise have Adequate Real
Estate Experience;
(3) the new manager shall deliver all organizational
documentation and other materials evidencing its Adequate Real Estate
Experience and otherwise be acceptable to Lender;
(4) the Borrower shall pay the reasonable costs and expenses of
Lender and Lender's counsel incurred in connection with the review and
approval of such new manager; and
(5) the terms of any new management agreement affecting the
Property must be acceptable to Lender in all respects, provided,
however, if the terms and conditions of the new management agreement
shall be substantially similar to the Management Agreement and the
management fee due thereunder is no greater than the fee provided in
the Management Agreement, such new management agreement shall be
deemed acceptable to Lender.
54. Rating Agencies. The term "Rating Agencies" shall mean any nationally
recognized rating agency(s) sought by Lender to obtain ratings with respect to
this Security Instrument or the Securitization (hereinafter defined). Lender
intends to, but is not required to, either (i) deposit this Security Instrument,
the Note and the Other Security Documents in a trust in exchange for the
issuance, to or at the direction of the Lender, of multiple classes of mortgage
pass-through certificates evidencing the entire beneficial ownership interest in
such trust or (ii) issue multiple classes of bonds (also, "Securities")
representing non-recourse obligations secured by this Security Instrument, the
Note and the Other Security Documents (the "Securities"). An election will be
made under the federal tax code to treat this Security Instrument, the Note and
the Other Security Documents and the related assets as one or more real estate
mortgage investment conduits. The Securities may be sold either in a public
offering or a private placement. The foregoing events and all matters
incidental thereto are herein referred to as the "Securitization".
55. Single Purpose Entity. Borrower covenants and agrees that it has not
and shall not: (a) engage in any business or activity other than the ownership,
operation and maintenance of the Property and activities incidental thereto; (b)
acquire or own any material assets other than (i) the Property, and (ii) such
incidental Personal Property as may be necessary for the operation of the
Property; (c) merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent; (d) fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the laws
of the jurisdiction of its organization or formation, or without the prior
written consent of Lender, amend, modify, terminate or fail to comply with the
provisions of Borrower's operating agreement, articles of organization or
similar organizational documents, as the case may be, as same may be further
amended or supplemented, if such amendment, modification, termination or failure
to comply would adversely affect the ability of Borrower to perform its
obligations hereunder, under the Note or under the Other Security Documents; (e)
own any subsidiary or make any investment in, any person or entity without the
consent of Lender; (f) commingle its assets with the assets of any of its
general partners, affiliates, members, principals or of any other person or
entity; (g) except as otherwise provided herein, incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than the Debt, except with respect to trade payables in the ordinary course of
its business of owning and operating the Property, provided that such debt is
paid when due; (h) fail to maintain its records, books of account and bank
accounts separate and apart from those of the general partners, principals,
members and affiliates of Borrower, the affiliates of a general partner or
member of Borrower, and any other person or entity; (i) enter into any contract
or agreement with any general partner, principal, members or affiliate of
Borrower, Guarantor or Indemnitor, or any general partner, principal or
affiliate thereof, 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 any general partner, principal, member or
affiliate of Borrower, Guarantor or Indemnitor (as defined in the Other Security
Documents), or any general partner, principal, member, or affiliate thereof, (j)
seek the dissolution or winding up in whole, or in part, of Borrower; (k)
maintain its assets in such a manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any general
partner, principal, member or affiliate of Borrower, or any general partner,
principal or affiliate thereof or any other person; (l) hold itself out to be
responsible for the debts of another person; (m) make any loans or advances to
any third party, including any general partner, principal, member or affiliate
of Borrower, or any general partner, principal, member or affiliate thereof; (n)
fail either to hold itself out to the public as a legal entity separate and
distinct from any other entity or person or to conduct its business solely in
its own name in order not (i) to mislead others as to the identity with which
such other party is transacting business, or (ii) to suggest that Borrower is
responsible for the debts of any third party (including any general partner,
principal, member or affiliate of Borrower, or any general partner, principal,
member or affiliate thereof); (o) fail to 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; or (p) file or
consent to the filing of any petition, either voluntary or involuntary, to take
advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors.
PART II
PENNSYLVANIA PROVISIONS
56. Inconsistencies. In the event of any inconsistencies between the
terms and conditions of PART I of this Security Instrument and PART II, the
terms and conditions of PART II shall control and be binding.
57. Remedies The following shall be added to Section 21 of this Security
Instrument entitled "Remedies of Lender":
Upon the occurrence of, and during the continuance of, any Event of
Default, Borrower agrees that Lender may take such action, without notice or
demand, as it deems advisable to protect and enforce its rights against Borrower
and in and to the Property, including, but not limited to, the following
actions, each of which may be pursued concurrently or otherwise, at such time
and in such order as Lender may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of Lender:
(a) Lender may declare the entire unpaid principal balance of the Note
to be due and payable immediately, whereupon the obligations secured hereby
shall become immediately due and payable. Thereafter, the default may be cured
only by the payment of the entire Debt.
(b) Lender may (i) institute and maintain an action of mortgage
foreclosure against any of the Property, through judicial proceedings or by
advertisement, at the option of Lender, pursuant to the applicable statutes,
ordinances, or rules of civil procedure, (ii) institute and maintain an action
on the obligations secured hereby, (iii) have judgment entered pursuant to any
power to confess judgment contained in the Note or this Security Instrument,
(iv) sell or cause to be sold any of the Property at public sale, and convey the
same to the purchaser in accordance with said statutes in a single parcel or in
several parcels at the option of Lender, or (v) take such other action at law or
in equity for the enforcement of any document evidencing or securing the
obligations secured hereby as the law may allow. Lender may proceed in any such
action to final judgment and execution thereon for all sums due, together with
interest on such sums as provided in the Note, all costs of suit and an
attorneys' commission for fees and expenses actually incurred. Interest at a
rate equal to the Default Rate shall be due on any judgment obtained by Lender
from the date of judgment until actual payment is made of the full amount of the
judgment by the Sheriff or otherwise.
(c) Lender may, without releasing Borrower from any obligation under
any document evidencing or securing the obligations secured hereby or under any
Lease or waiving any default: (i) collect any or all of the Rents, including
any rents past due and unpaid, (ii) perform any obligation or exercise any right
or remedy of Borrower under any Lease, or (iii) enforce any obligation of any
tenant of any of the Property. Lender shall not be obligated to do any of the
foregoing, even if Lender may have performed any obligation or exercised any
remedy of landlord or have enforced any obligation of a tenant. Lender may
exercise any right under this subsection (c) whether or not Lender shall have
entered into possession of any of the Property, and nothing contained herein
shall be construed as constituting Lender a "mortgagee in possession" unless
Lender shall have entered into and shall remain in actual possession of the
Property. Borrower hereby authorizes and instructs each and every present and
future tenant of any of the Property to pay all Rents directly to Lender and to
perform all other obligations of that tenant for the direct benefit of Lender as
if Lender were the landlord under the Lease with that tenant immediately upon
receipt of a demand by Lender to make such payment or perform such obligations.
No tenant shall have any responsibility to ascertain whether such demand is
permitted hereunder or whether an Event of Default shall have occurred; Borrower
hereby waives any right, claim or demand it may now or hereafter have against
any such tenant by reason of such payment of rents or performance of obligations
to Lender; and any such payment or performance to Lender shall discharge the
obligations of the tenant to make such payment or performance to Borrower.
Borrower agrees to indemnify Lender and hold Lender harmless from any and all
liability under any Lease and from any and all claims and demands which may be
asserted against Lender by reason of any alleged obligations to perform any
provision of any Lease, except (i) as to Lender's own negligence or wilful
misconduct or (ii) to the extent Lender has taken possession of any of the
Property and such part of the Property so taken is covered by such Lease.
(d) Lender may, without releasing Borrower from any obligation under
any document evidencing or securing the obligations secured hereby or under any
Lease or waiving any default, enter upon and take possession of any of the
Property, with or without legal action and by force if necessary, or have a
receiver appointed without proof of depreciation or inadequacy of the value of
the Property or other security or proof of the insolvency of Borrower. Lender
or said receiver may manage and operate any of the Property; make, cancel,
enforce or modify leases; obtain and evict tenants; establish or change the
amount of any rents; and perform any acts which Lender deems proper to protect
the security of this Security Instrument. After deduction of all costs and
expenses of operation and management of the Property and of collection of the
Rents (including attorneys' fees actually incurred, administration expenses,
management fees and brokers' commissions), Lender may apply the Rents received
by Lender to the payment of any or all of the following, in such order and
amounts as Lender, in its sole discretion, may elect: liens on any of the
Property, taxes, claims, insurance premiums, other carrying charges, invoices of
persons who have supplied goods or services to or for the benefit of any of the
Property, costs and expenses of maintenance, repair, restoration, alteration or
improvement of any of the Property, costs and expenses of maintenance, repair,
restoration, alteration or improvement of any of the Property, or any amount
outstanding on the obligations secured hereby. Lender may, in its sole
discretion, determine the method by which, and extent to which, the Rents will
be collected and obligations of tenants enforced; and Lender may waive or fail
to enforce any right or remedy of the landlord under a Lease. Lender shall not
be accountable for any Rents or other sums it does not actually receive.
Borrower hereby appoints Lender as its attorney-in-fact to perform all acts
which Borrower is required or permitted to perform under any and all Leases.
(e) Lender may obtain a receiver to manage the Property and collect
the rents, issues, profits and income therefrom.
(f) Lender may disaffirm and cancel any Lease which is subordinate to
this Security Instrument at any time before the expiration of sixty (60) days
after Lender acquires legal title to the Property by any transfer pursuant to
the exercise of a remedy hereunder or otherwise, even though Lender shall have
enforced such lease, collected rents thereunder or taken any action that might
be deemed by law to constitute an affirmance of the lease. Such disaffirmance
shall be made by notice addressed to the tenant at the Property or, at Lender's
option, such other address of the tenant as may be provided in that tenant's
lease.
(g) Lender may take possession of any of the collateral and may sell
such property pursuant to the provisions of the applicable Uniform Commercial
Code and exercise such other rights and remedies with respect to such property
as may be provided by said Code.
(h) Lender may apply on account of the obligations secured hereby the
balance of the accumulated installment payments made by Borrower for taxes,
water and sewer rents and insurance premiums, and all other items for which
Lender has made payment, as set forth herein.
(i) Upon the acceleration of the maturity of the obligations secured
hereby as herein provided, a tender of payment of the amount necessary to
satisfy the entire Debt made at any time prior to foreclosure sale by Borrower,
its successors or assigns, shall, to the extent permitted by law, constitute an
evasion of the prepayment terms of the obligations secured hereby and be deemed
to be a voluntary prepayment thereunder, and Lender shall not be obligated to
accept any such tender of payment unless such tender of payment includes the
additional prepayment premium required under the terms of the prepayment
privilege, if any, contained in the Note.
(j) If Lender retains the services of counsel in order to enforce any
remedy available to Lender under the Note, this Security Instrument or any of
the Other Security Documents, all reasonable attorneys' fee incurred in
connection with the enforcement hereof shall be payable on demand by Borrower to
Lender, and Borrower shall also pay on demand the cost of any title search and
all other costs incurred by Lender in connection with proceedings to recover any
sums due hereunder. Any such amounts not paid promptly on demand shall be added
to the outstanding principal amount of the Note, shall bear interest at the
Default Rate from the date of such demand until paid in full and shall be
secured by this Security Instrument. Borrower shall also pay on demand any
reasonable charge of Lender in connection with the cancellation of this Note
and/or the satisfaction of this Security Instrument of record. Nothing
contained herein shall limit or impair the obligation of Borrower to pay any and
all costs and expenses for which Borrower is otherwise liable under the Note,
this Security Instrument or any of the Other Security Documents and all costs
and expenses provided by law.
(k) In the event of a sale, by foreclosure, or otherwise, of less than all
of the Property, this Security Instrument shall continue as a lien and security
interest on the remaining portion of the Property unimpaired and without loss of
priority. Notwithstanding the foregoing, if any Event of Default shall occur,
the entire unpaid Debt shall be automatically due and payable, without any
further notice, demand or other action by Lender.
58. Environmental Representations and Warranties. The text of Section 12.1
of this Security Instrument entitled "Environmental Representations and
Warranties" is hereby amended by inserting after the words "addressing similar
issues:" and before the words "the Comprehensive Environmental Response" the
words "the Pennsylvania Hazardous Sites Cleanup Act, the Pennsylvania Solid
Waste Management Act,".
59. Purchase Money Instrument{tc \l2 "Purchase Money Instrument}. This
Security Instrument is intended to be a purchase money mortgage and shall be
entitled to all the benefits as such under the lien priority provisions of the
Pennsylvania Judicial Code, 42 Pa. C.S.A. . 8141, as amended.
60. Assembled Industrial Plant Mortgage{tc \l2 "Assembled Industrial Plant
Mortgage}. This Security Instrument is intended to be an assembled industrial
plant mortgage within the broadest interpretation of the "assembled industrial
plant mortgage doctrine" under the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, this Security Instrument has been executed under
seal by Borrower the day and year first above written.
KENNEDY BOULEVARD ASSOCIATES I, L.P., a Pennsylvania limited
partnership
By: KENNEDY BOULEVARD ASSOCIATES II, L.P., a
Pennsylvania limited partnership, its general
partner
By: KENNEDY BOULEVARD I GP, L.L.C., a South
Carolina limited liability company, its
general partner
By: CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES, a California limited
partnership, its sole member
By: CONCAP EQUITIES, INC., a Delaware
corporation, its general partner
By: /s/ Robert D. Long
Robert D. Long, Jr.
Vice President
Attest:/s/ William H. Jarrard, Jr.
Name: William H. Jarrard, Jr.
Title: Vice President
The mailing address of the within-named
Lender is: LEHMAN BROTHERS HOLDINGS
INC., D/B/A LEHMAN CAPITAL, A DIVISION
OF LEHMAN BROTHERS HOLDINGS INC.
Three World Financial Center, 200 Vesey Street,
New York, New York 10285
On behalf of Lender
This instrument prepared by:
Louis J. Najmy, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
STATE OF SOUTH CAROLINA )
)SS:
COUNTY OF GREENVILLE )
On this, the 22nd day of September, 1998, before me, Lee Ann Price,
the undersigned officer, personally appeared Robert D. Long, Jr., who
acknowledged himself/herself to be the Vice President of Concap Equities Inc., a
Delaware corporation, the general partner of Consolidated Capital Institutional
Properties, a California limited partnership, the sole member of Kennedy
Boulevard I GP, L.L.C., a South Carolina limited liability company, the general
partner of Kennedy Boulevard Associates II, L.P., a Pennsylvania limited
partnership, the general partner of KENNEDY BOULEVARD ASSOCIATES I, L.P., a
Pennsylvania limited partnership, and that (s)he as such ___________________,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained by signing the name of the corporation as general partner of
Consolidated Capital Institutional Properties, as sole member of Kennedy
Boulevard I G.P., L.L.C. as general partner of Kennedy Boulevard Associates II,
L.P., as general partner of KENNEDY BOULEVARD ASSOCIATES I, L.P. by
himself/herself as such officer.
[SEAL]
/s/ Lee Ann Price
Notary Public in and for the
State of South Carolina
My Commission Expires: Print name of Notary Public
5/14/07 Lee Ann Price
EXHIBIT A
Legal Description
REPAIR ESCROW AGREEMENT
This REPAIR ESCROW AGREEMENT ("Agreement") is made and entered into as
of this ____ day of _____, 1998, by and between KENNEDY BOULEVARD ASSOCIATES I,
L.P., a Pennsylvania limited partnership ("Borrower"), and LEHMAN BROTHERS
HOLDINGS INC. d/b/a Lehman Capital, a Division of Lehman Brothers Holdings Inc.,
a Delaware corporation ("Lender") and its successors and assigns.
W I T N E S S E T H:
WHEREAS, Lender has agreed to make and Borrower has agreed to accept the
Loan, which is to be evidenced by the Note and secured by the Security
Instrument encumbering the Property described on Exhibit "A" attached to, and
incorporated into, this Agreement by reference;
WHEREAS, as a condition of making the Loan, Lender is requiring Borrower
to make the Repairs to the Improvements, which Repairs are generally described
in the Schedule of Work attached to this Agreement as Exhibit "B";
WHEREAS, in order to assure that the Repairs are made and paid for in a
timely manner, Lender is requiring Borrower to establish the Repair Escrow Fund
with Lender pursuant to the terms of this Agreement; and
WHEREAS, Lender and Borrower are desirous of reducing to writing all of
their agreements regarding the Repair Escrow Fund.
NOW, THEREFORE, for and in consideration of the Loan, the mutual
promises and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower agree as follows:
1. Definitions. The following terms used in this Agreement shall have
the meanings set forth below in this Paragraph 1:
(a) "Completion Date" means the date for completion of each
Repair which is specified in Exhibit B.
(b) "Disbursement Request" means Borrower's written requests to
Lender in the form attached to this Agreement as Exhibit "C" for the
disbursement of money from the Repair Escrow Fund pursuant to Paragraph 3 below,
which requests shall not be made more often than once every thirty (30) days
during the term of this Agreement.
(c) "Improvements" means the mixed-use building known as The
Sterling and situated upon the Property.
(d) "Jurisdiction" means the State in which the Property is
located.
(e) "Loan" means the loan from Lender to Borrower in the
original principal amount of TWENTY THREE MILLION AND 00/100 DOLLARS
($23,000,000.00), as evidenced by the Note and secured by the Security
Instrument.
(f) "Loan Documents" means, collectively, the Note, Security
Instrument, this Agreement and all other instruments and documents executed in
connection with the Loan.
(g) "Minimum Disbursement Request Amount" means One Thousand and
00/100 Dollars ($1,000).
(h) "Note" means the promissory note from Borrower to Lender
evidencing the Loan.
(i) "Property" means the real property described on the attached
Exhibit "A".
(j) "Repairs" means the repairs to be made to the Improvements,
as described on the attached Exhibit "B" or as otherwise required by Lender in
accordance with this Agreement.
(k) "Repair Escrow Fund" means the sum of ONE MILLION SEVEN
HUNDRED NINETY SIX THOUSAND SEVEN HUNDRED FORTY TWO AND 50/100 DOLLARS
($1,796,742.50) deposited into escrow with Lender as of the date of this
Agreement, together with interest, if any, to be held in accordance with the
provisions of this Agreement.
(l) "Schedule of Work" means the schedule of work for the
Repairs attached to this Agreement as Exhibit "B".
(m) "Security Instrument" means the mortgage, deed of trust,
deed to secure debt, or other similar security instrument encumbering the
Property and securing Borrower's performance of its Loan obligations.
2. Repair Escrow Fund.
(a) Establishment. Lender hereby acknowledges that Borrower has
established the Repair Escrow Fund by depositing the amount of the Repair Escrow
Fund with Lender. Borrower and Lender agree that all monies deposited into the
Repair Escrow Fund shall be held by Lender in an interest bearing account if
Lender estimates that the Repairs will require longer than ninety (90) days to
complete, and any interest earned on such monies shall be added to the principal
balance of the Repair Escrow Fund and disbursed in accordance with the
provisions of this Agreement. Lender shall be entitled to deduct from the
Repair Escrow Fund a one time fee in the amount of [-0- Dollars ($-0-)] for
establishing the Repair Escrow Fund. Lender shall not be responsible for any
losses resulting from investment of monies in the Repair Escrow Fund or for
obtaining any specific level or percentage of earnings on such investment.
(b) Use. The Repair Escrow Fund shall, except as otherwise
stated in this Agreement, be used for the purpose of paying, or reimbursing
Borrower for, the costs of the Repairs.
3. Disbursements. From time to time, as construction and completion of
the Repairs progresses, upon Borrower's submission of a Disbursement Request in
the form attached to this Agreement as Exhibit C, and provided that Borrower is
in full compliance with all the applicable conditions set forth in this
Agreement and has complied with the conditions contained in the other Loan
Documents within the grace periods contained therein, if applicable, Lender
shall make disbursements from the Repair Escrow Fund for payment or
reimbursement of the actual costs of the Repairs. Borrower's Disbursement
Request shall be signed by Borrower, and Borrower shall include with its
Disbursement Request a report setting out the progress of the Repairs and any
other reports or information relating to the construction of the Repairs that
may be reasonably requested by Lender. Borrower also shall include with each
Disbursement Request copies of any applicable invoices and/or bills and
appropriate lien waivers for the prior period for which disbursement was made,
executed by all contractors and suppliers supplying labor or materials for the
Repairs, and, unless waived by Lender in writing, a report prepared by the
professional engineer employed by Lender as to the status of the Repairs.
Except for the final Disbursement Request, no Disbursement Request shall be for
an amount less than the Minimum Disbursement Request Amount. Lender may deduct
from each disbursement its actual out-of-pocket expenses incurred in processing
the disbursement, including but not limited to any out-of-pocket expenses for
engineering fees described in Section 7(d).
4. Reporting Requirements; Completion. Prior to receiving the final
disbursement from the Repair Escrow Fund, Borrower shall deliver to Lender, in
addition to the information required by Paragraph 3 above, the following:
(a) Contractor's Certificate. A certificate signed by each
major contractor and supplier of materials, as reasonably determined by Lender,
engaged to provide labor or materials for the Repairs to the effect that such
contractor or supplier has been paid in full for all work completed;
(b) Borrower's Certificate. A certificate signed by Borrower to
the effect that the Repairs have been fully paid for, that all money disbursed
hereunder has been used for the Repairs and no claim or claims exist against the
Borrower or against the Property or Improvements out of which a lien based on
furnishing labor or material exists or might ripen. Borrower may except from
the certificate described in the preceding sentence any claim or claims that
Borrower intends to contest, provided that any such claim or claims are
described in Borrower's certificate and Borrower certifies to Lender that the
Repair Escrow Fund is sufficient to make payment of the full amount which might
in any event be payable in order to satisfy such claim or claims. If required
by Lender, Borrower also shall certify to Lender that such portion of the
Repairs is in compliance with all applicable zoning ordinances;
(c) Engineer's Certificate. A certificate signed by the
professional engineer employed by Lender to the effect that the Repairs have
been completed in a good and workmanlike manner in compliance with the Schedule
of Work and all applicable building codes, zoning ordinances and other building
rules and regulations promulgated by applicable regulatory or governmental
authorities; and
(d) Other Certificates. Any other certificates of approval,
acceptance or compliance required by Lender from or by the city, county, state
or federal governmental authorities having jurisdiction over the Property and
the Repairs if such authority customarily issues such certificates.
5. Indirect and Excess Disbursements. If Borrower abandons or fails to
proceed diligently with the Repairs or otherwise is in default under this
Agreement, Lender, in its sole judgment, is authorized to hold, use and disburse
the Repair Escrow Fund to pay any and all costs, charges and expenses whatsoever
and howsoever incurred or required in connection with the construction and
completion of the Repairs, or in the payment or performance of any obligation of
Borrower to Lender. If Lender, for purposes specified in this Paragraph 5,
shall elect to pay any portion of the Repair Escrow Fund to parties other than
Borrower, then Lender may do so, at any time and from time to time, and the
amount of advances to which Borrower shall be entitled under this Agreement
shall be correspondingly reduced.
6. Schedule of Work. All disbursements from the Repair Escrow Fund
shall be limited to the costs of those items set forth on the Schedule of Work
attached to this Agreement as Exhibit "B".
7. Repairs. Borrower covenants and agrees with Lender as follows:
(a) Commencement of Work. Prior to the recordation of the
Security Instrument, no work of any kind has been or will be commenced or
performed upon the Property and no materials or equipment have been or will be
delivered to or upon the Property.
(b) Construction. Borrower will commence the Repairs as soon as
practicable after the date of this Agreement and will diligently proceed with
and complete the Repairs on or before the Completion Date in a workmanlike
manner and in accordance with the Schedule of Work, subject to delays caused by
circumstances not within the Borrower's reasonable control, good building
practices and all applicable laws, ordinances, rules and regulations.
(c) Changes in Schedule of Work . Without the prior written
consent of Lender, Borrower will make no departures from or alterations to the
Schedule of Work.
(d) Inspections. Borrower will permit Lender or any person
designated by Lender (including without limitation a professional inspection
engineer) and any interested governmental authority, at any time and from time
to time, to inspect the Repairs and Improvements and to examine and copy all of
Borrower's books and records and all contracts and bills pertaining to the
Repairs and Improvements. Lender may deduct from the Repair Escrow Fund
Lender's actual out-of-pocket costs for expenses charged by any professional
inspection engineer employed by Lender in connection with any such inspection,
which are customarily charged by prudent institutional lenders originating loans
on properties similar in type, age and character to the Property. Borrower
agrees to cause the replacement of any material or work that is defective,
unworkmanlike, does not comply with any applicable law, ordinance, rule or
regulation, or does not comply with the requirements of this Agreement, as
determined by Lender. Prior to and as a condition of the final disbursement of
funds from the Repair Escrow Fund, Lender shall inspect or cause to be inspected
the Repairs and the Improvements to determine that all Repairs, including but
not limited to interior and exterior repairs have been completed in a manner
acceptable to Lender.
(e) Purchases. Without the prior written consent of Lender, no
materials, machinery, equipment, fixtures or any other part of the Repairs shall
be purchased or installed under conditional sale contracts or lease agreements,
or any other arrangement wherein title to such Repairs is retained or subjected
to a purchase money security interest, or the right is reserved or accrues to
anyone to remove or repossess any such Repairs, or to consider them as personal
property.
8. Lien Protection. Borrower shall promptly pay or cause to be paid,
when due, all costs, charges and expenses incurred in connection with the
construction and completion of the Repairs, and shall keep the Property and
Improvements free and clear of any and all liens other than the lien of the
Security Instrument and any other junior lien which may be consented to by
Lender.
9. Adverse Claims. Borrower shall promptly advise Lender in writing of
any litigation, liens, or claims affecting the Property and of all complaints
and charges made by any governmental authority or any governmental department,
bureau, commission or agency exercising supervision or control over Borrower or
its business, which may delay or adversely affect the Repairs.
10.Compliance with Laws; Insurance Requirements.
(a) Compliance Laws. All Repairs shall comply with all
applicable laws, ordinances, rules and regulations of all governmental
authorities having jurisdiction over the Property and applicable insurance
requirements including, without limitation, applicable building codes, special
use permits, environmental regulations, and requirements of insurance
underwriters.
(b) Insurance Requirements. In addition to any insurance
required under the Loan Documents, Borrower shall provide or cause to be
provided workers' compensation, builder's risk (if required by Lender), and
public liability insurance and other insurance required under applicable law in
connection with any of the Repairs. All such policies shall be in form and
amount satisfactory to Lender. All such policies which can be endorsed with
standard mortgage clauses making losses payable to Lender or its assigns shall
be so endorsed. Copies of policies shall be deposited with Lender.
11.Use of Repair Escrow Fund. Borrower will accept disbursements from
the Repair Escrow Fund in accordance with the provisions of this Agreement and
will use, or cause to be used, each such disbursement solely to pay for
materials, labor and services, or to pay costs and expenses for which such
disbursement is requested.
12.Conditions Precedent. Lender shall not be obligated to make any
disbursement from the Repair Escrow Fund to or for the benefit of Borrower
unless at the time of each Disbursement Request all of the following conditions
prevail:
(a) No Default. No condition, event or act shall exist beyond
any applicable grace period, which would constitute a default (with or without
notice and/or lapse of time) under this Agreement or any other Loan Document.
(b) Representations and Warranties. All representations and
warranties of Borrower set forth in this Agreement and in the Loan Documents are
true in all material respects.
(c) Continuing Compliance. Borrower shall be in full compliance
(within any applicable grace period) with the provisions of this Agreement, the
other Loan Documents and any request or demand by Lender permitted hereby.
(d) No Lien Claim. No lien or claim based on furnishing labor
or materials has been filed or asserted against the Property or the
Improvements, unless Borrower has properly provided bond or other security
against loss in accordance with applicable law.
(e) Approvals. All licenses, permits, and approvals of
governmental authorities required for the Repairs as completed to the applicable
stage have been obtained.
(f) Legal Compliance. The Repairs as completed to the
applicable stage do not violate any laws, ordinances, rules or regulations, or
building lines or restrictions applicable to the Property.
13.Right to Complete Repairs. If Borrower abandons or fails to proceed
diligently with the Repairs or otherwise is in default under this Agreement,
Lender shall have the right (but not the obligation) to enter upon the Property
and take over and cause the completion of the Repairs. Any contracts entered
into or indebtedness incurred upon the exercise of such right may be in the name
of Borrower, and Lender is hereby irrevocably appointed the attorney in fact of
Borrower, such appointment being coupled with an interest, to enter into such
contracts, incur such obligations, enforce any contracts or agreements made by
or on behalf of Borrower (including the prosecution and defense of all actions
and proceedings in connection with the Repairs and the payment, settlement, or
compromise of all claims for materials and work performed in connection with the
Repairs) and do any and all things necessary or proper to complete the Repairs
including signing Borrower's name to any contracts and documents as may be
deemed necessary by Lender. In no event shall Lender be required to expend its
own funds to complete the Repairs, but Lender may, in Lender's sole discretion,
advance such funds. Any funds advanced shall be added to the outstanding
balance of the Note, secured by the Security Instrument and payable to Lender by
Borrower in accordance with the provisions of the Security Instrument pertaining
to the protection of Lender's security and advances made by Lender. Borrower
waives any and all claims it may have against Lender for materials used, work
performed or resultant damage to the Property.
14.Insufficient Account. If Lender determines in its reasonable
discretion that the Repair Escrow Fund is insufficient to pay for the Repairs,
Lender shall so notify Borrower, in writing, and as soon as possible (but in no
event later than thirty (30) days after such notice) Borrower shall pay to
Lender an amount, in cash, equal to such deficiency, which amount shall be
placed in the Repair Escrow Fund by Lender.
15.Security Agreement. Borrower hereby conveys, pledges, transfers and
grants to Lender and its successors and assigns a security interest pursuant to
the Uniform Commercial Code of the Jurisdiction and other applicable laws in and
to all money in the Repair Escrow Fund as such may increase or decrease from
time to time for the purpose of securing Borrower's obligations under this
Agreement and to further secure Borrower's obligations under the Note, Security
Instrument and other Loan Documents.
16.Post Default. If Borrower defaults in the performance (beyond any
applicable grace period) of its obligations under this Agreement or under the
Note, Security Instrument or any other Loan Document , Lender and its
successors and assigns shall have all remedies available to them under Article 9
of the Uniform Commercial Code of the Jurisdiction and under any other
applicable laws and, in addition, may retain all monies in the Repair Escrow
Fund, including interest, and in Lender's discretion, may apply such amounts,
without restriction and without any specific order of priority, to the payment
of any and all indebtedness or obligations of Borrower set forth in the Note,
Security Instrument or other Loan Documents, including, but not limited to,
principal, interest, taxes, insurance, reasonable attorneys' fees actually
incurred and/or repairs to the Property.
17.Termination. This Agreement shall terminate upon the completion of
the Repairs in accordance with this Agreement, and the full disbursement by
Lender of the Repair Escrow Fund. In the event there are funds remaining in the
Repair Escrow Fund after the Repairs have been completed in accordance with this
Agreement, and provided no default by Borrower exists beyond any applicable
notice or grace period under this Agreement or under any other Loan Documents,
such funds remaining in the Repair Escrow Fund shall be returned to Borrower.
18.No Amendment. Nothing contained in this Agreement shall be construed
to amend, modify, alter, change or supersede the terms and provisions of the
Note, Security Instrument or any other Loan Document and, if there shall exist a
conflict between the terms and provisions of this Agreement and those of the
Note, Security Instrument or other Loan Documents, then the terms and provisions
of the Note, Security Instrument and other Loan Documents shall control.
19.RELEASE; INDEMNITY.
(A) RELEASE. BORROWER COVENANTS AND AGREES THAT, IN PERFORMING
ANY OF ITS DUTIES UNDER THIS AGREEMENT, NEITHER LENDER NOR ANY OF ITS SUCCESSORS
AND ASSIGNS SHALL BE LIABLE FOR ANY LOSSES, COSTS OR DAMAGES WHICH MAY BE
INCURRED BY ANY OF THEM AS A RESULT THEREOF, EXCEPT FOR ANY LOSSES, COSTS OR
DAMAGES ARISING OUT OF THE WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH PARTY.
(B) INDEMNITY. BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD
HARMLESS LENDER AND ITS SUCCESSORS AND ASSIGNS, AGAINST ANY AND ALL LOSSES,
CLAIMS, DAMAGES, LIABILITIES AND EXPENSES INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEYS' FEES AND DISBURSEMENTS, WHICH MAY BE IMPOSED OR INCURRED
BY ANY OF THEM IN CONNECTION WITH THIS AGREEMENT EXCEPT TO THE EXTENT SUCH
LOSSES, CLAIMS, DAMAGES, LIABILITIES AND EXPENSES ARISE OUT OF THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF LENDER OR ITS SUCCESSORS OR ASSIGNS.
(c) No Personal Liability. Neither Borrower nor any member or
partner of Borrower shall be personally liable for the payment of any amount
under Subsection (a) or (b), except to the extent set forth in the Note and
Security Instrument.
20.Choice of Law. This Agreement shall be construed and enforced in
accordance with the laws of the Jurisdiction.
21.Successors and Assigns. Borrower acknowledges and agrees that
Lender, at its option, may assign or otherwise transfer the Loan and all
documents evidencing and securing the Loan, including, but not limited to, this
Agreement, to other parties subsequent to the execution of this Agreement. This
Agreement shall be binding upon the successors and assigns of Borrower and
Lender. Borrowers may not assign its rights, interests, or obligations under
this Agreement without first obtaining Lender's prior written consent.
Notwithstanding the foregoing, Borrower's rights, interests and obligation under
this Agreement shall be transferred to any transferee which acquires the
Property in accordance with the provisions of Section 9 of the Security
Instrument.
22.Attorneys' Fees. In the event that Lender or its successors or
assigns shall engage the services of an attorney at law to enforce the
provisions of this Agreement against Borrower, then Borrower shall pay all costs
of such enforcement, including any reasonable attorneys' fees actually incurred.
23.Remedies Cumulative. In the event of Borrower's default under this
Agreement, which default extends beyond any applicable grace period, Lender may
exercise all or any one or more of its rights and remedies available under this
Agreement, at law or in equity. Such rights and remedies shall be cumulative
and concurrent, and may be enforced separately, successively or together, and
Lender's exercise of any particular right or remedy shall not in any way prevent
Lender from exercising any other right or remedy available to Lender. Lender
may exercise any such remedies from time to time as often as may be deemed
necessary by Lender.
24.Determinations by Lender. Except as otherwise provided in this
Agreement, in any instance where the consent or approval of Lender may be given
or is required, or where any determination, judgment or decision is to be
rendered by Lender under this Agreement, the granting, withholding or denial of
such consent or approval and the rendering of such determination, judgment or
decision shall be made or exercised by Lender (or its designated representative)
at its sole and exclusive option and in its sole and absolute discretion.
25.Completion of Repairs. Lender's disbursement of monies in the Repair
Escrow Fund or other acknowledgment of completion of any Repair in a manner
satisfactory to Lender shall not be deemed a certification by Lender that the
Repair has been completed in accordance with applicable building, zoning or
other codes, ordinances, statutes, laws, regulations or requirements of any
governmental authority or agency. Borrower shall at all times have the sole
responsibility for insuring that all Repairs are completed in accordance with
all such governmental requirements.
26.No Agency or Partnership. Nothing contained in this Agreement shall
constitute Lender as a joint venturer, partner or agent of Borrower, or render
Lender liable for any debts, obligations, acts, omissions, representations or
contracts of Borrower.
27.Entire Agreement. This writing constitutes the entire agreement of
the parties relative to the Repair Escrow Fund. Any modification or amendment
hereto shall be ineffective unless in writing and signed by the parties hereto.
28.Cure Period. Borrower shall be deemed in default under this
Agreement only if:
(a) A default has occurred under the Note, the Security
Instrument or any other Loan Document which has extended beyond the expiration
of any applicable grace or cure period; or
(b) Borrower is in breach of any obligation under this Agreement
and has failed to cure the breach within thirty (30) days after notice of the
breach has been given by Lender.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
BORROWER:
KENNEDY BOULEVARD ASSOCIATES I, L.P., a Pennsylvania limited
partnership
By: KENNEDY BOULEVARD ASSOCIATES II, L.P., a Pennsylvania
limited partnership, its general partner
By: KENNEDY BOULEVARD I GP, L.L.C., a South Carolina
limited liability company, its general partner
By: CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES, a California limited partnership,
its sole member
By: CONCAP EQUITIES, INC., a Delaware
corporation, its general partner
By: /s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President
Borrower's Social Security or Tax Payer Identification Number:
23-2826507
LENDER:
LEHMAN BROTHERS HOLDINGS INC. d/b/a Lehman Capital, A Division of
Lehman Brothers Holdings Inc., a Delaware corporation
By:
Name:
Title:
EXHIBIT A
Property Description
EXHIBIT B
(To be Inserted)
EXHIBIT C
Disbursement Request
The undersigned hereby requests from
("Lender") the disbursement of funds in the amount of $
("Disbursement Request") from the Repair Escrow Fund established pursuant to the
Repair Escrow Agreement dated by and between Lender and the
undersigned to pay for repairs to the mixed-use building known as The Sterling
and located in Philadelphia, Pennsylvania.
The undersigned hereby represents and warrants to Lender that the
following information and certifications provided in connection with this
Disbursement Request are true and correct as of the date hereof:
1. Purpose for which disbursement is requested?
2. To whom shall the disbursement be made (may be the undersigned in
the case of reimbursement for advances and payments made or cost incurred for
work done by the undersigned.)?
3. Estimated costs of completing the uncompleted Repairs as of the date of
this Disbursement Request?
4. The undersigned certifies that:
(a) the disbursement requested pursuant to this Disbursement Request
will be used solely to pay a cost or costs allowable under the Repair Escrow
Agreement;
(b) none of the items for which disbursement is requested pursuant to
this Disbursement Request has formed the basis for any disbursement previously
made from the Repair Escrow Fund;
(c) all labor and materials for which disbursements have been requested
have been incorporated into the Improvements or suitably stored upon the
Property in accordance with reasonable and standard building practices, the
Repair Escrow Agreement and all applicable laws, ordinances, rules and
regulations of any governmental authority having jurisdiction over the Property;
and
(d) the materials, supplies and equipment furnished or installed for
the Repairs are not subject to any lien or security interest or that the funds
to be disbursed pursuant to this Disbursement Request are to be used to satisfy
any such lien or security interest.
5. All capitalized terms used in this Disbursement Request without
definition shall have the meanings ascribed to them in the Repair Escrow
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Disbursement Request
as of the day and date first above written.
Date: ____________________________________
REPLACEMENT RESERVE AND SECURITY AGREEMENT
THIS REPLACEMENT RESERVE AND SECURITY AGREEMENT ("Agreement") is made
as of the ____ day of ______, 1998, by and between KENNEDY BOULEVARD ASSOCIATES
I, L.P., a Pennsylvania limited partnership having an address at c/o Insignia
Properties Trust, One Insignia Financial Plaza, Greenville, South Carolina 29601
("Borrower") and LEHMAN BROTHERS HOLDINGS INC. D/B/A LEHMAN CAPITAL, A DIVISION
OF LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation having its principal
place of business at Three World Financial Center, 200 Vesey Street, New York,
New York 10285 ("Lender").
RECITALS:
A. Borrower by its promissory note of even date herewith given to
Lender (the note together with all extensions, renewals, modifications,
substitutions and amendments thereof shall collectively be referred to as the
"Note") is indebted to Lender in the principal sum of $23,000,000.00 in lawful
money of the United States of America, with interest from the date thereof at
the rates set forth in the Note (the indebtedness evidenced by the Note,
together with such interest accrued thereon, shall collectively be referred to
as the "Loan"), principal and interest to be payable in accordance with the
terms and conditions provided in the Note.
B. The Loan is secured by, among other things, a Mortgage and
Security Agreement (the "Security Instrument"), dated as of even date herewith,
which grants Lender a first lien on the property encumbered thereby (the
"Property"). All and any of the documents other than the Note, the Security
Instrument and this Agreement now or hereafter executed by Borrower and/or
others and by or in favor of Lender, which wholly or partially secure or
guarantee payment of the Note are referred to as the "Other Security Documents."
C. Lender requires as a condition to the making of the Loan that
Borrower enter into this Agreement and make certain deposits with Lender as
provided in this Agreement as additional security for all of Borrower's
obligations under the Note, the Security Instrument and the Other Security
Documents.
AGREEMENT:
For good and valuable consideration the parties hereto agree as
follows:
1. Deposits.
(a) Concurrently with the execution of this Agreement, Borrower shall
deposit with Lender -0- Dollars ($-0-) (the "Deferred Maintenance Deposit").
The Deferred Maintenance Deposit represents one hundred percent (100%) of the
estimated cost to complete the Replacements (as defined in Section 3(a))
described on Exhibit C.
(b) On each date that a regularly scheduled payment of principal or
interest is due under the Note, Borrower shall deposit with Lender the
applicable Monthly Deposit (defined in Section 1(c) of this Agreement.
(c) The "Monthly Deposit" required to be made each month during the
term of the Loan is $17,489.75 for the payment of Replacements and Tenant
Improvements and Leasing Commissions. The amount of the Monthly Deposit may be
increased by Lender in accordance with Section 8 of this Agreement.
(d) 65% of each Monthly Deposit (i.e. $11,295.58 of the Monthly
Deposit) shall be allocated for the payment of Replacements (the "Replacement
Account"). The remaining portion of each Monthly Deposit (i.e. $6,194.17 of the
Monthly Deposit) shall be allocated for the payment of Tenant Improvements and
Leasing Commissions (as defined below) (the "Leasing Account"). Lender shall
maintain a record of all deposits into and withdrawals from the Reserve (defined
in Section 1(e) of this Agreement) and their allocation to the Replacement
Account and the Leasing Account.
(e) Lender shall deposit each Monthly Deposit, as received, in an
escrow account (the "Reserve"). The Reserve shall not constitute a trust fund
and may be commingled with other monies held by Lender. Lender or a designated
representative of Lender shall have the sole right to make withdrawals from such
account. Provided Borrower complies with the provisions of Section 12 hereof,
the Reserve shall be held in an interest bearing account. Lender shall have no
responsibility or liability for the amount of interest earned on the Reserve.
All interest earned on funds in the Reserve shall be added to and become part of
the Reserve, shall be allocated pro rata to the Replacement Account and the
Leasing Account, and shall be for the benefit of Borrower, subject to Lender's
rights pursuant to the terms of this Agreement.
2. Security.
(a) Borrower assigns to Lender the Deferred Maintenance Deposit and
the Reserve as additional security for all of Borrower's obligations under the
Note, the Security Instrument and the Other Security Documents; provided,
however, that Lender shall make disbursements from the Reserve in accordance
with the terms of this Agreement.
3. Disbursements.
(a) Lender shall make disbursements from the portion of the Reserve
allocated to the Replacement Account to reimburse Borrower for the costs of
those items listed in Exhibit A attached hereto and made a part of this
Agreement (collectively the "Replacements"). Lender shall not be obligated to
make disbursements from the portion of the Reserve allocated to the Replacement
Account to reimburse Borrower for the costs described on Exhibit B attached
hereto and made a part hereof.
(b) Lender shall make disbursements from the portion of the Reserve
allocated to the Leasing Account to reimburse Borrower for the cost of (i)
tenant improvements required under any new Lease or modification, renewal or
extension of any existing Lease which is entered into after the date hereof,
provided that (A) any such Lease, modification, renewal or extension is entered
into in accordance with terms and provisions of the Security Instrument and the
Other Security Documents (collectively, the "Tenant Improvements") and (B) such
disbursement shall not, with respect to such Lease, modification, renewal or
extension, exceed the amount shown on Exhibit E on a per square foot basis, and
(ii) leasing commissions (including any so-called "override" leasing commissions
which may be due to any leasing or rental agent engaged by Borrower for the
Property in the event that an agent other than such agent shall also be entitled
to a leasing commission) incurred by Borrower in connection with the leasing of
the Property or a portion thereof, provided that (A)(x) such leasing commissions
and "override" leasing commissions are reasonable and customary for properties
similar to the Property and the portion of the Property leased for which such
leasing commission and "override" leasing commission is due, and (y) the amount
of such leasing commissions and "override" leasing commissions are determined
pursuant to arms length transactions between Borrower and any leasing agent to
which a leasing commission or "override" leasing commission is due, and
excluding any leasing commissions and "override" leasing commissions which shall
be due any general partner, or shareholder of Borrower (collectively, "Leasing
Commissions"), (B) such commissions are payable in connection with a new Lease
or modification, renewal or extension of an existing Lease which is entered into
after the date hereof in accordance with the provisions of the Security
Instrument and the Other Security Documents, and (C) such disbursement shall
not, with respect to any Lease or modification, extension or renewal thereof,
exceed the amount shown on Exhibit E on a per square foot basis.
(c) Lender shall, upon written request from Borrower and satisfaction
of the requirements set forth in this Section 3 and Section 4 below, disburse to
Borrower amounts from the Reserve necessary to reimburse Borrower for the actual
costs of (i) any approved Leasing Commissions upon satisfactory evidence that
the obligations of the leasing agent have been fully performed and (ii) any
approved Replacements and Tenant Improvements upon satisfactory completion of
such Replacements or Tenant Improvements (or upon partial completion in the case
of Replacements or Tenant Improvements made pursuant to Section 3(h)), as
determined by Lender in its sole discretion. In no event shall Lender be
obligated to disburse funds from the Reserve if an Event of Default (as defined
in Section 5.1 herein) exists under the Note, the Security Instrument, or this
Agreement (including but not limited to Borrower's failure to pay in full any
fees, costs and expenses then due and payable under this Agreement).
(d) Each request for disbursement from the Reserve in connection with
a Replacement or a Tenant Improvement shall be in a form specified or approved
by Lender and shall at a minimum set forth:
(i) the Replacements or Tenant Improvements for which such
disbursement is requested,
(ii) the quantity and price of each item purchased, if the Replacement
or Tenant Improvement includes the purchase or replacement of specific items
(such as appliances),
(iii) the price of all materials (grouped by type or category) used
in any Replacement or Tenant Improvement other than the purchase or replacement
of specific items, and
(iv) the cost of all contracted labor or other services applicable to
each Replacement or Tenant Improvement for which such request for disbursement
is made.
With each such request Borrower shall certify that the applicable Replacements
and Tenant Improvements have been completed, and have been made in accordance
with all applicable laws, ordinances, and regulations of any governmental office
or authority having jurisdiction over the Property. Each request for
disbursement shall include (i) to the extent the items set forth in such request
have been paid by Borrower, waivers of lien from each contractor providing
materials, labor or services, and evidence of the payment of such items
satisfactory to Lender, (ii) to the extent such items have not been paid by
Borrower, copies of invoices for all items or materials purchased and all
contracted labor or services in form satisfactory to Lender and (iii) unless
previously delivered to Lender in accordance with the terms hereof, waivers of
lien and evidence satisfactory to Lender that all contractors and other persons
who were the subject of previous disbursements from the Reserve have been paid
in full.
(e) Each request for disbursement from the Reserve in connection with
a Leasing Commission shall be in a form specified or approved by Lender and
shall at a minimum set forth.
(i) The Leasing Commissions for which such disbursement is
requested; and
(ii) The amount of each Leasing Commission.
With each such request Borrower shall certify that the obligations of the
leasing agent have been fully performed, and Borrower shall also deliver a
certification from the leasing agent that no further sums are due to it in
connection with the applicable Leasing Commission. Each request for disbursement
shall include copies of invoices and bills for such Leasing Commissions.
(f) To the extent disbursements from the Reserve are intended to pay
contractors and other persons who have not yet been paid by Borrower, such
disbursements shall constitute a trust fund in the possession of Borrower for
the benefit of such persons and shall be promptly applied by Borrower to the
payment of such persons.
(g) Except as provided in Section 3(h), each request for disbursement
from the Reserve shall be made only after completion of the Replacement for
which such disbursement is requested. Borrower shall provide Lender evidence
satisfactory to Lender, of completion.
(h) If (i) the time required to complete a Replacement or Tenant
Improvement exceeds one month, (ii) the contractor performing a Replacement or
Tenant Improvement requires periodic payments pursuant to terms of a written
contract, (iii) the total cost of such Replacement or Tenant Improvement exceeds
$25,000, and (iv) Lender has approved in writing in advance such periodic
payments, a request for reimbursement from the portion of Reserve allocated to
the Replacement Account or the Leasing Account (as the case may be) may be made
after completion of a portion of the work under such contract, provided (u) such
contract requires payment upon completion of such portion of the work, (v) the
materials for which the request is made are on site at the Property and are
properly secured or have been installed in the Property, (w) all other
conditions in this Agreement for disbursement have been satisfied, (x) funds
remaining in the Replacement Account or Leasing Account (as the case may be)
are, in Lender's judgment, sufficient to complete such Replacement or Tenant
Improvement and the other Replacements or Tenant Improvements when required (y)
the cost of the portion of the work completed under such contract exceeds
$5,000, and (z) each contractor or subcontractor receiving payments under such
contract shall provide a waiver of lien with respect to amounts which have been
paid to that contractor or subcontractor. Borrower shall not make a request for
disbursements more frequently than monthly under this subsection.
(i) Except for disbursements to be made pursuant to Section 3(h),
Borrower shall not make a request for disbursement from the Reserve more
frequently than once in any calendar month.
(j) Borrower shall not make a request for disbursement from the
Reserve in an amount less than the lesser of (i) $5,000, or (ii) except as set
forth in Section 3(h), the total cost of the Replacement, Tenant Improvement or
Leasing Commission for which the disbursement is requested.
(k) Borrower shall not make a request for disbursement from the
Reserve (A) for a Replacement in an amount greater than the amount allocated to
the Replacement Account, or (B) for a Tenant Improvement or Leasing Commission
in an amount greater than the amount allocated to the Leasing Account.
(l) In connection with any Replacement or Tenant Improvement that is
(i) a structural repair or improvement, or (ii) a replacement or repair of a
major component or element of any part of the Property, Lender may require, at
Borrower's expense, one or more inspections and/or certificates of completion by
an appropriate independent, qualified professional (e.g., architect, engineer,
consultant) approved by Lender.
4. Performance of Replacements.
4.1 Workmanlike Completion; Additional Replacements.
(a) Borrower shall complete all Replacements and Tenant Improvements
in a good and workmanlike manner as soon as practicable following the
commencement of making each such Replacement or Tenant Improvement. Lender
shall have the right to approve all subcontractors, contractors or other parties
providing labor or materials in connection with the Replacements and Tenant
Improvements costing in excess of $10,000, which approval shall not be
unreasonably withheld or delayed. Upon Lender's request, Borrower shall assign
any contract to Lender.
(b) If Borrower abandons or fails to proceed diligently with and
complete any Replacements and Tenant Improvements in a timely fashion or an
Event of Default has occurred, Lender shall have the right (but not the
obligation) to enter upon the Property and take over and cause the completion of
such Replacements and Tenant Improvements. Any contracts entered into or
indebtedness incurred upon the exercise of such right may be in the name of
Borrower, and Lender is hereby irrevocably appointed the attorney in fact of
Borrower, such appointment being coupled with an interest, to enter into such
contracts, incur such obligations, enforce any contracts or agreements made by
or on behalf of Borrower (including the prosecution and defense of all actions
and proceedings in connection with the Replacements and Tenant Improvements and
the payment, settlement or compromise of all bills and claims for materials and
work performed in connection with the Replacements and Tenant Improvements) and
do any and all things necessary or proper to complete any Replacements and
Tenant Improvements including signing Borrower's name to any contracts and
documents as may be deemed necessary by Lender. In no event shall Lender be
required to expend its own funds to complete any Replacements and Tenant
Improvements, but Lender may, in its sole discretion, advance such funds. Any
funds advanced shall be added to the outstanding balance of the Loan, secured by
the Security Instrument, bear interest at the Default Rate (as defined in the
Note) and payable to Lender by Borrower in accordance with the provisions of the
Security Instrument pertaining to the protection of Lender's security and
advances made by Lender. Borrower waives any and all claims it may have against
Lender for materials used, work performed or resultant damage to the Property.
4.2 Deferred Maintenance.
Notwithstanding anything contained herein to the contrary, Borrower
agrees to perform all Replacements shown on Exhibit C within sixty (60) days
after the date hereof, except to the extent a different time period with respect
to the completion of any such Replacement is expressly set forth on Exhibit C,
in which case such Replacement shall be performed within the time period so
specified. Notwithstanding anything to the contrary contained herein, (i) the
Deferred Maintenance Deposit shall be used solely for the payment of the actual
costs of the Replacements described on Exhibit C until such time as such
Replacements are completed in accordance with the terms of this Agreement and
(ii) Borrower shall not be entitled to receive disbursements from the Deferred
Maintenance Deposit in excess of the amounts budgeted for each Replacement on
Exhibit C, except to the extent that Borrower shall achieve cost savings with
respect to other amounts budgeted for Replacement items described on Exhibit C,
in which event such cost savings may be applied to cost overruns with respect to
other Replacement items described therein. All conditions, covenants and
agreements set forth herein with respect to a disbursement from the Reserve
shall apply to the disbursements from the Deferred Maintenance Deposit.
4.3 Entry Onto Property: Inspections.
(a) Borrower shall permit Lender or Lender's representatives
(including an independent person such as an engineer, architect, consultant or
contractor) making Replacements or Tenant Improvements pursuant to Section
4.1(b) of this Agreement to enter onto the Property during normal business hours
(subject to the rights of tenants under their leases) (i) to inspect the
condition of the Property, (ii) inspect the progress of any Replacements or
Tenant Improvements and all materials being used in connection therewith, (iii)
to examine all plans and shop drawings relating to such Replacements or Tenant
Improvements which are or may be kept at the Property, and (iv) to complete any
Replacements or Tenant Improvements made pursuant to Sections 4.1 (b). Borrower
agrees to cause all contractors and subcontractors to cooperate with Lender or
Lender's representatives or such other persons described above in connection
with inspections described in this Section 4.3 or the completion of Replacements
or Tenant Improvements pursuant to Sections 4.1(b).
(b) Lender may inspect the Property in connection with any
Replacement or Tenant Improvement prior to disbursing funds from the Reserve for
such Replacement or Tenant Improvement. In addition to Lender's costs and
expenses, Borrower shall pay Lender a reasonable inspection fee not exceeding
$400.00 for each such inspection by Lender. Lender, at Borrower's expense, also
may require an inspection by an appropriate independent qualified professional
selected by Lender and/or a copy of a certificate of completion by an
independent qualified professional acceptable to Lender prior to the
disbursement of any amounts from the Reserve.
4.4 Lien-Free Completion.
(a) Borrower covenants and agrees that each of the Replacements and
Tenant Improvements and all materials, equipment, fixtures, or any other item
comprising a part of any Replacement or Tenant Improvement shall be constructed,
installed or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those liens existing on the date of
this Agreement which have been approved in writing by Lender).
(b) Prior to each disbursement from the Reserve, Lender may require
Borrower to provide Lender with either (i) a search of title to the Property
effective to the date of the disbursement, or (ii) an endorsement to the title
insurance policy insuring Lender's interest in the Property which updates the
effective date of the policy to the date of the disbursement, which search or
title endorsement shows that no mechanic's or materialmen's liens or other liens
of any nature have been placed against the Property since the date of
recordation of the Security Instrument (other than liens which Borrower is
diligently contesting in good faith and which have been bonded off to the
satisfaction of Lender) and that title to the Property is free and clear of all
liens (other than the lien of the Security Instrument and any other liens
previously approved in writing by Lender, if any).
(c) In addition, as a condition to any disbursement for any
Replacement, series of related Replacements or Tenant Improvements, Lender may
require Borrower to obtain from each contractor, subcontractor, or materialman
an acknowledgment of payment and release of lien for work performed and
materials supplied. Any such acknowledgment and release shall conform to the
requirements of applicable law and shall cover all work performed and materials
supplied (including equipment and fixtures) for the Property by that contractor,
subcontractor or materialman through the date covered by the current
reimbursement request.
5. Event of Default.
5.1 Event of Default Under this Agreement. An "Event of Default"
shall occur under this Agreement if Borrower fails to comply with any provision
of this Agreement and such failure is not cured within thirty (30) days after
notice from Lender, provided that, if such failure does not involve merely the
payment of money and cannot be cured within thirty (30) days of Lender's notice,
Borrower shall have such additional period of time, not to exceed ninety (90)
days from Lender's notice, to cure same before such failure shall constitute an
Event of Default hereunder. Borrower understands that an Event of Default under
this Agreement shall be deemed to be an Event of Default under the terms of the
Note, the Security Instrument and the Other Security Documents, and that in
addition to the remedies specified in this Agreement, Lender shall be able to
exercise all of its rights and remedies under the Note, the Security Instrument
and the Other Security Documents upon an Event of Default. If an Event of
Default occurs under the Note, the Security Instrument or any of the Other
Security Documents, such event shall be deemed an Event of Default hereunder.
5.2 Application of Reserve and Deferred Maintenance Deposit Upon an
Event of Default.
(a) The funds held in the Reserve and the Deferred Maintenance
Deposit are pledged as additional security for the indebtedness evidenced by the
Note and secured by the Security Instrument. Following the occurrence of an
Event of Default, Borrower shall immediately lose all of its rights to receive
disbursements from the Reserve and the Deferred Maintenance Deposit unless and
until all amounts secured by the Security Instrument have been paid in full and
the lien of the Security Instrument has been released or assigned by Lender.
Upon any such Event of Default, Lender may in its sole and absolute discretion,
use the Reserve and the Deferred Maintenance Deposit (or any portion thereof)
for any purpose, including but not limited to (i) repayment of any indebtedness
secured by the Security Instrument, including but not limited to principal
prepayments and the prepayment premium applicable to such full or partial
prepayments (as applicable); provided, however, that such application of funds
shall not cure or be deemed to cure any Event of Default; (ii) reimbursement of
Lender for all losses and expenses (including, without limitation, reasonable
legal fees) suffered or incurred by Lender as a result of such an Event of
Default; (iii) completion of the Replacements and Tenant Improvements as
provided in Section 4.1, or for any other repair or replacement to the Property;
(iv) payment of any Leasing Commissions then due and payable, or (v) payment of
any amount expended in exercising (and exercise) all rights and remedies
available to Lender at law or in equity or under this Agreement or under the
Note, the Security Instrument or any of the Other Security Documents.
(b) Nothing in this Agreement or the Security Instrument shall
obligate Lender to apply all or any portion of the Reserve or the Deferred
Maintenance Deposit on account of any Event of Default by Borrower or to
repayment of the indebtedness secured by the Security Instrument or in any
specific order of priority.
5.3 Borrower's Other Obligations. Nothing contained in this Agreement
shall in any manner whatsoever alter, impair or affect the obligations of
Borrower, or relieve Borrower of any of its obligations to make payments and
perform all of its other obligations required under the Note, the Security
Instrument or the Other Security Documents.
6. Subsequent Requirement of Monthly Deposits. Commencing on the
first date that a regularly scheduled payment of principal or interest is due
under the Note, and continuing each consecutive month thereafter, Borrower shall
be required to make the Monthly Deposits provided for hereunder until and unless
Lender approves a temporary deferral or a reduction in the amount of the Monthly
Deposits; provided, however, that if Lender approves either a temporary deferral
or reduction in the amount of the Monthly Deposits, such action by Lender shall
not prevent Lender, in the event of an Event of Default by Borrower under this
Agreement, the Note, the Security Instrument or the Other Security Documents (or
upon any other date that Lender may deem appropriate) from requiring Borrower to
subsequently resume payment of the Monthly Deposits.
7. Remedies Cumulative. None of the rights and remedies herein
conferred upon or reserved to Lender under this Agreement is intended to be
exclusive of any other rights, and each and every right shall be cumulative and
concurrent, and may be enforced separately, successively or together, and may be
exercised from time to time as often as may be deemed necessary by Lender.
8. Insufficient Balance. The insufficiency of any balance in the
Reserve or the Deferred Maintenance Deposit shall not abrogate Borrower's
agreement to fulfill its obligations contained herein or in the Security
Instrument. In the event Lender determines that (i) the balance of any of the
Replacement Account or the Leasing Account is less than the current estimated
cost to make the Replacements or the Tenant Improvements and Leasing Commissions
which Borrower, in the prudent operation of the Property, can reasonably be
anticipated to incur during the succeeding twenty four (24) months, or (ii) the
balance of the Deferred Maintenance Deposit is less than the amount necessary to
complete the items set forth on Exhibit D, Borrower shall deposit the shortage
within ten (10) days of request by Lender. In the event Lender determines from
time to time based on Lender's inspections that the amount of the Monthly
Deposit is insufficient to fund the cost of likely Replacements, Tenant
Improvements and Leasing Commissions and related contingencies that may arise
during the remaining term of the Loan, Lender may require an increase in the
amount of the Monthly Deposits upon thirty (30) days prior written notice to
Borrower.
9. Indemnification. Borrower agrees to indemnify Lender and to hold
Lender harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations and costs and expenses (including
litigation costs and reasonable attorneys' fees and expenses) arising from or in
any way connected with the performance of the Replacements and Tenant
Improvements or the holding or investment of the Reserve or in connection with
any Leasing Commissions. Borrower assigns to Lender all rights and claims
Borrower may have against all persons or entities supplying labor or materials
in connection with the Replacements and Tenant Improvements or acting as a
leasing agent in connection with Leasing Commissions; provided, however, that
Lender may not pursue any such right or claim unless an Event of Default has
occurred.
10. Determinations by Lender. In any instance in this Agreement where
the consent or approval of Lender may be given or is required, or where any
determination, judgment or decision is to be rendered by Lender under this
Agreement, the granting, withholding or denial of such consent or approval and
the rendering of such determination, judgment or decision shall be made or
exercised by Lender, at its sole and exclusive option and in its sole and
absolute discretion.
11. Borrower's Records. Borrower shall furnish such financial
statements, invoices, records, papers and documents relating to the Property as
Lender may reasonably require from time to time to make the determinations
permitted or required to be made by Lender under this Agreement.
12. Interest Fees. If Borrower wishes to earn interest on the
Reserve, Borrower shall be required to pay a one-time set-up fee on the date
hereof of $250.
13. No Third Party Beneficiary. This Agreement is intended solely
for the benefit of Borrower and Lender and their respective successors and
assigns, and no third party shall have any rights or interest in the Replacement
Reserve, this Agreement, the Note, the Security Instrument or any of the Other
Security Documents. Nothing contained in this Agreement shall be deemed or
construed to create an obligation on the part of Lender to any third party, nor
shall any third party have a right to enforce against Lender any right that
Borrower may have under this Agreement.
14. Completion of Replacements. Lender's approval of any plans for
any Replacement, any Tenant Improvement, release of funds from the Replacement
Reserve, inspection of the Property by Lender or Lender's agents, or other
acknowledgment of completion of any Replacement or Tenant Improvement in a
manner satisfactory to Lender shall not be deemed an acknowledgment or warranty
of Lender to any person that the Replacement or Tenant Improvement has been
completed in accordance with applicable building, zoning or other codes,
ordinances, statutes, laws, regulations or requirements of any governmental
agency.
15. No Agency or Partnership. Nothing contained in this Agreement
shall constitute Lender as a joint venturer, partner or agent of Borrower, or
render Lender liable for any debts, obligations, acts, omissions,
representations, or contracts of Borrower.
16. Choice of Law. This Agreement shall be governed, construed,
applied and enforced in accordance with the laws of the state in which the
Property is located and applicable laws of the United States of America.
17. Termination of Reserve. After payment in full of all
sums evidenced by the Note and secured by the Security Instrument and release or
assignment by Lender of the lien of the Security Instrument, Lender shall
disburse to Borrower all amounts remaining in the Reserve.
18. Notices. All notices or other written communications to Borrower
or Lender hereunder shall be deemed to have been properly given (i) upon
delivery, if delivered in person with receipt acknowledged by the recipient
thereof, (ii) one (1) Business Day (hereinafter defined) after having been
deposited for overnight delivery with any reputable overnight courier service,
or (iii) three (3) Business Days after having been deposited in any post office
or mail depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed to Borrower or Lender at their addresses set forth in the Security
Instrument or addressed as such party may from time to time designate by written
notice to the other parties. For purposes of this Section 18, the term
"Business Day" shall mean a day on which commercial banks are not authorized or
required by law to close in New York, New York. Either party by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
19. No Oral Change. This Agreement, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act or failure to act on the part of Borrower or Lender, but
only by an agreement in writing signed by the party against whom enforcement of
any modification, amendment, waiver, extension, change, discharge or termination
is sought.
20. Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.
21. Inapplicable Provisions. If any term, covenant or condition of
this Agreement is held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be construed without such provision.
22. Headings, etc. The headings and captions of various paragraphs
of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
23. Duplicate Originals; Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.
24. Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
25. Definitions. The word "Lender" as used herein includes Lender
and any and all of its agents. All capitalized words and phrases not otherwise
defined herein shall have the meanings ascribed to them in the Security
Instrument.
26. Miscellaneous. Wherever pursuant to this Agreement it is
provided that Borrower pay any costs and expenses, such costs and expenses shall
include, but not be limited to, legal fees and disbursements of Lender, whether
retained firms, the reimbursement for the expenses of in-house staff or
otherwise.
27. Exculpation. Borrower's obligations under this Agreement are
subject to the provisions of paragraph 50 of the Security Instrument, and such
provisions are incorporated herein by reference.
[NO FURTHER TEXT ON THIS PAGE]
IN WITNESS WHEREOF the undersigned have executed this agreement as of
the date and year first written above.
BORROWER:
KENNEDY BOULEVARD ASSOCIATES I, L.P., a Pennsylvania limited
partnership
By: KENNEDY BOULEVARD ASSOCIATES II, L.P., a
Pennsylvania limited partnership, its general
partner
By: KENNEDY BOULEVARD I GP, L.L.C., a South
Carolina limited liability company, its
general partner
By: CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES, a California limited
partnership, its sole member
By: CONCAP EQUITIES, INC., a Delaware
corporation, its general partner
By: /s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President
LENDER:
LEHMAN BROTHERS HOLDINGS INC., D/B/A LEHMAN CAPITAL, A
DIVISION OF LEHMAN BROTHERS HOLDINGS INC.
By:
Name:
Title:
EXHIBIT A
LIST OF REPLACEMENTS
Except as specifically excluded in Exhibit B hereof, Replacements shall
consist of all capital repairs or replacements to the improvements or personal
property located on the Property, including, but not limited to, (i) structural
improvements and replacements, (ii) resurfacing, striping and sealing of parking
lots, (iii) roofing, (iv) window, window treatment, storefront and door
replacements, (v) brick pointing, (vi) curbing, (vii) installation or
replacement of HVAC systems, (viii) substantial improvement and replacement of
plumbing, sprinkler and electrical systems, (ix) the cost of replacing
carpeting, blinds, equipment and appliances, (x) painting of the exterior of the
Property and (xi) the costs of any repairs, improvements, equipment,
alterations, additions, changes, replacements and other items which, under
generally accepted accounting principles, consistently applied, are properly
classified as capital expenditures or capital improvements.
EXHIBIT B
EXCLUSIONS FROM REPLACEMENTS
Notwithstanding the provisions of Exhibit A hereto or anything else
contained in this Agreement to the contrary, the following costs shall not
constitute "Replacements" and Lender shall not be obligated to make
disbursements from the Replacement Reserve to reimburse Borrower for such costs:
(a) costs of routine maintenance to the Property;
(b) the costs of salaries, benefits and administrative expenses
related to the employment of (i) officers and executives of
Borrower, and of employees of Borrower above the level of
building manager, and (ii) employees of Borrower at or below the
level of building manager except, in the case of (ii), those
costs which Borrower can demonstrate to Lender's satisfaction to
be properly allocable to the work performed by such employees in
connection with Replacements;
(c) the cost of any items for which Borrower is reimbursed by
insurance or otherwise;
(d) the cost of any landscaping work to the Property;
(e) the cost of any material additions or material alterations to the
Property after the date hereof.
EXHIBIT C
SCHEDULED REPAIRS
SCHEDULED REPAIRS
NONE
EXHIBIT D
NONE
EXHIBIT E
TENANT IMPROVEMENTS AND LEASING COMMISSIONS
TENANT IMPROVEMENTS
Tenant Improvement Allowance $___________ per square foot of leased space.
LEASING COMMISSIONS
Leasing Commissions Allowance $__________ per square foot of leased space.
EXHIBIT 99.1
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
September, 1998 AND 1997
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
1998 1997
(Unaudited) (Note)
Assets
Cash and cash equivalents $ 2,013 $ 1,439
Receivables and deposits 1,947 1,241
Restricted escrows 560 798
Other assets 1,292 1,550
Investment properties:
Land 9,237 10,217
Building and related personal property 94,549 97,598
103,786 107,815
Less accumulated depreciation (75,922) (75,746)
27,864 32,069
$ 33,676 $ 37,097
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 361 $ 426
Tenant security deposit liabilities 580 620
Accrued property taxes 907 116
Other liabilities 474 513
Mortgage notes 22,926 23,133
Master loan and interest payable 310,870 289,783
336,118 314,591
Partners' Deficit
General partner (3,024) (2,775)
Limited partners (299,418) (274,719)
(302,442) (277,494)
$ 33,676 $ 37,097
Note:The balance sheet at December 31, 1997, has been derived from the
audited financial statements at that date, but does not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Rental income $ 4,943 $ 4,730 $ 14,795 $ 14,099
Interest income 45 31 138 91
Other income 382 277 1,048 871
Gain on sale of property -- -- 523 --
Total revenues 5,370 5,038 16,504 15,061
Expenses:
Operating 2,550 2,956 7,451 8,150
General and administrative 133 158 455 685
Depreciation 1,312 1,325 3,950 3,873
Property taxes 310 320 954 962
Interest 9,449 8,614 28,615 25,935
Total expenses 13,754 13,373 41,425 39,605
Net loss $ (8,384) $ (8,335) $(24,921) $(24,544)
Net loss allocated
to general partner (1%) $ (84) $ (83) $ (249) $ (245)
Net loss allocated
to limited partners (99%) (8,300) (8,252) (24,672) (24,299)
$ (8,384) $ (8,335) $(24,921) $(24,544)
See Accompanying Notes to Consolidated Financial Statements
c)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 1998 and 1997
(in thousands)
General Limited
Partners Partners Total
Partners' deficit at
December 31, 1996 $ (2,449) $(242,488) $(244,937)
Net loss for the nine months
ended September 30, 1997 (245) (24,299) (24,544)
Partners' deficit at
September 30, 1997 $ (2,694) $(266,787) $(269,481)
Partners' deficit at
December 31, 1997 $ (2,775) $(274,719) $(277,494)
Distributions -- (27) (27)
Net loss for the nine months
ended September 30, 1998 (249) (24,672) (24,921)
Partners' deficit at
September 30, 1998 $ (3,024) $(299,418) $(302,442)
See Accompanying Notes to Consolidated Financial Statements
d)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1998 1997
Cash flows from operating activities:
Net loss $(24,921) $(24,544)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 4,118 4,039
Gain on sale of property (523) --
Loss on disposal of property 28 --
Change in accounts:
Receivables and deposits (706) (300)
Other assets 35 (111)
Accounts payable (65) (550)
Tenant security deposit liabilities (9) (5)
Accrued property taxes 778 586
Other liabilities (49) 74
Accrued interest on Master Loan 23,568 23,238
Net cash provided by operating activities 2,254 2,427
Cash flows from investing activities:
Property improvements and replacements (1,328) (1,615)
Lease commissions paid (54) (136)
Net withdrawals from restricted escrows 238 906
Proceeds from sale of investment property 2,179 --
Distributions from investments in limited partnerships -- 336
Net cash provided by (used in)
investing activities 1,035 (509)
Cash flows from financing activities:
Principal payments on Master Loan (2,481) (2,031)
Principal payments on notes payable (207) (194)
Distributions to partners (27) --
Net cash used in financing activities (2,715) (2,225)
Net increase (decrease) in cash and cash equivalents 574 (307)
Cash and cash equivalents at beginning of period 1,439 1,961
Cash and cash equivalents at end of period $ 2,013 $ 1,654
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4,990 $ 2,635
See Accompanying Notes to Consolidated Financial Statements
e)
CONSOLIDATED CAPITAL EQUITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Consolidated
Capital Equity Partners, L.P. ("CCEP") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
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 ConCap Holdings, Inc. (the "General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1998, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
Consolidation
CCEP owns a 75% interest in a limited partnership ("Western Can, Ltd.") which
owns 444 De Haro, an office building in San Francisco, California. CCEP's
investment in Western Can, Ltd. is consolidated in CCEP's financial statements.
No minority interest liability has been reflected for the 25% minority interest
because Western Can, Ltd. has a net capital deficit and no minority liability
exists with respect to CCEP.
NOTE B - RELATED PARTY TRANSACTIONS
CCEP has no employees and is dependent on the General Partner and its affiliates
for the management and administration of all partnership activities. CCEP paid
property management fees based upon collected gross rental revenues for property
management services in each of the nine month periods ended September 30, 1998
and 1997. The Partnership Agreement ("Agreement") also provides for
reimbursement to the General Partner and its affiliates for costs incurred in
connection with the administration of CCEP activities.
Also, CCEP is subject to an Investment Advisory Agreement between CCEP and an
affiliate of the General Partner. This agreement provides for an annual fee,
payable in monthly installments, to an affiliate of the General Partner for
advising and consulting services for CCEP's properties. The following amounts
were paid or accrued to the General Partner and affiliates:
For the Nine Months Ended
September 30,
1998 1997
(in thousands)
Property management fees $805 $771
Investment advisory fees 131 136
Reimbursement for services of affiliates
(included in general and administrative
and operating expenses and other assets) (1) 274 424
(1) Included in "Reimbursement for services of affiliates" for 1998 and 1997 is
approximately $28,000 and $54,000, respectively, in reimbursements for
construction oversight costs and approximately $16,000 and $109,000
respectively, of lease commissions.
In addition to the compensation and reimbursements described above, interest
payments are made to and loan advances are received from Consolidated Capital
Institutional Properties ("CCIP") pursuant to the Master Loan Agreement (the
"Master Loan"), which is described more fully in the 1997 Annual Report.
Approximately $3,789,000 in interest payments were made during the nine month
period ended September 30, 1998. No advances were received under the Master
Loan during the nine months ended September 30, 1998. Principal payments of
approximately $2,481,000 were made on the Master Loan during the nine months
ended September 30, 1998.
For the period January 1, 1997 to August 31, 1997, CCEP insured its properties
under a master policy through an agency affiliated with the General Partner with
an insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the master policy. The agent assumed the financial obligations to the
affiliate of the General Partner which receives payments on these obligations
from the agent. The amount of CCEP's insurance premiums accruing to the benefit
of the affiliate of the General Partner by virtue of the agent's obligations is
not significant.
NOTE C - MASTER LOAN AND ACCRUED INTEREST PAYABLE
The Master Loan principal and accrued interest payable balances at September 30,
1998, and December 31, 1997, are approximately $310,870,000 and $289,783,000,
respectively.
Terms of Master Loan Agreement
Under the terms of the Master Loan, interest accrues at a fluctuating rate per
annum adjusted annually on July 15 by the percentage change in the U.S.
Department of Commerce Implicit Price Deflator for the Gross National Product
subject to an interest rate ceiling of 12.5%. The interest rates for each of
the nine month periods ended September 30, 1998 and 1997, were 12.5%. Payments
are currently payable quarterly in an amount equal to "Excess Cash Flow",
generally defined in the Master Loan as net cash flow from operations after
third-party debt service and capital expenditures. Any unpaid interest is added
to principal, compounded annually, and is payable at the loan's maturity. Any
net proceeds from the sale or refinancing of any of CCEP's properties are paid
to CCIP under the terms of the Master Loan Agreement. The Master Loan Agreement
matures in November 2000.
During the nine months ended September 30, 1998, CCEP paid approximately
$2,481,000 to CCIP as principal payments on the Master Loan. Cash received on
certain investments by CCEP, which are required to be transferred to CCIP per
the Master Loan Agreement, accounted for approximately $79,000. Approximately
$296,000 was due to an "Excess Cash Flow" payment paid to CCIP as stipulated by
the Master Loan.
Approximately $2,106,000 received was due to the sale of Northlake Quadrangle.
Such proceeds are required to be transferred to CCIP as per the Master Loan
Agreement, as mentioned above.
NOTE D - GAIN ON SALE OF PROPERTY
On April 16, 1998, CCEP sold Northlake Quadrangle to an unrelated third party
for a contract price of $2,325,000. The Partnership received net proceeds of
approximately $2,106,000 after payment of closing costs. The proceeds were
remitted to CCIP to pay down the Master Loan, as required by the Master Loan
Agreement.
