FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-13309
ANGELES PARTNERS XII
(Exact name of small business issuer as specified in its charter)
California 95-3903623
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES PARTNERS XII
BALANCE SHEET
(Unaudited)
June 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash:
Unrestricted $ 3,299,463
Restricted--tenant security deposits 906,278
Accounts receivable, net of allowance for
doubtful accounts of $23,248 95,406
Escrows for taxes 680,131
Restricted escrows 2,142,972
Other assets 2,367,273
Investment in joint venture 155,723
Investment properties:
Land $ 10,340,868
Buildings and related personal
property 85,631,391
95,972,259
Less accumulated depreciation (48,751,322) 47,220,937
$ 56,868,183
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 329,522
Tenant security deposits 908,992
Accrued taxes 901,430
Other liabilities 813,404
Mortgage notes payable 73,652,844
Partners' Deficit
General partner $ (582,363)
Limited partners (44,773 units
issued and outstanding) (19,155,646) (19,738,009)
$ 56,868,183
</TABLE>
See Accompanying Notes to Financial Statements
1
<PAGE>
b) ANGELES PARTNERS XII
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Rental income $4,980,287 $4,812,231 $ 9,790,380 $ 9,389,252
Other income 347,489 288,765 684,307 592,983
Total revenues 5,327,776 5,100,996 10,474,687 9,982,235
Expenses:
Operating 1,407,814 1,332,109 2,690,707 2,791,099
General and administrative 200,236 265,283 331,705 438,058
Property management fees 254,797 242,543 506,756 486,872
Maintenance 508,070 626,772 905,045 1,150,651
Depreciation 1,127,621 1,085,023 2,244,993 2,149,421
Amortization 8,495 6,544 16,488 13,024
Interest 1,542,345 1,761,707 3,097,621 3,598,548
Property taxes 533,312 454,403 1,025,727 931,225
Bad debt expense 75,358 51,918 75,358 51,918
Loss on disposal of asset 3,837 6,381 26,604 6,381
Tenant reimbursements (21,771) (45,698) (51,112) (142,213)
Total expenses 5,640,114 5,786,985 10,869,892 11,474,984
Equity in income (loss) of
joint venture 7,066 57,517 (51,004) 8,014
Net loss $ (305,272) $ (628,472) $ (446,209) $(1,484,735)
Net loss allocated to
general partners (1%) $ (3,053) $ (6,285) $ (4,462) $ (14,847)
Net loss allocated to
limited partners (99%) (302,219) (622,187) (441,747) (1,469,888)
$ (305,272) $ (628,472) $ (446,209) $(1,484,735)
Net loss per limited
partnership unit $ (6.75) $ (13.90) $ (9.87) $ (32.83)
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
c) ANGELES PARTNERS XII
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Limited
Partnership General Limited
Units Partners Partners Total
Original capital
contributions 44,773 $ 1,000 $ 44,773,000 $ 44,774,000
Partners' (deficit) capital
at December 31, 1994 44,773 $(577,901) $(18,713,899) $(19,291,800)
Net loss for the six months
ended June 30, 1995 -- (4,462) (441,747) (446,209)
Partners' (deficit) capital
at June 30, 1995 44,773 $(582,363) $(19,155,646) $(19,738,009)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
d) ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net loss $ (446,209) $(1,484,735)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Depreciation 2,244,993 2,149,421
Amortization of discounts, loan costs,
and leasing commissions 191,938 353,123
Bad debt 75,358 51,918
Loss on disposal of asset 26,604 6,381
Equity in loss (income) of joint venture 51,004 (8,014)
Change in accounts:
Restricted cash (25,021) (13,565)
Accounts receivable (37,918) (104,630)
Escrows for taxes 14,604 (277,287)
Other assets (14,420) (19,880)
Accounts payable (405,494) (335,295)
Tenant security deposit liabilities 28,901 30,773
Accrued taxes (50,788) 10,342
Other liabilities 186,550 201,264
Net cash provided by
operating activities 1,840,102 559,816
Cash flows from investing activities:
Property improvements and replacements (482,175) (569,760)
Deposits to restricted escrows (903,422) (163,511)
Withdrawals from restricted escrows 43,998 352,881
Net cash used in
investing activities (1,341,599) (380,390)
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
ANGELES PARTNERS XII
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended
June 30,
1995 1994
Cash flows used in financing activities:
Payments on mortgage notes payable $(5,631,860) $ (291,309)
Proceeds from refinance 6,600,000 --
Loan costs (214,136) (14,006)
Net cash provided by (used in)
financing activities 754,004 (305,315)
Net increase (decrease) in cash 1,252,507 (125,889)
Cash at beginning of period 2,046,956 2,568,130
Cash at end of period $ 3,299,463 $ 2,442,241
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 2,922,172 $ 3,170,308
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE>
e) ANGELES PARTNERS XII
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six
month periods ended June 30, 1995, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1995.
For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-KSB for the
fiscal year ended December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note B - Investment in Joint Venture
The Partnership owns a 44.5% interest in the Princeton Meadows Golf Course
Joint Venture ("Joint Venture"). The Partnership accounts for its interest in
the Joint Venture on the equity method.
Condensed balance sheet information of the Joint Venture at June 30, 1995 is
as follows:
<TABLE>
<CAPTION>
<S> <C>
Assets
Cash $ 215,177
Deferred charges and other assets 136,312
Investment properties, net 1,903,381
Total $ 2,254,870
Liabilities and Partners' Capital
Notes payable to AMIT, in default $1,320,419
Other liabilities 585,478
Partners' capital 348,973
$2,254,870
</TABLE>
6
<PAGE>
Note B - Investment in Joint Venture (continued)
The condensed statements of operations of the Joint Venture are
summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenue $ 379,075 $ 441,581 $ 483,728 $ 545,935
Costs and expenses (363,196) (312,331) (598,344) (527,927)
Net income (loss) $ 15,879 $ 129,250 $(114,616) $ 18,008
</TABLE>
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement for certain expenses incurred
by affiliates on behalf of the Partnership. The following payments were made
to the Managing General Partner and affiliates for the six months ended June
30, 1995 and 1994:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
Property management fees $506,756 $486,872
Marketing services 1,359 7,476
Reimbursement for services of
affiliates 231,345 248,424
</TABLE>
The Partnership insures its properties under a master policy through an
agency and insurer unaffiliated with the Managing General Partner. An
affiliate of the Managing 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 current year's master policy. The
current agent assumed the financial obligations of the affiliate of the
Managing General Partner who 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 Managing General Partner by virtue of the
agent's obligations is not significant.
Angeles Mortgage Investment Trust ("AMIT"), a lending trust sponsored by an
affiliate of the Managing General Partner, currently provides financing to the
Joint Venture in the amount of $1,320,419 which is in default at June 30, 1995
(see Part II, Item 1. Legal Proceedings).
7
<PAGE>
Note C - Transactions with Affiliated Parties (continued)
MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner,
owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these
Class B Shares, in whole or in part, into Class A Shares on the basis of 1
Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP
to receive 1% of the distributions of net cash distributed by AMIT. These
Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares
which allows MAE GP to vote approximately 33% of the total shares (unless and
until converted to Class A Shares at which time the percentage of the vote
controlled represented by the shares held by MAE GP would approximate 1% of
the vote). Between the date of acquisition of these shares (November 24, 1992)
and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE
GP voted its shares at the 1995 annual meeting in connection with the election
of trustees and other matters. MAE GP has not exerted and continues to decline
to exert any management control over or participate in the management of AMIT.
However, MAE GP may choose to vote these shares as it deems appropriate in the
future.
As part of a settlement of certain disputes with AMIT, MAE GP Corporation
granted to AMIT an option to acquire the Class B shares. This option can be
exercised at the end of 10 years or when all loans made by AMIT to partnerships
affiliated with MAE GP as of November 9, 1994, which is the date of execution
of a definitive Settlement Agreement, have been paid in full, but in no event
prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of
$250,000 at closing, which occurred April 14, 1995, as payment for the option.
Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT, the result of which is MAE GP will be able
to vote the Class B shares on all matters except those involving transactions
between AMIT and MAE GP affiliated borrowers or the election of any MAE GP
affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted
to the AMIT trustees, in their capacity as trustees of AMIT, proxies with
regard to the Class B shares instructing such trustees to vote said Class B
shares in accordance with the vote of the majority of the Class A shares
voting to be determined without consideration of the votes of "Excess Class A
Shares" as defined in section 6.13 of the Declaration of Trust of AMIT.
Note D - Pickwick Place Refinancing
On April 17, 1995, the Partnership refinanced the mortgage encumbering
Pickwick Place. The total mortgage indebtedness which carried a stated
interest rate of 10.5% was in default due to a maturity date of June 1994.
The new mortgage indebtedness of $6,600,000 carries a stated interest rate
of 9.10% and is being amortized over 28 years with a balloon payment due
April 1, 2005.
Total capitalized loan costs incurred for the refinancing were $214,136
and are being amortized over the life of the loan.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of nine apartment complexes
and one commercial complex. The following table sets forth the average
occupancy of the properties for the six months ended June 30, 1995 and 1994:
Average
Occupancy
Property 1995 1994
Briarwood
Cedar Rapids, Iowa 97% 97%
Chambers Ridge
Harrisburg, Pennsylvania 91% 91%
Gateway Gardens
Cedar Rapids, Iowa 98% 96%
Hunters Glen - 1
Plainsboro, New Jersey 95% 91%
Hunters Glen - 2
Plainsboro, New Jersey 95% 92%
Hunters Glen - 3
Plainsboro, New Jersey 94% 93%
Pickwick Place
Indianapolis, Indiana 93% 94%
Southpointe
Bedford Heights, Ohio 84% 91%
Twin Lake Towers
Westmont, Illinois 97% 96%
Cooper Pointe Plaza
Olympia, Washington 97% 98%
The Managing General Partner attributes the increase in occupancy at
Hunters Glen - 1 and Hunters Glen - 2 to property improvements and the
decrease at Southpointe to personnel turnovers and upgrading the tenant base.
The Partnership's net loss for the six months ended June 30, 1995, was
$446,209, of which $305,272 was for the three months ended June 30, 1995. The
net loss for the corresponding periods of 1994 were $1,484,735 and $628,472,
respectively. This decrease in net loss is due to increases in revenues and
decreases in administrative, maintenance, operating, and interest expenses.
The increase in revenues is due to the increased occupancy at Gateway Gardens
and Hunters Glen 1 and 2. Administrative expense decreased due to decreases
in professional fees and reimbursements for partnership administration.
Operating and maintenance expenses decreased due to a less harsh winter in
1995 as compared to 1994 resulting in decreased utility bills, snow removal,
maintenance supplies and salary expense. Interest expense decreased due to a
decrease in the mortgage principal carried by the Partnership as a result of
the mortgages amortizing and the pay off of the second mortgage on Pickwick
Place in 1994. These decreases in expense were partially offset by increases
in bad debt expense
9
<PAGE>
related to receivables being written off at Pickwick Place and Hunters Glen.
There was also a decrease in tenant reimbursements for the six and three month
periods ended June 30, 1995, as compared to the corresponding periods in 1994
due to decreases in reimbursable expenses in 1995 and due to changes in the
estimate in 1994.
The Partnership's equity interest in the loss of the Joint Venture for the
six months ended June 30, 1995, was $51,004 and the Partnership's equity
interest in the income of the Joint venture for the six months ended June 30,
1994, was $8,014. The loss during 1995 can be attributed to bad debt expense
recorded during the year due to reserving uncollectible receivables. In
addition the Joint Venture has experienced a decrease in association dues
from 1994 to 1995.
At June 30, 1995, the Partnership had unrestricted cash of $3,299,463
compared to $2,442,241 at June 30, 1994. Net cash provided by operating
activities increased primarily as a result of the decrease in net loss as
discussed above and a decrease in accounts receivable and escrows for taxes.
This increase was partially offset by a decrease in accounts payable and
accrued taxes. Net cash used in investing activities increased as a result
of an increase in deposits to restricted escrows due to the refinancing of
Pickwick Place. Net cash provided by financing activities increased due to
proceeds from the Pickwick Place refinancing.
On April 17, 1995, the Partnership refinanced the mortgage encumbering
Pickwick Place Apartments. The total indebtedness refinanced was $5,332,638
which represented the first mortgage. The new mortgage indebtedness of
$6,600,000 matures in 10 years. (See Note D for a more detailed discussion.)
The first mortgage on Phase III of the Hunters Glen Apartments in the
amount of $8,500,000 matured in December 1994. The Partnership is currently
attempting to refinance this mortgage; however, due to the December 1994
maturity, as of June 30, 1995, this mortgage is in default.
The Princeton Meadows Golf Course property, which is the sole investment
property of the Joint Venture, had an underground fuel storage tank that was
removed in 1992. This fuel storage tank caused contamination to the area.
Reports were filed with the proper authorities, however, no directives have
been given as to corrective action. The Managing General Partner can not
define the extent of the contamination without further testing. Based on
discussions with environmental engineers, this is a low priority site with
the New Jersey Department of Environmental Protection and any remediation
costs are deemed immaterial.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
Future cash distributions will depend on the levels of net cash generated
from operations, property sales and the availability of cash reserves.
10
<PAGE>
As part of the ongoing business plan of the Partnership, the Managing
General Partner monitors the rental market environment of each of its
investment properties to assess the feasibility of increasing rents,
maintaining or increasing occupancy levels and protecting the Partnership
from increases in expenses. As part of this plan the Managing 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 Managing General Partner
will be able to sustain such a plan.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Angeles Mortgage Investment Trust ("AMIT"), a lending trust sponsored by an
affiliate of the Managing General Partner, currently provides financing to the
Joint Venture in the amount of $1,320,419 which is in default at June 30, 1995.
MAE GP Corporation ("MAE GP"), an affiliate of the Managing General Partner,
owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these
Class B Shares, in whole or in part, into Class A Shares on the basis of 1
Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP
to receive 1% of the distributions of net cash distributed by AMIT. These
Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares
which allows MAE GP to vote approximately 33% of the total shares (unless and
until converted to Class A Shares at which time the percentage of the vote
controlled represented by the shares held by MAE GP would approximate 1% of
the vote). Between the date of acquisition of these shares (November 24, 1992)
and March 31, 1995, MAE GP declined to vote these shares. Since that date,
MAE GP voted its shares at the 1995 annual meeting in connection with the
election of trustees and other matters. MAE GP has not exerted and continues
to decline to exert any management control over or participate in the
management of AMIT. However, MAE GP may choose to vote these shares as it
deems appropriate in the future.
As part of a settlement of certain disputes with AMIT, MAE GP granted to
AMIT an option to acquire the Class B shares. This option can be exercised at
the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994, which is the date of execution of a
definitive Settlement Agreement, have been paid in full, but in no event prior
to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at
closing, which occurred April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT the result of which is MAE GP will be able
to vote the Class B shares on all matters except those involving transactions
between AMIT and MAE GP affiliated borrowers or the election of any MAE GP
affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted
to the AMIT trustees, in their capacity as trustees of AMIT, proxies with
regard to the Class B shares instructing such trustees to vote said Class B
shares in accordance with the vote of the majority of the Class A Shares
voting to be determined without consideration of the votes of "Excess Class A
Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT.
12
<PAGE>
The Registrant is unaware of any other pending or outstanding litigation
that is not of a routine nature. The Managing General Partner of the
Registrant believes that all such pending or outstanding litigation will be
resolved without a material adverse effect upon the business, financial
condition or operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
10.17 Contracts related to refinancing of debt
(a) Promissory Note for $6,600,000 dated April 17, 1995 between
Pickwick Place AP XII LP and First Union National Bank of North
Carolina.
(b) Mortgage, Security Agreement and Financing Statement dated April
17, 1995 between Pickwick Place AP XII LP and First Union
National Bank of North Carolina.
(c) Assignment of Leases and Rents dated April 17, 1995 between
Pickwick Place AP XII LP and First Union National Bank of North
Carolina.
27 Financial Data Schedule
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1995.
13
<PAGE>
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.
ANGELES PARTNERS XII
By: Angeles Realty Corporation II
Managing General Partner
By:
Carroll D. Vinson
President
By:
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: August 11, 1995
14
<PAGE>
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.
ANGELES PARTNERS XII
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long
Robert D. Long
Controller and Principal
Accounting Officer
Date: August 14, 1995
14
<PAGE>
PROMISSORY NOTE
$6,600,000_____ April 17, 1995
FOR VALUE RECEIVED, the undersigned, PICKWICK PLACE AP XII, L.P., a
South Carolina limited partnership ("Borrower"), whose address is One Insignia
Financial Plaza, Greenville, South Carolina 29602, promises to pay to the
order of First Union National Bank of North Carolina, a national banking
association ("Lender"), at the office of Lender at One First Union Center,
TW-8, Charlotte, North Carolina 28288, or at such other place as Lender may
designate to Borrower in writing from time to time, the principal sum of Six
Million six hundred thousand dollars------------------------------------------
---------------------------_ ($6,600,000________) together with interest on so
much thereof as is from time to time outstanding and unpaid, from the date of
the advance of the principal evidenced hereby, at the rate of _Nine and ten
hundredths_______ (9.10%) percent per annum (the "Note Rate"), in lawful money
of the United States of America, which shall at the time of payment be legal
tender in payment of all debts and dues, public and private. All amounts
hereunder are payable without relief from valuation and appraisement laws.
ARTICLE I - TERMS AND CONDITIONS
1.01 Payment of Principal and Interest. Said interest shall be
computed hereunder based on a 360-day year and based on twelve (12) 30-day
months for each full calendar month and on the actual number of days elapsed
for any partial month in which interest is being calculated. In computing the
number of days during which interest accrues, the day on which funds are
initially advanced shall be included regardless of the time of day such
advance is made, and the day on which funds are repaid shall be included
unless repayment is credited prior to close of business. Payments in federal
funds immediately available in the place designated for payment received by
Lender prior to 2:00 p.m. local time at said place of payment shall be
credited prior to close of business, while other payments may, at the option
of Lender, not be credited until immediately available to Lender in federal
funds in the place designated for payment prior to 2:00 p.m. local time at
said place of payment on a day on which Lender is open for business. Such
principal and interest shall be payable in equal consecutive monthly
installments of $54,342.72_ each, beginning on the first day of the second
full calendar month following the date of this Note (or on the first day of
the first full calendar month following the date hereof, in the event the
advance of the principal amount evidenced by this Note is the first day of a
calendar month), and continuing on the first day of each and every month
thereafter through and including April 1, 2005, and on May 1, 2005 (the
"Maturity Date"), at which time the entire outstanding principal balance
hereof, together with all accrued but unpaid interest thereon, shall be due
and payable in full. Each such monthly installment shall be applied first to
the payment of accrued interest and then to reduction of principal. If the
advance of the principal amount evidenced by this Note is made on a date other
than the first day of a calendar month, then Borrower shall pay to Lender
contemporaneously with the execution hereof interest at
<PAGE>
the Note Rate for a period from the date hereof through and including the
first day of the next succeeding calendar month.
1.02 Prepayment.
(a) This Note may be prepaid in whole but not in part (except as
otherwise specifically provided herein) at any time after the fifth (5th)
anniversary of this Note provided (i) written notice of such prepayment is
received by Lender not more than sixty (60) days and not less than thirty (30)
days prior to the date of such prepayment, (ii) such prepayment is accompanied
by all interest accrued hereunder and all other sums due hereunder and under
the other Loan Documents (as hereinafter defined), and (iii) if such
prepayment occurs prior to the date that is six (6) months prior to the
Maturity Date, Lender is paid a prepayment fee in an amount equal to the
greater of (A) one (1%) percent of the principal amount being prepaid or (B)
the positive excess of (1) the present value ("PV") of all future installments
of principal and interest due under this Note including the principal amount
due at maturity (collectively, "All Future Payments"), discounted at an
interest rate per annum equal to the sum of (a) the Treasury Constant Maturity
Yield Index published during the second full week preceding the date on which
such premium is payable for instruments having a maturity coterminous with the
remaining term of this Note, and (b) fifty (50) basis points over (2) the
principal amount of this Note outstanding immediately before such prepayment
[(PV of All Future Payments) - (principal balance at time of prepayment) =
prepayment fee]. "Treasury Constant Maturity Yield Index" shall mean the
average yield for "This Week" as reported by the Federal Reserve Board in
Federal Reserve Statistical Release H.15(519). If there is no Treasury
Constant Maturity Yield Index for instruments having a maturity coterminous
with the remaining term of this Note, then the index shall be equal to the
weighted average yield to maturity of the Treasury Constant Maturity Yield
Indices with maturities next longer and shorter than such remaining average
life to maturity, calculated by averaging (and rounding upward to the nearest
whole multiple of 1 /100 of 1% per annum, if the average is not such a
multiple) the yields of the relevant Treasury Constant Maturity Yield Indices
(rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of
1% or above rounded upward). In the event that any prepayment fee is due
hereunder, Lender shall deliver to Borrower a statement setting forth the
amount and determination of the prepayment fee, and, provided that Lender
shall have in good faith applied the formula described above, Borrower shall
not have the right to challenge the calculation or the method of calculation
set forth in any such statement in the absence of manifest error, which
calculation may be made by Lender on any day during the thirty (30) day period
preceding the date of such prepayment. Lender shall not be obligated or
required to have actually reinvested the prepaid principal balance at the
Treasury Constant Maturity Yield or otherwise as a condition to receiving the
prepayment fee. No prepayment fee or premium shall be due or payable in
connection with any prepayment of the indebtedness, in whole, evidenced by
this Note made on or after the date that is six (6) months prior to the
Maturity Date. In addition to the aforesaid prepayment fee if, upon any such
prepayment (whether prior to or after the date that is six (6) months prior to
the Maturity Date), the aforesaid prior written notice has not been timely
received by Lender, the prepayment fee shall be increased by an amount equal
to the lesser of (i) thirty (30) days' unearned interest computed on the
outstanding principal balance of this Note so prepaid and (ii) unearned
interest computed on the outstanding principal balance of this Note so prepaid
for the period from, and including, the date of prepayment through the
otherwise stated maturity date of this Note.
2
<PAGE>
(b) Partial prepayments of this Note shall not be permitted,
except partial prepayments resulting from Lender applying insurance or
condemnation proceeds to reduce the outstanding principal balance of this Note
as provided in the Security Instrument (as hereinafter defined), in which
event no prepayment fee or premium shall be due. No notice of prepayment
shall be required under the circumstance specified in the preceding sentence.
No principal amount repaid may be reborrowed. Partial payments of principal
shall be applied to the unpaid principal balance evidenced hereby but such
application shall not reduce the amount of the fixed monthly installments
required to be paid pursuant to Section 1.01 above.
(c) Except as otherwise expressly provided in Section 1.02(a)
and (b) above, the prepayment fees provided above shall be due, to the extent
permitted by applicable law, under any and all circumstances where all or any
portion of this Note is paid prior to the Maturity Date, whether such
prepayment is voluntary or involuntary (including, without limitation, any
prepayment made prior to the fifth anniversary of the date hereof), even if
such prepayment results from Lender's exercise of its rights upon Borrower's
default and acceleration of the maturity date of this Note (irrespective of
whether foreclosure proceedings have been commenced), and shall be in addition
to any other sums due hereunder or under any of the other Loan Documents. No
tender of a prepayment of this Note with respect to which a prepayment fee is
due shall be effective unless such prepayment is accompanied by the prepayment
fee. If the indebtedness of this Note shall have been declared due and
payable by Lender pursuant to Section 1.04 hereof due to a default by
Borrower, then any tender of payment of such indebtedness made prior to the
fifth anniversary date hereof must include a prepayment fee computed as
provided in Section 1.02(a) above plus an additional prepayment fee of one
percent (1%) of the principal balance of this Note.
1.03 Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by that certain Mortgage, Security
Agreement and Financing Statement (Fixture Filing) (the "Security Instrument")
from Borrower to Lender, dated as of April __, 1995, concerning property
located in Indianapolis, Indiana. The Security Instrument together with this
Note and all other documents to or of which Lender is a party or beneficiary
now or hereafter evidencing, securing, guarantying, modifying or otherwise
relating to the indebtedness evidenced hereby, are herein referred to
collectively as the "Loan Documents". All of the terms and provisions of the
Loan Documents are incorporated herein by reference. Some of the Loan
Documents are to be filed for record on or about the date hereof in the
appropriate public records.
1.04 Default. It is hereby expressly agreed that should any default
occur in the payment of principal or interest as stipulated above and such
payment is not made within fifteen (15) days of the date such payment is due
(provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should any other default occur under
any of the Loan Documents which is not cured within any applicable grace or
cure period, then a default shall exist hereunder, and in such event the
indebtedness evidenced hereby, including all sums advanced or accrued
hereunder or under any other Loan Document, and all unpaid interest accrued
thereon, shall, at the option of Lender and without notice to Borrower, at
once become due and payable and may be collected forthwith, whether or not
there has been a prior demand for payment and regardless of the stipulated
date of maturity. In the event that any payment (other than the payment of
principal due on the Maturity Date) due under the Note is not received by
Lender on the date when due
3
<PAGE>
(subject to the applicable grace period), then in addition to any default
interest payments due hereunder, Borrower shall also pay to Lender a late
charge in an amount equal to five percent (5.0%) of the amount of such
overdue payment. So long as any default exists hereunder beyond any
applicable grace or cure period, regardless of whether or not there has been
an acceleration of the indebtedness evidenced hereby, and at all times
after maturity of the indebtedness evidenced hereby (whether by
acceleration or otherwise), interest shall accrue on the outstanding principal
balance of this Note at a rate per annum equal to four percent (4.0%) plus the
interest rate which would be in effect hereunder absent such default or
maturity, or if such increased rate of interest may not be collected under
applicable law, then at the maximum rate of interest, if any, which may be
collected from Borrower under applicable law (the "Default Interest Rate"),
and such default interest shall be immediately due and payable. Borrower
acknowledges that it would be extremely difficult or impracticable to
determine Lender's actual damages resulting from any late payment or default,
and such late charges and default interest are reasonable estimates of those
damages and do not constitute a penalty. The remedies of Lender in this Note
or in the Loan Documents, or at law or in equity, shall be cumulative and
concurrent, and may be pursued singly, successively or together in Lender's
discretion. Time is of the essence of this Note. In the event this Note, or
any part hereof, is collected by or through an attorney-at-law, Borrower
agrees to pay all costs of collection including, but not limited to,
reasonable attorneys' fees.
1.05 Exculpation. Notwithstanding anything in the Loan Documents to
the contrary, but subject to the qualifications hereinbelow set forth, Lender
agrees that (i) Borrower shall be liable upon the indebtedness evidenced
hereby and for the other obligations arising under the Loan Documents to the
full extent (but only to the extent) of the security therefor, the same being
all properties (whether real or personal), rights, estates and interests now
or at any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents (collectively, the "Security
Property"), (ii) if default occurs in the timely and proper payment of all or
any part of such indebtedness evidenced hereby or in the timely and proper
performance of the other obligations of Borrower under the Loan Documents, any
judicial or other proceedings brought by Lender against Borrower shall be
limited to the preservation, enforcement and foreclosure, or any thereof, of
the liens, security titles, estates, assignments, rights and security
interests now or at any time hereafter securing the payment of this Note
and/or the other obligations of Borrower under the Loan Documents, and no
attachment, execution or other writ of process shall be sought, issued or
levied upon any assets, properties or funds of Borrower other than the
Security Property except with respect to the liability described below in this
section, and (iii) in the event of a foreclosure of such liens, security
titles, estates, assignments, rights or security interests securing the
payment of this Note and/or the other obligations of Borrower under the Loan
Documents, no judgment for any deficiency upon the indebtedness evidenced
hereby shall be sought or obtained by Lender against Borrower, except with
respect to the liability described below in this section; provided, however,
that, notwithstanding the foregoing provisions of this section, Borrower shall
be fully and personally liable and subject to legal action (a) for proceeds
paid under any insurance policies (or paid as a result of any other claim or
cause of action against any person or entity) by reason of damage, loss or
destruction to all or any portion of the Security Property,
to the full extent of such proceeds not previously delivered to Lender,
but which, under the terms of the Loan Documents, should have been
delivered to Lender, (b) for proceeds or awards resulting from the
condemnation or other taking in lieu of condemnation of all or any portion of
the Security Property,
4
<PAGE>
or any of them, to the full extent of such proceeds or awards not previously
delivered to Lender, but which, under the terms of the Loan Documents,
should have been delivered to Lender, (c) for all tenant security deposits
or other refundable deposits paid to or held by Borrower or any other person
or entity in connection with leases of all or any portion of the Security
Property which are not applied in accordance with the terms of the applicable
lease or other agreement, (d) for rent and other payments received from
tenants under leases of all or any portion of the Security Property paid
more than one month in advance, (e) for rents, issues, profits and revenues
of all or any portion of the Security Property received or applicable to a
period after any notice of default from Lender hereunder or under the Loan
Documents in the event of any default by Borrower hereunder or thereunder
which are not either applied to the ordinary and necessary expenses of
owning and operating the Security Property or paid to Lender, (f) for waste
committed on the Security Property, damage to the Security Property as a
result of the intentional misconduct or gross negligence of Borrower or
any of its principals, officers or general partners, or any agent or employee
of any such persons, or any removal of the Security Property in violation of
the terms of the Loan Documents, to the full extent of the losses or damages
incurred by Lender on account of such failure, (g) for failure to pay any
valid taxes, assessments, mechanic's liens, materialmen's liens or other
liens which could create liens on any portion of the Security Property which
would be superior to the lien or security title of the Security Instrument
or the other Loan Documents, to the full extent of the amount claimed by
any such lien claimant, (h) for all obligations and indemnities of
Borrower under the Loan Documents relating to hazardous or toxic
substances or compliance with environmental laws and regulations to the full
extent of any losses or damages (including, but not limited to, those
resulting from diminution in value of any Security Property) incurred by
Lender as a result of the existence of such hazardous or toxic substances or
failure to comply with environmental laws or regulations, and (i) for fraud or
material misrepresentation by Borrower or any of its principals, officers, or
general partners, any guarantor, any indemnitor or any agent, employee or
other person authorized or apparently authorized to make statements or
representations on behalf of Borrower, any principal, officer or partner of
Borrower, any guarantor or any indemnitor, to the full extent of any losses,
damages and expenses of Lender on account thereof. References herein to
particular sections of the Loan Documents shall be deemed references to such
sections as affected by other provisions of the Loan Documents relating
thereto. Nothing contained in this section shall (1) be deemed to be a
release or impairment of the indebtedness evidenced by this Note or the other
obligations of Borrower under the Loan Documents or the lien of the Loan
Documents upon the Security Property, or (2) preclude Lender from foreclosing
the Loan Documents in case of any default or from enforcing any of the other
rights of Lender except as stated in this section, or (3) limit or impair in
any way whatsoever the Indemnity and Guaranty Agreement and the Hazardous
Substances Indemnity Agreement each of even date executed and delivered in
connection with the indebtedness evidenced by this Note or release, relieve,
reduce, waive or impair in any way whatsoever, any obligation of any party to
such Indemnity and Guaranty Agreement and Hazardous Substances Indemnity
Agreement.
ARTICLE II - GENERAL CONDITIONS
2.01 No Waiver: Amendment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a partial or
past due payment, or indulgences granted
5
<PAGE>
from time to time shall be construed (i) as a novation of this Note or
as a reinstatement of the indebtedness evidenced hereby or as a waiver of such
right of acceleration or of the right of Lender thereafter to insist upon
strict compliance with the terms of this Note, or (ii) to prevent the
exercise of such right of acceleration or any other right granted hereunder
or by any applicable laws; and Borrower hereby expressly waives the benefit
of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in
conflict with the foregoing. No extension of the time for the payment of
this Note or any installment due hereunder, made by agreement with any person
now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of
Borrower under this Note, either in whole or in part unless Lender agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
2.02 Waivers. Presentment for payment, demand, protest and notice of
demand, protest and nonpayment and all other notices are hereby waived by
Borrower. Borrower hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption,
appraisement, exemption and homestead now or hereafter provided by the
Constitution and laws of the United States of America and of each state
thereof, both as to itself and in and to all of its property, real and
personal, against the enforcement and collection of the obligations evidenced
by this Note or the other Loan Documents.
2.03 Limit of Validity. The provisions of this Note and of all
agreements between Borrower and Lender, whether now or existing or hereafter
arising and whether written of oral, are hereby expressly limited so that in
no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of this Note or otherwise, shall the amount paid,
or agreed to be paid ("Interest"), to Lender for the use, forbearance or
retention of the money loaned under this Note exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
performance or fulfillment of any provision hereof or of any agreement between
Borrower and Lender shall, at the time performance or fulfillment of such
provision shall be due, exceed the limit for Interest prescribed by law or
otherwise transcend the limit of validity prescribed by applicable law, then
ipso facto the obligation to be performed or fulfilled shall be reduced to
such limit and if, from any circumstance whatsoever, Lender shall ever receive
anything of value deemed Interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive Interest shall be applied to
the reduction of the principal balance owing under this Note in the inverse
order of its maturity (whether or not then due) or at the option of Lender be
paid over to Borrower, and not to the payment of Interest. All Interest
(including, but not limited to, any amounts or payments deemed to be Interest)
paid or agreed to be paid to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal balance of this Note so
that the Interest thereof for such full period will not exceed the maximum
amount permitted by applicable law. This Section 2.03 will control all
agreements between Borrower and Lender.
2.04 Use of Funds. Borrower hereby warrants, represents and covenants
that no funds disbursed hereunder shall be used for personal, family or
household purposes.
6
<PAGE>
2.05 Unconditional Payment. Borrower is and shall be obligated to pay
principal, interest and any and all other amounts which become payable
hereunder or under the other Loan Documents absolutely and unconditionally and
without any abatement, postponement, diminution or deduction and without any
reduction for counterclaim or setoff. In the event that at any time any
payment received by Lender hereunder shall be deemed by a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
any bankruptcy, insolvency or other debtor relief law, then the obligation to
make such payment shall survive any cancellation or satisfaction of this Note
or return thereof to Borrower and shall not be discharged or satisfied with
any prior payment thereof or cancellation of this Note, but shall remain a
valid and binding obligation enforceable in accordance with the terms and
provisions hereof, and such payment shall be immediately due and payable upon
demand.
2.06 Miscellaneous. This Note shall be interpreted, construed and
enforced according to the laws of the State of Indiana. The terms and
provisions hereof shall be binding upon and inure to the benefit of Borrower
and Lender and their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of
the parties or by operation of law. As used herein, the terms "Borrower" and
"Lender" shall be deemed to include their respective heirs, executors, legal
representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. If Borrower consists
of more than one person or entity, each shall be jointly and severally liable
to perform the obligations of Borrower under this Note. All personal pronouns
used herein, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural and vice
versa. Titles of articles and sections are for convenience only and in no way
define, limit, amplify or describe the scope or intent of any provisions
hereof. Time is of the essence with respect to all provisions of this Note.
This Note and the other Loan Documents contain the entire agreements between
the parties hereto relating to the subject matter hereof and thereof and all
prior agreements relative hereto and thereto which are not contained herein or
therein are terminated.
Borrower's Tax Identification No.:
57-0995341
7
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note as of the date first
above written.
PICKWICK PLACE AP XII, L.P.,
a South Carolina limited partnership
By: Angeles Partners XII GP Limited
Partnership, a South Carolina
limited partnership, its sole
general partner
By: GP Services III, Inc.,
a Delaware corporation,
its sole general partner
By: /s/ Robert D. Long Jr.
Name:Robert D. Long Jr.
Title: CAO/Controller
PAY TO THE ORDER OF _______________________________________________________,
WITHOUT RECOURSE.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: _______________________
Name:
Title:
8
<PAGE>
STATE OF South Carolina )
) ss:
COUNTY OF Greenville )
Before me, a Notary Public in and for said County and State, personally
appeared Robert D. Long Jr._, the CAO/Controller____ of GP Services III,
Inc., a Delaware corporation, said corporation being the sole General
Partner of Angeles Partners XII GP Limited Partnership, a South Carolina
limited partnership being the sole General Partner of Pickwick Place AP XII,
L.P., a South Carolina limited partnership and acknowledged the execution
of the foregoing instrument as such officer acting for and on behalf
of said corporation acting in its capacity as General Partner for and
on behalf of said limited partnership, and who having been duly sworn, stated
that any representations therein contained are true and correct.
Witness my hand and Notarial Seal this 17th day of April, 1995.
\s\Antoinette m. Wolf______________
(signature)
Antoinette M. Wolf
My Commission Expires: (printed name) Notary Public
Feb. 25, 2004 Resident of Greenville County
THIS INSTRUMENT WAS PREPARED BY BRIAN J. NEILINGER, ESQ.
OF ORRICK, HERRINGTON & SUTCLIFFE
9
<PAGE>
MORTGAGE, SECURITY AGREEMENT AND FINANCING STATEMENT
(FIXTURE FILING)
PICKWICK PLACE AP XII, L.P.
MORTGAGOR
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
MORTGAGEE
DATED: AS OF APRIL 17, 1995
THIS INSTRUMENT AFFECTS REAL AND PERSONAL PROPERTY SITUATED IN THE STATE OF
INDIANA, COUNTY OF MARION, KNOWN BY THE STREET ADDRESS OF 1130 RACQUET CLUB
NORTH DRIVE, INDIANAPOLIS, INDIANA.
THIS INSTRUMENT IS TO BE FILED AND INDEXED IN THE REAL ESTATE RECORDS AND IS
ALSO TO BE INDEXED IN THE INDEX OF UCC-2 FINANCING STATEMENTS (FIXTURE
FILINGS) UNDER THE NAMES OF MORTGAGOR, AS "DEBTOR", AND MORTGAGEE, AS
"SECURED PARTY". SEE SECTION 4.23 OF THIS INSTRUMENT FOR DESCRIPTION OF
COLLATERAL AND OTHER DETAILS.
Record and Return to:
Orrick, Herrington & Sutcliffe
599 Lexington Avenue
New York, New York 10022
Attention: Susan Inkeles
<PAGE>
THIS MORTGAGE, SECURITY AGREEMENT AND FINANCING STATEMENT (FIXTURE
FILING) (this "Mortgage") is made as of the 17th day of April, 1995, by
P I C K WICK PLACE AP XII, L.P., a South Carolina limited partnership
("Mortgagor"), whose address is One Insignia Financial Plaza, Greenville,
North Carolina 29602 in favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
a national banking association ("Mortgagee"), whose address is One First Union
Center, TW-8, Charlotte, North Carolina 28288.
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH IS HEREBY ACKNOWLEDGED, MORTGAGOR HEREBY IRREVOCABLY MORTGAGES,
WARRANTS, GRANTS, BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND
ASSIGNS, AND GRANTS A SECURITY INTEREST, TO MORTGAGEE, ITS SUCCESSORS AND
ASSIGNS, with power of sale, in all of Mortgagor's estate, right, title and
interest in, to and under any and all of the following described property,
whether now owned or hereafter acquired (collectively, the "Property"):
A. All that certain real property situated at 1130 Racquet Club
North Drive, County of Marion, State of Indiana, more particularly described
on Exhibit A attached hereto and incorporated herein by this reference (the
"Real Estate"), together with all of the easements, rights, privileges,
franchises, tenements, hereditaments and appurtenances now or hereafter
thereunto belonging or in any way appertaining and all of the estate, right,
title, interest, claim and demand whatsoever of Mortgagor therein or thereto,
either at law or in equity, in possession or in expectancy, now or hereafter
acquired;
B. All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Real Estate
(the "Improvements");
C. All furniture, furnishings, fixtures, goods, equipment,
inventory or personal property owned by Mortgagor and now or hereafter located
on, attached to or used in and about the Improvements. including, but not
limited to, all machines, engines, boilers, dynamos, elevators, stokers,
tanks, cabinets, awnings, screens, shades, blinds, carpets, draperies, lawn
mowers, and all appliances, plumbing, heating, air conditioning, lighting,
ventilating, refrigerating, disposals and incinerating equipment, and all
fixtures and appurtenances thereto, and such other goods and chattels and
personal property owned by Mortgagor as are now or hereafter used or furnished
in operating the Improvements, or the activities conducted therein, and all
building materials and equipment hereafter situated on or about the Real
Estate or Improvements, and all warranties and guaranties relating thereto,
and all additions thereto and substitutions and replacements therefor
(exclusive of any of the foregoing owned or leased by tenants of space in the
Improvements);
D. All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, passages, sewer rights, and other emblements
now or hereafter located on the Real Estate or under
2
<PAGE>
or above the same or any part or parcel thereof, and all estates, rights,
titles, interests, tenements, hereditaments and appurtenances, reversions
and remainders whatsoever, in any way belonging, relating or appertaining
to the Real Estate and/or Improvements or any part thereof, or which
hereafter shall in any way belong, relate or be appurtenant thereto, whether
now owned or hereafter acquired by Mortgagor;
E. All water, ditches, wells, reservoirs and drains and all
water, ditch, well, reservoir and drainage rights which are appurtenant to,
located on, under or above or used in connection with the Real Estate or the
Improvements, or any part thereof, whether now existing or hereafter created
or acquired;
F. All minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or above the Real
Estate;
G. All cash funds, deposit accounts and other rights and evidence
of rights to cash, now or hereafter created or held by Mortgagee pursuant to
this Mortgage or any other of the Loan Documents (as hereinafter defined),
including, without limitation, all funds now or hereafter on deposit in the
Impound Account (as hereinafter defined);
H. All leases, licenses, concessions and occupancy agreements of
the Real Estate or the Improvements now or hereafter entered into and all
rents, royalties, issues, profits, revenue, income and other benefits
(collectively, the "Rents and Profits") of the Real Estate or the
Improvements, now or hereafter arising from the use or enjoyment of all or any
portion thereof or from any present or future lease, license, concession,
occupancy agreement or other agreement pertaining thereto or arising from any
of the Contracts (as hereinafter defined) or any of the General Intangibles
(as hereinafter defined) and all cash or securities deposited to secure
performance by the tenants, lessees or licensees, as applicable, of their
obligations under any such leases, licenses, concessions or occupancy
agreements, whether said cash or securities are to be held until the
expiration of the terms of said leases, licenses, concessions or occupancy
agreements or applied to one or more of the installments of rent coming due
prior to the expiration of said terms, subject to, however, the provisions
contained in Section 1.11 hereinbelow;
I. All contracts and agreements now or hereafter entered into
covering any part of the Real Estate or the Improvements (collectively, the
"Contracts") and all revenue, income and other benefits thereof, including,
without limitation, management agreements, service contracts, maintenance
contracts, equipment leases, personal property leases and any contracts or
documents relating to construction on any part of the Real Estate or the
Improvements (including plans, drawings, surveys, tests, reports, bonds and
governmental approvals) or to the management or operation of any part of the
Real Estate or the Improvements;
J. All present and future monetary deposits given to any public
or private utility with respect to utility services furnished to any part to
the Real Estate or the Improvements;
K. All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles
(including without limitation, trademarks,
3
<PAGE>
trade names, servicemarks and symbols now or hereafter used in connection
with any part of the Real Estate or the Improvements, all names by which
the Real Estate or the Improvements may be operated or known, all rights
to carry on business under such names, and all rights, interest and privileges
which Mortgagor has or may have as developer or declarant under any
covenants, restrictions or declarations now or hereafter relating to the Real
Estate or the Improvements) and all notes or chattel paper now or hereafter
arising from or by virtue of any transactions related to the Real Estate
or the Improvements (collectively, the "General Intangibles");
L. All water taps, sewer taps, certificates of occupancy,
permits, licenses, franchises, certificates, consents, approvals and other
rights and privileges now or hereafter obtained in connection with the Real
Estate or the Improvements and all present and future warranties and
guaranties relating to the Improvements or to any equipment, fixtures,
furniture, furnishings, personal property or components of any of the
foregoing now or hereafter located or installed on the Real Estate or the
Improvements;
M. All building materials, supplies and equipment now or
hereafter placed on the Real Estate or in the Improvements and all
architectural renderings, models, drawings, plans, specifications, studies and
data now or hereafter relating to the Real Estate or the Improvements;
N. All right, title and interest of Mortgagor in any insurance
policies or binders now or hereafter relating to the Property including any
unearned premiums thereon; and
O . All proceeds, products, substitutions and accessions
(including claims and demands therefor) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation awards.
FOR THE PURPOSES OF SECURING:
(1) The debt evidenced by that certain promissory note (such
promissory note, together with any and all renewals, modifications,
consolidations and extensions thereof, is hereinafter referred to as the
"Note") of even date with this Mortgage, made by Mortgagor to the order of
Mortgagee in the original principal amount of Six million six hundred thousand
dollars-------------- ($6,600,000_____),
together with interest as therein provided, which Note matures on May 1, 2005;
(2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and
contained in any other agreements, documents or instruments now or hereafter
evidencing, securing or otherwise relating to the indebtedness evidenced by
the Note (the Note, this Mortgage, and such other agreements, documents and
instruments, together with any and all renewals, amendments, extensions and
modifications thereof, are hereinafter collectively referred to as the "Loan
Documents") and the payment of all other sums therein covenanted to be paid
and any judgment(s) or final decree(s) rendered to collect any money
obligations of the Mortgagor to the Mortgagee and/or to enforce the
performance or collection of all covenants, agreements, other obligations and
liabilities of the Mortgagor under this Mortgage and the other Loan Documents;
4
<PAGE>
(3) Any and all additional advances made by Mortgagee to protect
or preserve the Property or the lien or security interest created hereby on
the Property, or for taxes, assessments or insurance premiums as hereinafter
provided or for performance of any of Mortgagor's obligations hereunder or
under the other Loan Documents or for any other purpose provided herein or in
the other Loan Documents (whether or not the original Mortgagor remains the
owner of the Property at the time of such advances); and
(4) Any and all other indebtedness now owing or which may
hereafter be owing by Mortgagor to Mortgagee, however and whenever incurred or
evidenced, whether express or implied, direct or indirect, absolute or
contingent, or due or to become due, and all renewals, modifications,
consolidations, replacements and extensions thereof.
(All of the sums referred to in Paragraphs (1) through (4) above
are herein sometimes referred to as the "secured indebtedness" or the
"indebtedness secured hereby").
TO HAVE AND TO HOLD the Property unto Mortgagee, its successors
and assigns forever, for the purposes and uses herein set forth.
PROVIDED, HOWEVER, that if the principal and interest and all
other sums due or to become due under the Note, including, without limitation,
any prepayment fees required pursuant to the terms of the Note, shall have
been paid at the time and in the manner stipulated therein and all other sums
payable hereunder and all other indebtedness secured hereby shall have been
paid and all other covenants contained in the Loan Documents shall have been
performed, then, in such case, this Mortgage shall be satisfied and the
estate, right, title and interest of Mortgagee in the Property shall cease,
and upon payment to Mortgagee of all reasonable costs and expenses incurred
for the preparation of the release hereinafter referenced and all recording
costs if allowed by law, Mortgagee shall release this Mortgage and the lien
hereof by proper instrument.
ARTICLE I
COVENANTS OF MORTGAGOR
For the purpose of further securing the indebtedness secured
hereby and for the protection of the security of this Mortgage, for so long as
the indebtedness secured hereby or any part thereof remains unpaid, Mortgagor
represents, warrants, covenants and agrees as follows:
1.1 Warranties of Mortgagor. Mortgagor, for itself and its
successors and assigns, does hereby represent, warrant and covenant to and
with Mortgagee, its successors and assigns, that:
(a) To the best of Mortgagor's knowledge, Mortgagor has good and
marketable fee simple title to the Property, subject only to those matters
expressly set forth on Exhibit B attached hereto and by this reference
incorporated herein (the "Permitted Exceptions"), and has full power and
lawful authority to grant, bargain, sell, convey, assign, transfer and
mortgage its interest in the Property in the manner and form hereby done or
intended. Mortgagor will preserve its interest in and title to the Property
and will forever warrant and defend the same to Mortgagee against any and all
claims whatsoever and will forever warrant and defend the validity and
priority of the lien and
5
<PAGE>
security interest created herein against the claims of all persons and
parties whomsoever, subject to the Permitted Exceptions. The foregoing
warranty of title shall survive the foreclosure of this Mortgage
and shall inure to the benefit of and be enforceable by Mortgagee in the event
Mortgagee acquires title to the Property pursuant to any foreclosure;
(b) No bankruptcy or insolvency proceedings are pending or
contemplated by Mortgagor or, to the best knowledge of Mortgagor, against
Mortgagor or by or against any endorser, cosigner or guarantor of the Note;
(c) All reports, certificates, affidavits, statements and other
data furnished by Mortgagor to Mortgagee in connection with the loan evidenced
by the Note are true and correct in all material respects and do not omit to
state any fact or circumstance necessary to make the statements contained
therein not materially misleading;
(d) The execution, delivery and performance of this Mortgage, the
Note and all of the other Loan Documents have been duly authorized by all
necessary action to be, and are, binding and enforceable against Mortgagor in
accordance with the respective terms thereof and do not contravene, result in
a breach of or constitute (upon the giving of notice or the passage of time or
both) a default under the partnership agreement, articles of incorporation or
other organizational documents of Mortgagor or any contract or agreement of
any nature to which Mortgagor is a party or by which Mortgagor or any of its
property may be bound and do not violate or contravene any law, order, decree,
rule or regulation to which Mortgagor is subject;
(e) To the best of Mortgagor's knowledge and belief, the Real
Estate and the Improvements, and the intended use thereof by Mortgagor comply
in all material respects with all applicable restrictive covenants, zoning
ordinances, subdivision and building codes, flood disaster laws, applicable
health and environmental laws and regulations and all other ordinances, orders
or requirements issued by any state, federal or municipal authorities having
or claiming jurisdiction over the Property. The Real Estate and Improvements
constitute a separate tax parcel for purposes of ad valorem taxation. The
Real Estate and Improvements do not require any rights over, or restrictions
against, other property in order to comply with any of the aforesaid
governmental ordinances, orders or requirements.
(f) All utility services necessary and sufficient for the full
use, occupancy, operation and disposition of the Real Estate and the
Improvements for their intended purposes are available to the Property,
including water, storm sewer, sanitary sewer, gas, electric, cable and
telephone facilities, through public rights-of-way or perpetual private
easements approved by Mortgagee;
(g) All streets, roads, highways, bridges and waterways necessary
for access to and full use, occupancy, operation and disposition of the Real
Estate and the Improvements have been completed, have been dedicated to and
accepted by the appropriate municipal authority and are open and available to
the Real Estate and the Improvements without further condition or cost to
Mortgagor;
6
<PAGE>
(h) All curb cuts, driveways and traffic signals shown on the
survey delivered to Mortgagee prior to the execution and delivery of this
Mortgage are existing and have been fully approved by the appropriate
governmental authority;
( i ) There are no judicial, administrative, mediation or
arbitration actions, suits or proceedings pending or threatened against or
affecting Mortgagor, (and, if Mortgagor is a partnership, any of its general
partners) or the Property which, if adversely determined, would materially
impair either the Property or Mortgagor's ability to perform the covenants or
obligations required to be performed under the Loan Documents;
(j) The Property is free from delinquent water charges, sewer
rents, taxes and assessments;
(k) As of the date of this Mortgage, the Property is free from
unrepaired damage caused by fire, flood, accident or other casualty;
(l) As of the date of this Mortgage, no part of the Real Estate
or the Improvements has been taken in condemnation, eminent domain or like
proceeding nor is any such proceeding pending or to Mortgagor's knowledge and
belief, threatened or contemplated;
(m) To the best of Mortgagor's knowledge, Mortgagor possesses all
franchises, patents, copyrights, trademarks, tradenames, licenses and permits
adequate for the conduct of its business substantially as now conducted;
(n) The Improvements are structurally sound, in good repair and
free of defects in materials and workmanship and have been constructed and
installed in substantial compliance with the plans and specifications relating
thereto except as otherwise disclosed in that certain engineering report dated
April 13, 1995 and prepared by Inspection & Valuation International. All
major building systems located within the Improvements, including, without
limitation, the heating and air conditioning systems and the electrical and
plumbing systems, are in good working order and condition;
(o) Mortgagor has delivered to Mortgagee true, correct and
complete copies of all Contracts and all amendments thereto or modifications
thereof;
(p) Mortgagor and the Property are free from any past due
obligations for sales and payroll taxes;
(q) There are no security agreements or financing
statements affecting any of the Property other than (i) as disclosed in
writing by Mortgagor to Mortgagee prior to the date hereof and (ii) the
security agreements and financing statements created in favor of Mortgagee;
and
(r) The Property forms no part of any property owned, used or
claimed by Mortgagor as a residence or business homestead and is not exempt
from forced sale under the laws
7
<PAGE>
of the State of Indiana. Mortgagor hereby disclaims and renounces each
and every claim to all or any portion of the Property as a homestead.
1.2 Defense of Title. If, while this Mortgage is in force, the
title to the Property or the interest of Mortgagee therein shall be the
subject, directly or indirectly, of any action at law or in equity, or be
attached directly or indirectly, or endangered, clouded or adversely affected
in any manner, Mortgagor, at Mortgagor's expense, shall take (or cause the
applicable title company insuring the lien of this Mortgage to take) all
necessary and proper steps for the defense of said title or interest,
including the employment of counsel approved by Mortgagee, the prosecution or
defense of litigation, and the compromise or discharge of claims made against
said title or interest. Notwithstanding the foregoing, in the event that
Mortgagee determines that Mortgagor (or such title company) is not adequately
performing its obligations under this Section (beyond any applicable grace or
cure period), Mortgagee may, without limiting or waiving any other rights or
remedies of Mortgagee hereunder, take such steps, with respect thereto as
Mortgagee shall deem necessary or proper and any and all third party costs and
expenses incurred by Mortgagee in connection therewith, together with interest
thereon at the Default Interest Rate (as defined in the Note) from the date
incurred by Mortgagee until actually paid by Mortgagor, shall be immediately
paid by Mortgagor on demand and shall be secured by this Mortgage and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.
1.3 Performance of Obligations. Mortgagor shall pay when due
the principal of and the interest on the indebtedness evidenced by the Note
without relief from valuation and appraisement laws. Mortgagor shall also pay
all charges, fees and other sums required to be paid by Mortgagor as provided
in the Loan Documents, and shall observe, perform and discharge all
obligations, covenants and agreements to be observed, performed or discharged
by Mortgagor set forth in the Loan Documents in accordance with their terms.
Further, Mortgagor shall promptly perform and comply with all covenants,
conditions, obligations and prohibitions required of Mortgagor in connection
with any other document or instrument affecting title to the Property, or any
part thereof, regardless of whether such document or instrument is superior or
subordinate to this Mortgage.
1.4 Insurance. Mortgagor shall, at Mortgagor's expense,
maintain in force and effect on the Property at all times while this Mortgage
continues in effect the following insurance:
(a) "All-risk" coverage insurance against loss or damage to the
Property from all-risk perils. The amount of such insurance shall be not less
than one hundred percent (100%) of the full replacement cost of the
Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Property and owned by
Mortgagor from time to time, without reduction for depreciation. The
determination of the replacement cost amount shall be adjusted annually to
comply with the requirements of the insurer issuing such coverage or, at
Mortgagee's election, by reference to such indices, appraisals or information
as Mortgagee determines in its reasonable discretion. Full replacement cost,
as used herein, means, with respect to the Improvements, the cost of replacing
the Improvements without regard to deduction for depreciation, exclusive of
the cost of excavations, foundations and footings below the lowest basement
floor, and means, with respect to such furniture, furnishings, fixtures,
equipment and other
8
<PAGE>
items, the cost of replacing the same. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or
a waiver of any coinsurance provisions, all subject to Mortgagee's approval.
(b) Commercial general liability insurance for personal injury,
bodily injury, death and property damage liability in amounts not less than
$5,000,000 (inclusive of umbrella coverage), combined single limit "per
occurrence" for bodily injury, personal injury and property damage. This
policy must contain, but not be limited to, coverage for premises and
operations liability, contractual liability, hired and non-owned automobile
liability, personal injury liability and property damage liability. During
any construction on the Real Estate, Mortgagor's general contractor for such
construction shall also provide the insurance required in this Subsection (b).
Mortgagee hereby retains the right to periodically review the amount of said
liability insurance being maintained by Mortgagor and to require an increase
in the amount of said liability insurance should Mortgagee deem an increase to
be reasonably prudent under then existing circumstances.
(c) Insurance covering the major components of the central
heating, air conditioning and ventilating systems, boilers, other pressure
vessels, high pressure piping and machinery, elevators and escalators, if any,
and other similar equipment installed in the Improvements, in an amount equal
to one hundred percent (100%) of the full replacement cost of the Improvements
which policies shall insure against physical damage to and loss of occupancy
and use of the Improvements arising out of an accident or breakdown covered
thereunder.
(d) If the Real Estate or any part thereof is identified by the
Secretary of Housing and Urban Development as being situated in an area now or
subsequently designated as having special flood hazards (including, without
limitation, those areas designated as Zone A or Zone B), flood insurance in an
amount equal to one hundred (100%) of the replacement cost of the Improvements
or the maximum amount of flood insurance available, whichever is the lesser.
(e) During the period of any construction on the Real Estate or
renovation or alteration of the Improvements, a so-called "Builder's All-Risk
Completed Value" or "Course of Construction" insurance policy in non-reporting
form for any Improvements under construction, renovation or alteration in an
amount approved by Mortgagee and Worker's Compensation Insurance covering all
persons engaged in such construction, renovation or alteration.
(f) Rental value or rental income insurance in amounts sufficient
to compensate Mortgagor for all Rents and Profits during a period of not less
than one year in which the Property may be damaged or destroyed.
(g) Such other insurance on the Property or on any replacements
or substitutions thereof or additions thereto as may from time to time be
reasonably required by Mortgagee against other insurable hazards or casualties
which at the time are commonly insured against in the case of property
similarly situated, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
9
<PAGE>
All such insurance shall (i) be with insurers authorized to do business
in the state within which the Real Estate is located and who have and maintain
a rating of at least the third (3rd) highest rating category of Moody's or
Standard and Poor's, (ii) contain the complete address of the Real Estate (or
a complete legal description), (iii) be for terms of at least one year, (iv)
contain deductibles no greater than $10,000.00 or as otherwise required by
Mortgagee, and (v) be subject to the reasonable approval of Mortgagee as to
insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates.
Mortgagor shall as of the date hereof deliver to Mortgagee evidence that
said insurance policies have been paid current as of the date hereof and
certified copies of such insurance policies and original certificates of
insurance signed by an authorized agent evidencing such insurance satisfactory
to Mortgagee. Mortgagor shall renew all such insurance and deliver to
Mortgagee certificates evidencing such renewals at least thirty (3O) days
before any such insurance shall expire. Without limiting the required
endorsements to insurance policies, Mortgagor further agrees that all such
policies shall provide that proceeds thereunder shall be payable to Mortgagee,
its successors and assigns, pursuant and subject to a mortgagee clause
(without contribution) of standard form attached to, or otherwise made a part
of, the applicable policy and that Mortgagee, its successors and assigns,
shall be named as an additional insured under all liability insurance
policies. Mortgagor further agrees that all such insurance policies: (i)
shall provide for at least thirty (30) days' prior written notice to Mortgagee
prior to any cancellation or termination thereof and prior to any modification
thereof which affects the interest of Mortgagee; (ii) shall contain an
endorsement or agreement by the insurer that any loss shall be payable to
Mortgagee in accordance with the terms of such policy notwithstanding any act
or negligence of Mortgagor which might otherwise result in forfeiture of such
insurance; and (iii) shall either name Mortgagee as an additional insured or
waive all rights of subrogation against Mortgagee. The delivery to Mortgagee
of the insurance policies or the certificates of insurance as provided above
shall constitute an assignment of all proceeds payable under such insurance
policies by Mortgagor to Mortgagee as further security for the indebtedness
secured hereby. In the event of foreclosure of this Mortgage, or other
transfer of title to the Property in extinguishment in whole or in part of the
secured indebtedness, all right, title and interest of Mortgagor in and to all
proceeds payable under such policies then in force concerning the Property
shall thereupon vest in the purchaser at such foreclosure, or in Mortgagee or
other transferee in the event of such other transfer of title. Approval of
any insurance by Mortgagee shall not be a representation of the solvency of
any insurer or the sufficiency of any amount of insurance. In the event
Mortgagor fails to provide, maintain, keep in force of deliver and furnish to
Mortgagee the policies of insurance required by this Mortgage or evidence of
their renewal as required herein, Mortgagee may, but shall not be obligated
to, procure such insurance and Mortgagor shall pay all amounts advanced by
Mortgagee, together with interest thereon at the Default Interest Rate from
and after the date advanced by Mortgagee until actually repaid by Mortgagor,
promptly upon demand by Mortgagee. Any amounts so advanced by Mortgagee,
together with interest thereon, shall be secured by this Mortgage and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. Mortgagee shall not be responsible for nor incur any
liability for the insolvency of the insurer or other failure of the insurer to
perform, even though Mortgagee has caused the insurance to be placed with the
insurer after failure of Mortgagor to furnish such insurance.
10
<PAGE>
1.5 Payment of Taxes. Mortgagor shall pay or cause to be paid,
except to the extent provision is actually made therefor pursuant to Section
1.6 of this Mortgage, all taxes and assessments which are or may become a lien
on the Property or which are assessed against or imposed upon the Property.
Upon Mortgagee's request, Mortgagor shall promptly furnish Mortgagee with
receipts (or if receipts are not immediately available, with copies of
canceled checks evidencing payment with receipts to follow promptly after they
become available) showing payment of such taxes and assessments at least
fifteen (15) days prior to the applicable delinquency date therefor.
Notwithstanding the foregoing, Mortgagor may in good faith, by appropriate
proceedings and upon notice to Mortgagee, contest the validity, applicability
or amount of any asserted tax or assessment so long as (a) such contest is
diligently pursued, (b) Mortgagee determines, in its reasonable opinion, that
such contest suspends the obligation to pay the tax and that nonpayment of
such tax or assessment will not result in the sale, loss, forfeiture or
diminution of the Property or any part thereof or any interest of Mortgagee
therein, and (c) prior to the earlier of the commencement of such contest or
the delinquency date of the asserted tax or assessment, Mortgagor deposits in
the Impound Account (as hereinafter defined) an amount determined by Mortgagee
to be adequate to cover the payment of such tax or assessment and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that Mortgagor shall promptly cause to be paid any amount adjudged by
a court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final; and provided,
further, that in any event each such contest shall be concluded, the taxes,
assessments, interest, costs and penalties shall be paid prior to the date any
writ or order is issued under which the Property may be sold, lost or
forfeited.
1.6 Tax and Insurance Impound Account. If at any time during the
term of the loan secured hereby either of the following shall occur: (i) a
default by Mortgagor hereunder or under any of the other Loan Documents which
default has not been cured within any applicable grace or cure period provided
herein or in the other Loan Documents; (ii) all bank accounts in connection
with the Property are not maintained with First Union National Bank of North
Carolina (or one of its affiliates); or (iii) First Union Mortgage Corporation
is replaced (by means other than a voluntary transfer e.g., a default under
the servicing agreement) as Mortgagee's master or sub-servicing agent of the
loan secured hereby (the occurrence of any of the events described in (i),
(ii) or (iii) above is an "Impound Event"), then Mortgagor shall establish and
maintain at all times while this Mortgage continues in effect an impound
account (the "Impound Account") with Mortgagee for payment of real estate
taxes and assessments and insurance on the Property and as additional security
for the indebtedness secured hereby. Commencing on the first succeeding
payment date under the Note, following notice of the occurrence of an Impound
Event, Mortgagor shall deposit in the Impound Account an amount determined by
Mortgagee to be necessary to ensure that there will be on deposit with
Mortgagee an amount which, when added to the monthly payments subsequently
required to be deposited with Mortgagee hereunder on account of real estate
taxes, assessments and insurance premiums, will result in there being on
deposit with Mortgagee in the Impound Account an amount sufficient to pay the
next due annual installment of real estate taxes and assessment on the
Property at least one (1) month prior to the delinquency date thereof (if paid
in one installment) and the next due annual insurance premiums with respect to
the Property at least one (1) month prior to the due date thereof (if paid in
one installment). Thereafter on each monthly payment date under the Note,
Mortgagor shall pay to Mortgagee, concurrently with and in addition to the
monthly payment due under the Note and until the Note and all other
indebtedness secured hereby is fully paid and
11
<PAGE>
performed, deposits in an amount equal to one-twelfth (1/12) of the amount
of the annual real estate taxes and assessments that will next become
due and payable on the Property, plus one-twelfth (1/12) of the amount of
the annual premiums that will next become due and payable on insurance
policies which Mortgagor is required to maintain hereunder, each as estimated
and determined by Mortgagee. So long as no default beyond any applicable
grace or cure period hereunder or under the other Loan Documents has
occurred and is continuing, all sums in the Impound Account shall be held by
Mortgagee in the Impound Account to pay said taxes, assessments and insurance
premiums in one installment before the same become delinquent. Mortgagor
shall be responsible for ensuring the receipt by Mortgagee, at least
thirty (30) days prior to the respective due date for payment thereof, of
all bills, invoices and statements for all taxes, assessments and
insurance premiums to be paid from the Impound Account, and so long as no
default beyond any applicable grace or cure period hereunder or under the
other Loan Documents has occurred and is continuing, Mortgagee shall pay the
governmental authority or other party entitled thereto directly to the
extent funds are available for such purpose in the Impound Account. In making
any payment from the Impound Account, Mortgagee shall be entitled to rely on
any bill, statement or estimate procured from the appropriate public office or
insurance company or agent without any inquiry into the accuracy of such bill,
statement or estimate and without any inquiry into the accuracy, validity,
enforceability or contestability of any tax, assessment, valuation, sale,
forfeiture, tax lien or title or claim thereof. The Impound Account shall
not, unless otherwise explicitly required by applicable law, be or be deemed
to be escrow or trust funds, but, at Mortgagee's option and in Mortgagee's
discretion, may either be held in a separate account or be commingled by
Mortgagee with the general funds of Mortgagee. Interest on the funds
contained in the Impound Account shall be paid by Mortgagee to Mortgagor. The
Impound Account is solely for the protection of Mortgagee and entails no
responsibility on Mortgagee's part beyond the payment of taxes, assessments
and insurance premiums following receipt of bills, invoices or statements
therefor in accordance with the terms hereof and beyond the allowing of due
credit for the sums actually received. Upon assignment of this Mortgage by
Mortgagee, any funds in the Impound Account shall be turned over to the
assignee and any responsibility of Mortgagee, as assignor, with respect
thereto shall terminate. If the total funds in the Impound Account shall
exceed the amount of payments actually applied by Mortgagee for the purposes
of the Impound Account, such excess may be credited by Mortgagee on subsequent
payments to be made hereunder or, at the option of Mortgagee, refunded to
Mortgagor. If, however, the Impound Account shall not contain sufficient
funds to pay the sums required when the same shall become due and payable,
Mortgagor shall, within ten (10) days after receipt of written notice thereof,
deposit with Mortgagee the full amount of any such deficiency. If the
Mortgagor shall fail to deposit with Mortgagee the full amount of such
deficiency as provided above, Mortgagee shall have the option, but not the
obligation, to make such deposit and all amounts so deposited by Mortgagee,
together with interest thereon at the Default Interest Rate from the date
incurred by Mortgagee until actually paid by Mortgagor, shall be immediately
paid by Mortgagor on demand and shall be secured by this Mortgage and by all
of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note. If there is a default under this Mortgage which is not
cured within any applicable grace of cure period, Mortgagee may, but shall not
be obligated to, apply at any time the balance then remaining in the Impound
Account against the indebtedness secured hereby in whatever order Mortgagee
shall subjectively determine. No such application at the Impound Account
shall be deemed to cure any default hereunder. Upon full payment of the
indebtedness secured hereby in accordance with its terms or at such earlier
time as
12
<PAGE>
Mortgagee may elect, the balance of the Impound Account then in
Mortgagee's possession shall be paid over to Mortgagor and no other party
shall have any right or claim thereto.
1.7 - Intentionally Deleted Prior to Execution
1.8 Replacement Reserve; Security Interest Reserves.
(a) At Lender's option, as additional security for the
indebtedness secured hereby, Mortgagor shall establish and maintain at all
times while this Mortgage continues in effect a repair reserve (the
"Replacement Reserve") with Mortgagee for payment of certain non-recurring
types of costs and expenses incurred by Mortgagor for interior and exterior
work to the Property, including without limitation, performance of work to the
roofs, chimneys, gutters, downspouts, paving, curbs, driveways, ramps,
balconies, porches, patios, exterior walls, exterior doors and doorways,
windows, elevators and mechanical and HVAC equipment (collectively, the
"Repairs") provided such costs and expenses are incurred for repairs (i) not
incurred for ordinary wear and tear at the Property and (ii) categorized under
generally accepted accounting principles as a capital expense and not as an
operating expense. Commencing on the first monthly payment date under the
Note and continuing thereafter on each monthly payment date under the Note,
the Mortgagor shall pay Mortgagee, concurrently with and in addition to the
monthly payment due under the Note and until the Note and all other
indebtedness secured hereby is fully paid and performed, a deposit to the
Replacement Reserve in an amount equal to $7,000 per month. So long as no
default beyond any applicable grace or cure period hereunder or under the
other Loan Documents has occurred and is continuing, all sums in the
Replacement Reserve shall be held by Mortgagee in the Replacement Reserve to
pay the costs and expenses of Repairs. So long as no default beyond any
applicable grace or cure period hereunder or under the other Loan Documents
has occurred and is continuing, Mortgagee shall, to the extent funds are
available for such purpose in the Replacement Reserve, disburse to Mortgagor
the amount paid or incurred by Mortgagor in performing such Repairs within ten
(10) days following: (a) the receipt by Mortgagee of a written request from
Mortgagor for disbursement from the Replacement Reserve and a certification by
Mortgagor in the form attached hereto as Exhibit C that the work in connection
with the applicable item of Repair has been completed or is in progress, (b)
the delivery to Mortgagee of invoices, receipts or other evidence satisfactory
to Mortgagee verifying the cost of performing the Repairs; (c) for
disbursement requests in excess of $10,000.00 per month, the delivery to
Mortgagee of affidavits, lien waivers or other evidence reasonably
satisfactory to Mortgagee showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and have furnished material or labor to the Property have
been paid all amounts due for labor and materials furnished to the Property;
(d) for disbursement requests in excess of $10,000.00 per month, delivery to
Mortgagee of a certification from an inspecting architect or other third party
acceptable to Mortgagee describing the Repairs and verifying the completion
(or the progress) of the Repairs and the value of the Repairs (whether
completed or in progress); and (e) for disbursement requests in excess of
$10,000,00 per month, delivery to Mortgagee of a new certificate of occupancy
for the portion of the Improvements covered by such Repairs, if said new
certificate of occupancy is required by law, or a certification by Mortgagor
that no new certificate of occupancy is required. Mortgagee shall not be
required to make advances from the Replacement Reserve more frequently than
once in any thirty (30) day period. In making any payment from the
Replacement Reserve, Mortgagee shall be
13
<PAGE>
entitled to rely on such request from Mortgagor without any inquiry into the
accuracy, validity or contestability of any such amount. Mortgagee may,
at Mortgagee's expense, make or cause to be made during the term of this
Mortgage an annual inspection at the Property to determine the need, as
determined by Mortgagee in its reasonable judgment, for further Repairs of
the Property. In the event that such inspection reveals that further Repairs
of the Property are required, Mortgagee shall provide Mortgagor with a
written description of the required Repairs and Mortgagor shall complete such
Repairs to the reasonable satisfaction of Mortgagee within ninety (90) days
after the receipt of such description from Mortgagee, or such later date as
may be approved by Mortgagee in its reasonable discretion. The Replacement
Reserve shall not, unless otherwise explicitly required by applicable
law, be or be deemed to be escrow or trust funds, but, at Mortgagee's
option and in Mortgagee's discretion, may either be held in a separate
account or be commingled by Mortgagee with the general funds of Mortgagee.
Interest on the funds contained in the Replacement Reserve shall be credited
to Mortgagor as provided in Section 4.31 hereof. The Replacement Reserve is
solely for the protection of Mortgagee and entails no responsibility
on Mortgagee's part beyond the payment of the costs and expenses
described in this Section in accordance with the terms hereof and beyond
the allowing of due credit for the sums actually received. In the event
that the amounts on deposit or available in the Replacement Reserve are
inadequate to pay the cost of the Repairs, Mortgagor shall pay the amount of
such deficiency. Upon assignment of this Mortgage by Mortgagee, any funds in
the Replacement Reserve shall be turned over to the assignee and any
responsibility of Mortgagee, as assignor, with respect thereto shall
terminate. If there is a default under this Mortgage which is not cured
within any applicable grace or cure period, Mortgagee may, but shall not be
obligated to, apply at any time the balance then remaining in the Replacement
Reserve against the indebtedness secured hereby in whatever order Mortgagee
shall subjectively determine. No such application of the Replacement Reserve
shall be deemed to cure any default hereunder. Upon full payment of the
indebtedness secured hereby in accordance with its terms or at such earlier
time as Mortgagee may elect, the balance of the Replacement Reserve then in
Mortgagee's possession shall be paid over to Mortgagor and no other party
shall have any right or claim thereto.
(b) As additional security for the payment and performance by
Mortgagor of all duties, responsibilities and obligations under the Note and
the other Loan Documents, Mortgagor hereby unconditionally and irrevocably
assigns, conveys, pledges, mortgages, transfers, delivers, deposits, sets over
and confirms unto Mortgagee, and hereby grants to Mortgagee a security
interest in, (i) the Impound Account, the Repair and Remediation Reserve (as
defined in Exhibit D) and the Replacement Reserve (collectively, the
"Reserves"), (ii) the accounts into which the Reserves have been deposited,
(iii) all insurance of said accounts, (iv) all accounts, contract rights and
general intangibles or other rights and interests pertaining thereto, (v) all
sums now or hereafter therein or represented thereby, (vi) all replacements,
substitutions or proceeds thereof, (vii) all instruments and documents now or
hereafter evidencing the Reserves or such accounts, (viii) all powers,
options, rights, privileges and immunities pertaining to the Reserves
(including the right to make withdrawals therefrom), and (ix) all proceeds of
the foregoing. Mortgagor hereby authorizes and consents to the account into
which the Reserves have been deposited being held in Mortgagee's name or the
name of any entity servicing the Note for Mortgagee and hereby acknowledges
and agrees, that Mortgagee, or at Mortgagee's election, such servicing agent,
shall have exclusive control over said account. Notice of the assignment and
security interest granted to Mortgagee herein may be
14
<PAGE>
delivered by Mortgagee at any time to the financial institution wherein
the Reserves have been established, and Mortgagee, or such servicing
entity, shall have possession of all passbooks or other evidences of such
accounts. Mortgagor hereby assumes all risk of loss with respect to amounts
on deposit in the Reserves, so long as the amounts on deposit have been
invested in a "Permitted Investment" as that term is defined in Exhibit
E attached hereto. Mortgagor hereby knowingly, voluntarily and intentionally
stipulates, acknowledges and agrees that the advancement of the funds from
the Reserves as set forth herein is at Mortgagor's direction and is not
the exercise by Mortgagee of any right of set-off or other remedy upon a
default. Except as otherwise permitted in this Mortgage, Mortgagor hereby
waives all right to withdraw funds from the Reserves. If a default
shall occur hereunder or under any other of the Loan Documents which is not
cured within any applicable grace or cure period, then Mortgagee may, without
notice or demand on Mortgagor, at its option: (A) withdraw any or all
of the funds (including, without limitation, interest) then remaining in the
Reserves and apply the same, after deducting all costs and expenses of
safekeeping, collection and delivery (including, but not limited to,
attorneys' fees, costs and expenses) to the indebtedness evidenced by the
Note or any other obligations of Mortgagor under the other Loan Documents in
such manner or as Mortgagee shall deem appropriate in its sole discretion,
and the excess, if any, shall be paid to Mortgagor, (B) exercise any and
all rights and remedies of a secured party under any applicable Uniform
Commercial Code, and/or (C) exercise any other remedies available at
law or in equity. No such use or application of the funds contained in the
Reserves shall be deemed to cure any default hereunder or under the other Loan
Documents.
1.9 Casualty and Condemnation. Mortgagor shall give Mortgagee prompt
written notice of the occurrence of any casualty affecting, or the institution
of any proceedings for eminent domain or for the condemnation of, the Property
or any portion thereof. All insurance proceeds on the Property, and all
causes of action, claims, compensation, awards and recoveries for any damage,
condemnation or taking of all or any part of the Property or for any damage or
injury to it for any loss or diminution in value of the Property, are hereby
assigned to and shall be paid to Mortgagee. At any time (x) during the last
twelve (12) months prior to the stated maturity or (y) from and after the
acceleration of the indebtedness secured hereby, Mortgagee may participate in
any suits or proceedings relating to any such proceeds, causes of action,
claims, compensation, awards or recoveries and Mortgagee is hereby authorized,
in its own name or in Mortgagor's name, to adjust any loss covered by
insurance or any condemnation claim or cause of action, and to settle or
compromise any claim or cause of action in connection therewith, and Mortgagor
shall from time to time deliver to Mortgagee any instruments required to
permit such participation. Mortgagee shall apply any sums received by it
under this Section first to the payment of all of its costs and expenses
(including, but not limited to, legal fees and disbursements) incurred in
obtaining those sums, and then, as follows:
(a) In the event that less than seventy percent (70%) of the
Improvements located on the Real Estate have been taken or destroyed, then if:
(1) no material default is then continuing hereunder or
under any of the other Loan Documents and no event has occurred which,
with the giving of notice of the passage of time or both, would
constitute a material default hereunder or under any of the other Loan
Documents, and
15
<PAGE>
(2) the Property can, in Mortgagee's judgment, with
diligent restoration or repair, be returned to a condition at least
equal to the condition thereof that existed prior to the casualty or
partial taking causing the loss or damage within the earlier to occur of
(i) nine (9) months after the receipt of insurance proceeds or
condemnation awards by either Mortgagor of Mortgagee and (ii) the stated
maturity date of the Note, and
(3) all necessary governmental approvals can be obtained
to allow the rebuilding and reoccupancy of the Property as described in
Section 1.9 (a)(2) above, and
(4) there are sufficient sums available (through insurance
proceeds or condemnation awards and contributions by Mortgagor, the full
amount of which shall at Mortgagee's option have been deposited with
Mortgagee) for such restoration or repair (including, without
limitation, for any costs and expenses of Mortgagee to be incurred in
administering said restoration or repair) and for payment of principal
and interest to become due and payable under the Note during such
restoration or repair, and
(5) the economic feasibility of the Improvements after
such restoration or repair will be such that income from their operation
is reasonably anticipated to be sufficient to pay operating expenses of
the Property and debt service on the indebtedness secured hereby in full
w i t h the same coverage ratio considered by Mortgagee in its
determination to make the loan secured hereby, and
(6) Mortgagor shall have delivered to Mortgagee, at
Mortgagor's sole cost and expense, an appraisal report in form and
substance satisfactory to Mortgagee appraising the value of the Property
as so restored or repaired to be not less than 95% of the appraised
value of the Property considered by Mortgagee in its determination to
make the loan secured hereby, and
(7) Mortgagor so elects by written notice delivered to
Mortgagee within fifteen (15) days after settlement of the aforesaid
insurance or condemnation claim,
then, Mortgagee shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Mortgagor therefor, to
Mortgagor in the manner and upon such terms and conditions as would be
required by a prudent interim construction lender, including, but not limited
to, the prior reasonable approval by Mortgagee of plans and specifications,
contractors and form of construction contracts and the furnishing to Mortgagee
of permits, bonds, lien waivers, invoices, receipts and affidavits from
contractors and subcontractors in form and substance reasonably satisfactory
to Mortgagee in its discretion, with any remainder being applied by Mortgagee
for payment of the indebtedness secured hereby in whatever order Mortgagee
directs in its absolute discretion.
(b) In all other cases, namely, in the event that seventy
percent (70%) or more of the Improvements located on the Real Estate have been
taken or destroyed or Mortgagor does not elect to restore or repair the
Property pursuant to clause (a) above, or otherwise fails to meet the
16
<PAGE>
requirements of clause (a) above, then in any of such events, Mortgagee shall
elect, in Mortgagee's absolute discretion and without regard to the adequacy
of Mortgagee's security, to do either of the following: (1) accelerate the
maturity date of the Note and declare any and all indebtedness secured hereby
to be immediately due and payable and apply the remainder of such sums
received pursuant to this Section to the payment of the indebtedness secured
hereby in whatever order Mortgagee directs in its absolute discretion, with
any remainder being paid to Mortgagor, or (2) notwithstanding that Mortgagor
may have elected not to restore or repair the Property pursuant to the
provisions of Section 1.9(a)(7) above, require Mortgagor to restore or repair
the Property in the manner and upon such terms and conditions as would be
required by a prudent interim construction lender, including, but not limited
to the deposit by Mortgagor with Mortgagee, within thirty (30) days after
demand therefor, of any deficiency necessary in order to assure the
availability of sufficient funds to pay for such restoration or repair,
including Mortgagee's costs and expenses to be incurred in connection
therewith, the prior approval by Mortgagee of plans and specifications,
contractors and form of construction contracts and the furnishing to Mortgagee
of permits, bonds, lien waivers, invoices, receipts and affidavits from
contractors and subcontractors in form and substance satisfactory to Mortgagee
in its discretion, and apply the remainder of such sums toward such
restoration and repair, with any balance thereafter remaining being applied by
Mortgagee for payment of the indebtedness secured hereby in whatever order
Mortgagee directs in its absolute discretion. Any reduction in the
indebtedness secured hereby resulting from Mortgagee's application of any sums
received by it hereunder shall take effect only when Mortgagee actually
receives such sums and elects to apply such sums to the indebtedness secured
hereby and, in any event, the unpaid portion of the indebtedness secured
hereby shall remain in full force and effect and Mortgagor shall not be
excused in the payment thereof. Partial payments received by Mortgagor, as
described in the preceding sentence, shall be applied first to the final
payment due under the Note and thereafter to installments due under the Note
in the inverse order of their due date. If Mortgagor elects or Mortgagee
directs Mortgagor to restore or repair the Property after the occurrence of a
casualty or partial taking of the Property as provided above, Mortgagor shall
promptly and diligently, at Mortgagor's sole cost and expense and regardless
of whether the insurance proceeds or condemnation award, as appropriate, shall
be sufficient for the purpose, restore, repair replace and rebuild the
Property as nearly as possible to its value, condition and character
immediately prior to such casualty or partial taking in accordance with the
foregoing provisions and Mortgagor shall pay to Mortgagee all costs and
expenses of Mortgagee incurred in administering said rebuilding, restorations
or repair, provided the Mortgagee makes such proceeds or award available for
such purpose. Mortgagor agrees to execute and deliver from time to time such
further instruments as may be reasonably requested by Mortgagee to confirm the
foregoing assignment to Mortgagee of any award, damage, insurance proceeds,
payment or other compensation. At any time (x) during the last twelve (12)
months prior to the stated maturity or (y) from and after the acceleration of
the indebtedness secured hereby, Mortgagee is hereby irrevocably constituted
and appointed the attorney-in-fact of Mortgagor (which power of attorney shall
be irrevocable so long as any indebtedness secured hereby is outstanding,
shall be deemed coupled with an interest, shall survive the voluntary or
involuntary dissolution of Mortgagor and shall not be affected by any
disability or incapacity suffered by Mortgagor subsequent to the date hereof),
with full power of substitution, to settle for, collect and receive any such
awards, damages, insurance proceeds, payments or other compensation from the
parties or authorities making the same, to appear in and prosecute any
proceedings therefor and to give receipts and acquittances therefor.
17
<PAGE>
1.10 Mechanics' Liens. Mortgagor shall pay when due all claims
and demands of mechanics, materialmen, laborers and others for any work
performed or materials delivered for the Real Estate or Improvements;
provided, however, that, Mortgagor shall have the right to contest in good
faith any such claim or demand, so long as it does so diligently, by
appropriate proceedings and without prejudice to Mortgagee and provided that
neither the Property nor any interest therein would be in any danger of sale,
loss or forfeiture as a result of such proceeding or contest. In the event
Mortgagor shall contest any such claim or demand, Mortgagor shall promptly
notify Mortgagee of such contest and thereafter shall, upon Mortgagee's
request, promptly provide a bond, cash deposit or other security reasonably
satisfactory to Mortgagee to protect Mortgagee's interest and security should
the contest be unsuccessful. If Mortgagor shall fail to immediately discharge
or provide security against any such claim or demand as aforesaid, Mortgagee
may do so and any and all expenses incurred by Mortgagee, together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note.
1.11 Rents and Profits. As additional and collateral security
for the payment of the indebtedness secured hereby and cumulative of any and
all rights and remedies herein provided for, Mortgagor hereby absolutely and
presently assigns to Mortgagee all existing and future Rents and Profits.
Mortgagor hereby grants to Mortgagee the sole, exclusive and immediate right,
without taking possession of the Property, to demand, collect (by suit or
otherwise), receive and give valid and sufficient receipts for any and all of
said Rents and Profits, for which purpose Mortgagor does hereby irrevocably
make, constitute and appoint Mortgagee its attorney-in-fact with full power to
appoint substitutes or a trustee to accomplish such purpose (which power of
attorney shall be irrevocable so long as any indebtedness secured hereby is
outstanding, shall be deemed to be coupled with an interest, shall survive the
voluntary or involuntary dissolution of Mortgagor and shall not be affected by
any disability or incapacity suffered by Mortgagor subsequent to the date
hereof). Mortgagee shall be without liability for any loss which may arise
from a failure or inability to collect Rents and Profits, proceeds or other
payments. However, until the occurrence of a default under this Mortgage
which has not been cured within any applicable grace or cure period, Mortgagor
shall have a license to collect and receive the Rents and Profits when due and
prepayments thereof for not more than one month prior to due date thereof.
Upon the occurrence of a default hereunder which has not been cured within any
applicable grace or cure period, Mortgagor's license shall automatically
terminate without notice to Mortgagor and Mortgagee may thereafter, without
taking possession of the Property, collect the Rents and Profits itself or by
an agent or receiver. From and after the termination of such license,
Mortgagor shall be the agent of Mortgagee in collection of the Rents and
Profits and all of the Rents and Profits so collected by Mortgagor shall be
held in trust by Mortgagor for the sole and exclusive benefit of Mortgagee and
Mortgagor shall, within one (1) business day after receipt of any Rents and
Profits, pay the same to Mortgagee to be applied by Mortgagee as hereinafter
set forth. Neither the demand for or collection of Rents and Profits by
Mortgagee shall constitute any assumption by Mortgagee of any obligations
under any agreement relating thereto. Mortgagee is obligated to account only
for such Rents and Profits as are actually collected or received by Mortgagee.
Mortgagor irrevocably agrees and consents that the respective payors of the
Rents and Profits shall, upon demand and notice from Mortgagee of a default
hereunder, pay said Rents and Profits to Mortgagee without liability to
determine the actual
18
<PAGE>
existence of any default claimed by Mortgagee. Mortgagor hereby waives any
right, claim or demand which Mortgagor may now or hereafter have against any
such payor by reason of such payment of Rents and Profits to Mortgagee, and
any such payment shall discharge such payor's obligation to make such
payment to Mortgagor. All Rents and Profits collected or received by Mortgagee
shall be applied against all expenses of collection, including, without
limitation, reasonable attorneys' fees, against costs of operation and
management of the Property and against the indebtedness secured hereby, in
whatever order or priority as to any of the items so mentioned as Mortgagee
directs in its sole subjective discretion and without regard to the adequacy
of its security; provided, however, prior to the appointment of a receiver
Mortgagee shall remit to Mortgagor (while Mortgagor is in possession of the
Property) even though the license has been terminated sufficient funds from
the Rents and Profits to enable Mortgagor to pay the monthly costs and
expenses of the Property based on a budget to be prepared by Mortgagor and
reasonably approved by Mortgagee (but in no event shall Mortgagee be liable
for any deficiency in the event there are insufficient funds to pay for such
operating expenses). Neither the exercise by Mortgagee of any rights under
this Section nor the application of any Rents and Profits to the secured
indebtedness shall cure or be deemed a waiver of any default hereunder. The
assignment of Rents and Profits hereinabove granted shall continue in full
force and effect during any period of foreclosure or redemption with respect
to the Property. Mortgagor has executed an Assignment of Leases and Rents
dated of even date herewith (the "Assignment") in favor of Mortgagee covering
all of the right, title and interest of Mortgagor, as landlord, lessor or
licensor, in and to any leases, licenses and occupancy agreements relating to
all or portions of the Property. All rights and remedies granted to Mortgagee
under the Assignment shall be in addition to and cumulative of all rights and
remedies granted to Mortgagee hereunder.
1.12 Leases and Licenses.
(a) Mortgagor shall, in leasing space in the Improvements,
utilize the form lease which has been previously approved by Mortgagee. All
leases of space in the Improvements shall be on terms consistent with the
terms for similar leases in the market area of the Real Estate, shall provide
for free rent only if the same is consistent with prevailing market conditions
and shall provide for market rents then prevailing in the market area of the
Real Estate. Such leases shall also provide for security deposits in
reasonable amounts. Mortgagor shall also submit to Mortgagee for Mortgagee's
approval, which approval shall not be unreasonably withheld, prior to the
execution thereof, any proposed lease, license or occupancy agreement of the
Improvements or any portion thereof that differs materially and adversely from
the aforementioned form lease. Mortgagor shall not execute any lease, license
or occupancy agreement for all or a substantial portion of the Property,
except for an actual occupancy by the tenant, lessee or licensee thereunder,
and shall at all times promptly and faithfully perform, or cause to be
performed, all of the material covenants, conditions and agreements contained
in all leases, licenses and occupancy agreements with respect to the Property,
now or hereafter existing, on the part of the landlord, lessor or licensor
thereunder to be kept and performed. Mortgagor shall furnish to Mortgagee,
within ten (10) days after a request by Mortgagee to do so, but in any event
by January 15 of each year, a current rent roll certified by Mortgagor as
being true and correct containing the names of all tenants, lessees and
licensees with respect to the Property, the terms of their respective leases,
licenses or occupancy agreements, the spaces occupied and the rentals or fees
payable thereunder and the amount of each tenant's security
19
<PAGE>
deposit. Upon the request of Mortgagee, Mortgagor shall deliver to Mortgagee
a copy of each such lease, license and occupancy agreement. Mortgagor shall
not do or suffer to be done any act that might result in a material
default by the landlord, lessor or licensor under any such lease, license
or occupancy agreement or allow the tenant, lessee or licensee thereunder
to withhold payment or rent and, except as otherwise expressly permitted
by the terms of Section 1.13 hereof, shall not further assign any such
lease, license or occupancy agreement or any such rents. Mortgagor, at no
cost or expense to Mortgagee, shall enforce, short of termination, the
performance and observance of each and every material condition and covenant
of each of the parties under such leases. Mortgagor shall not, without the
prior written consent of Mortgagee, modify any of the leases, terminate or
accept the surrender of any leases, waive or release any other party from
the performance or observance of any obligation or condition under such
leases except in the normal course of business in a manner which is
consistent with sound and customary leasing and management practices for
similar properties in the community in which the Property is located.
Mortgagor shall not permit the prepayment of any rents under any of the
leases for more than one (1) month prior to the due date thereof.
(b) Each lease, license and occupancy agreement executed after
the date hereof affecting any of the Real Estate or the Improvements must
provide, in a manner approved by Mortgagee, that the tenant, lessee or
licensee, as appropriate, will recognize as its landlord, lessor or licensor
and attorn to any person succeeding to the interest of Mortgagor upon any
foreclosure of this Mortgage or deed in lieu of foreclosure. Each such lease,
license and occupancy agreement shall also provide that, upon request of said
successor-in-interest, the tenant, lessee or licensee shall execute and
deliver an instrument or instruments confirming its attornment as provided for
i n this Section; provided, however, that neither Mortgagee nor any
successor-in-interest shall be bound by any payment of rental for more than
one (1) month in advance, or any amendment or modification of said lease or
rental agreement made without the express written consent of Mortgagee or said
successor-in-interest.
(c) Upon the occurrence of a default under this Mortgage which
is not cured within any applicable grace period, whether before or after the
whole principal sum secured hereby is declared to be immediately due or
whether before or after the institution of legal proceedings to foreclose this
Mortgage, forthwith, upon demand of Mortgagee, Mortgagor shall surrender to
Mortgagee and Mortgagee shall be entitled to take actual possession of the
Property or any part thereof personally, or by its agent or attorneys. In
such event, Mortgagee shall have, and Mortgagor hereby gives and grants to
Mortgagee, the right, power and authority to make and enter into leases,
licenses and occupancy agreements with respect to the Property or portions
thereof for such rents and for such periods of occupancy and upon conditions
and provisions as Mortgagee may deem desirable in its sole discretion, and
Mortgagor expressly acknowledges and agrees that the term of such lease,
license or occupancy agreement may extend beyond the date of any foreclosure
sale at the Property; it being the intention of Mortgagor that in such event
Mortgagee shall be deemed to be and shall be the attorney-in-fact of Mortgagor
for the purpose of making and entering into leases, licenses or occupancy
agreements of parts or portions of the Property for the rents and upon the
terms, conditions and provisions deemed desirable to Mortgagee in its sole
discretion and with like effect as if such leases, licenses or occupancy
agreements had been made by Mortgagor as the owner in fee simple of the
Property free and clear of any conditions or limitations established by this
20
<PAGE>
Mortgage. The power and authority hereby given and granted by Mortgagor to
Mortgagee shall be deemed to be coupled with an interest, shall not be
revocable by Mortgagor so long as any indebtedness secured hereby is
outstanding, shall survive the voluntary or involuntary dissolution of
Mortgagor and shall not be affected by any disability or incapacity suffered
by Mortgagor subsequent to the date hereof. In connection with any action
taken by Mortgagee pursuant to this Section, Mortgagee shall not be liable for
any loss sustained by Mortgagor resulting from any failure to let the
Property, or any part thereof, or from any other act or omission of Mortgagee
in managing the Property, nor shall Mortgagee be obligated to perform or
discharge any obligation, duty or liability under any lease, license or
occupancy agreement covering the Property or any part thereof or under or by
reason of this instrument or the exercise of rights or remedies hereunder.
Mortgagor shall, and does hereby, indemnify Mortgagee for, and hold Mortgagee
harmless from, any and all claims, actions, demands, liabilities, loss or
damage which may or might be incurred by Mortgagee under any such lease,
license or occupancy agreement or under this Mortgage or by the exercise of
rights or remedies hereunder and from any and all claims and demands
whatsoever which may be asserted against Mortgagee by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in any such lease, license or
occupancy agreement other than those finally determined to have resulted
solely from the gross negligence or willful misconduct of Mortgagee. Should
Mortgagee incur any such liability, the amount thereof, including, without
limitation, costs, expenses and attorneys' fees, together with interest
thereon at the Default Interest Rate from the date incurred by Mortgagee until
actually paid by Mortgagor, shall be immediately due and payable to Mortgagee
by Mortgagor on demand and shall be secured hereby and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note. Nothing in this Section shall impose on Mortgagee any duty, obligation
or responsibility for the control, care, management or repair of the Property,
or for the carrying out of any of the terms and conditions of any such lease,
license or occupancy agreement, nor shall it operate to make Mortgagee
responsible or liable for any waste committed on the Property by the tenants
or by any other parties or for any dangerous or defective condition of the
Property, or for any negligence in the management, upkeep, repair or control
of the Property. Mortgagor hereby assents to, ratifies and confirms any and
all actions of Mortgagee with respect to the Property taken under this
Section.
1.13 Alienation and Further Encumbrances.
(a) Except as specifically allowed hereinbelow in this Section
and notwithstanding anything to the contrary contained in Section 4.6 hereof,
in the event that the Property or any part thereof shall be sold, conveyed,
disposed of, alienated, hypothecated, leased (except to tenants of space in
the Improvements in accordance with the provisions of Section 1.12 hereof),
assigned, pledged, mortgaged, further encumbered or otherwise transferred or
Mortgagor shall be divested of its title to the Property or any interest
therein, in any manner or way, whether voluntarily or involuntarily, without
the prior written consent of Mortgagee being first obtained, which consent may
be withheld in Mortgagee's sole discretion, then, the same shall constitute a
default hereunder and Mortgagee shall have the right, at its option, to
declare any or all of the indebtedness secured hereby, irrespective of the
maturity date specified in the Note, immediately due and payable and to
otherwise exercise any of its other rights and remedies contained in Article
III hereof. If such acceleration is during any period when a prepayment fee
is payable pursuant to
21
<PAGE>
the provisions set forth in the Note, then, in addition to all of the
foregoing, such prepayment fee shall also then be immediately due and
payable to the same end as though Mortgagor were prepaying the entire
indebtedness secured hereby on the date of such acceleration.
For the purposes of this Section: (i) in the event either Mortgagor
or any of its general partners is a corporation or trust, the sale,
conveyance, transfer or disposition of more than 49% of the issued
and outstanding capital stock of Mortgagor or any of its general
partners or of the beneficial interest of such trust (or the issuance
of new shares of capital stock in Mortgagor or any of its general
partners so that immediately after such issuance the total capital stock
then issued and outstanding is more than 149% of the total immediately
prior to such issuance) shall be deemed to be a transfer of an interest
in the Property, and (ii) in the event Mortgagor or any general partner
of Mortgagor is a limited or general partnership, a joint venture or
a limited liability company, a change, removal or resignation of a
general partner or managing partner or the transfer of the partnership
interest of any general or managing partner, shall be deemed to be
a transfer of an interest in the Property. Notwithstanding the
foregoing, however, (i) limited partnership interests in Mortgagor or
in any general partner of Mortgagor shall be freely transferable without
the consent of Mortgagee and (ii) any involuntary transfer caused by
the death of Mortgagor or any general partner, shareholder, joint
venturer, or beneficial owner of a trust shall not be a default under
this Mortgage so long as Mortgagor is reconstituted, if required,
following such death and so long as those persons responsible for
the management of the Property remain unchanged as a result of such
death or any replacement management is approved by Mortgagee.
(b) In the event that Mortgagee shall consent, without in any
way implying any obligation on the part of Mortgagee to so consent, to a
further encumbrance of the Property, the documents evidencing or creating such
encumbrance shall be subject to the prior approval of Mortgagee and shall
expressly provide, in addition to any other items required by Mortgagee, that:
(i) they are subordinate, secondary, junior and inferior in all respects to
the lien of this Mortgage, to the security provided by the other Loan
Documents and to any and all rights of Mortgagee set forth therein, including,
without limitation, Mortgagee's right to payment under the Note and the rights
of Mortgagee set forth herein with respect to any insurance proceeds and
condemnation awards which are a part of the Property; and (ii) they shall
remain subordinate, secondary, junior and inferior in all respects to any
amendments, modifications, extensions or changes in this Mortgage and the
other Loan Documents thereafter entered into by Mortgagee and Mortgagor or any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby; and (iii) they are subordinate, secondary,
junior and inferior in all respects to all existing and future leases of space
in the improvements and the holder thereof shall, upon request of Mortgagee,
specifically subordinate the lien of such encumbrance to all leases of space
in the improvements executed after the date of such encumbrance; and (iv) the
holder of such subordinate mortgage acknowledges and agrees that a conveyance
of all or any portion of the Property to such holder by foreclosure, deed in
lieu of foreclosure or otherwise shall constitute a default under this
Mortgage.
(c) Notwithstanding the foregoing provisions of this Section,
Mortgagee shall consent to a sale, conveyance or transfer of the Property in
its entirety (hereinafter, "Sale") to any person or entity provided that each
of the following terms and conditions are satisfied:
22
<PAGE>
(1) There can occur no more than two (2) Sales during the
term of the loan secured hereby (and not more frequently than one (1)
time per calendar year) exclusive of a Sale to a Real Estate Investment
Trust as provided in clause (11) below;
(2) No default beyond any applicable grace or cure period
is then continuing hereunder or under any of the other Loan Documents;
(3) Mortgagor gives Mortgagee written notice of the terms
of such prospective Sale not less than sixty (60) days before the date
on which such Sale is scheduled to close and, concurrently therewith,
gives Mortgagee all such information concerning the proposed transferee
of the Property (hereinafter, "Buyer") as Mortgagee would require in
evaluating an initial extension of credit to a borrower and pays to
Mortgagee a non-refundable application fee in the amount of $2,500.00.
Mortgagee shall have the right to approve or disapprove the proposed
Buyer. In determining whether to give or withhold its approval of the
proposed Buyer, Mortgagee shall consider the Buyer's experience and
track record in owning and operating facilities similar to the Property,
the Buyer's financial strength, the Buyer's general business standing
and the Buyer's relationships and experience with contractors, vendors,
tenants, lenders and other business entities; provided, however, that,
notwithstanding Mortgagee's agreement to consider the foregoing factors
in determining whether to give or withhold such approval, such approval
shall be given or withheld based on what Mortgagee determines to be
commercially reasonable in Mortgagee's sole discretion and, if given,
may be given subject to such conditions as Mortgagee may deem
appropriate. Notwithstanding the foregoing, Mortgagee shall approve a
proposed Buyer whose experience includes managing first class multi-
family residential complexes of a type and size similar to the Property,
and which manages in the aggregate no less than 1,000 residential units
at the time of such transfer;
(4) Mortgagor pays Mortgagee, concurrently with the
closing of such Sale, a non-refundable assumption fee in an amount equal
to all out-of-pocket costs and expenses, including, without limitation,
reasonable attorneys' fees, incurred by Mortgagee in connection with the
Sale plus either (i) if the closing of such Sale occurs prior to the
assignment of this Mortgage to any party other than a shareholder of
Mortgagee, or any affiliate of such shareholder, an amount equal to one
percent (1.0%) of the then outstanding principal balance of the Note or
(ii) if the closing of such sale occurs on or subsequent to such
assignment, the amount of $7,500.00;
(5) The Buyer assumes and agrees to pay the indebtedness
secured hereby subject to the provisions of Section 4.27 hereof and,
prior to or concurrently with the closing of such Sale, the Buyer
executes, without any cost or expense to Mortgagee, such documents and
agreements as Mortgagee shall reasonably require to evidence and
effectuate said assumption and delivers such legal opinions as Mortgagee
may reasonably require;
(6) Mortgagor and the Buyer execute, without any cost or
expense to Mortgagee, new financing statements or financing statement
amendments and any additional documents reasonably requested by
Mortgagee;
23
<PAGE>
(7) Mortgagor delivers to Mortgagee, without any cost or
expense to Mortgagee, such endorsements to Mortgagee's title insurance
policy, hazard insurance endorsements or certificates and other similar
materials as Mortgagee may deem necessary at the time of the Sale, all
in form and substance satisfactory to Mortgagee, including, without
limitation, an endorsement or endorsements to Mortgagee's title
insurance policy insuring the lien of this Mortgage, extending the
effective date of such policy to the date of execution and delivery (or,
if later, of recording) of the assumption agreement referenced above in
subparagraph (4) of this Section with no additional exceptions added to
such policy and insuring that fee simple title to the Property is vested
in the Buyer;
(8) Mortgagor executes and delivers to Mortgagee, without
any cost or expense to Mortgagee, a release of Mortgagee, its officers,
directors, employees and agents, from all claims and liability relating
to the transactions evidenced by the Loan Documents through and
including the date of the closing of the Sale, which agreement shall be
in form and substance satisfactory to Mortgagee and shall be binding
upon the Buyer;
(9) Subject to the provisions of Section 4.27 hereof, such
Sale is not construed so as to relieve Mortgagor of any liability under
the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising prior to or simultaneously with the
closing of such Sale and Mortgagor executes, without any cost or expense
to Mortgagee, such documents and agreements as Mortgagee shall
reasonably require to evidence and effectuate the ratification of said
liability; and
(10) Such Sale is not construed so as to relieve any
current guarantor or indemnitor of its obligations under any guaranty or
indemnity agreement executed in connection with the loan secured hereby
and each such current guarantor and indemnitor executes, without any
cost or expense to Mortgagee, such documents and agreements as Mortgagee
shall reasonably require to evidence and effectuate the ratification of
each such guaranty and indemnity agreement, provided that if the Buyer
or a party associated with the Buyer approved by Mortgagee in its sole
discretion assumes the obligations of the current guarantor or
indemnitor under its guaranty or indemnity agreement and the Buyer or
such party associated with the Buyer, as applicable, executes, without
any cost or expense to Mortgagee, a new guaranty or indemnity agreement
in form and substance satisfactory to Mortgagee, then Mortgagee shall
release the current guarantor or indemnitor from all obligations arising
under its guaranty or indemnity agreement after the closing of such
Sale; and
(11) In the event such Sale is to a Real Estate Investment
Trust, such transfer shall be subject to all of the conditions contained
in this Section 1.13(c), except in no event shall the transfer fees set
forth in Section 1.13(c) 4(i) or (ii) be due and payable.
1.14 Payment of Utilities, Assessments, Charges, Etc. Mortgagor
shall pay when due all utility charges which are incurred by Mortgagor or
which may become a charge or lien against any portion of the Property for gas,
electricity, water and sewer services furnished to the Real Estate and/or the
Improvements and all other assessments or charges of a similar nature, or
24
<PAGE>
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Real Estate and/or the Improvements or any portion
thereof, whether or not such assessments or charges are or may become liens
thereon.
1.15 Access Privileges and Inspections. Mortgagee and the
agents, representatives and employees of Mortgagee shall, subject to the
rights of tenants, have full and free access to the Real Estate and the
Improvements and any other location where books and records concerning the
Property are kept at all reasonable times and upon reasonable notice for the
purposes of inspecting the Property and of examining, copying and making
extracts from the books and records of Mortgagor relating to the Property.
Mortgagor shall lend assistance to all such agents, representatives and
employees of Mortgagee.
1.16 Waste; Alteration of Improvements. Mortgagor shall not
commit, suffer or permit any waste on the Property nor take any actions that
might invalidate any insurance carried on the Property. Mortgagor shall
maintain the Property in good condition and repair. No material part of the
Improvements may be removed, demolished or materially altered, without the
prior written consent of Mortgagee. Without the prior written consent of
Mortgagee which consent shall not be unreasonably withheld, Mortgagor shall
not commence construction of any improvements on the Real Estate other than
improvements required for the maintenance or repair of the Property.
1.17 Zoning. Without the prior written consent of Mortgagee,
Mortgagor shall not seek, make, suffer, consent to or acquiesce in any change
in the zoning or conditions of use of the Real Estate or the Improvements.
Mortgagor shall comply with and make all payments required under the
provisions of any covenants, conditions or restrictions affecting the Real
Estate or the Improvements. Mortgagor shall comply with all existing and
future requirements of all governmental authorities having jurisdiction over
the Property. Mortgagor shall keep all licenses, permits, franchises and
other approvals necessary for the operation of the Property in full force and
effect. Mortgagor shall operate the Property as an apartment complex for so
long as the indebtedness secured hereby is outstanding. If, under applicable
zoning provisions, the use of all or any part of the Real Estate or the
Improvements is or becomes a nonconforming use, Mortgagor shall not cause or
permit such use to be discontinued or abandoned without the prior written
consent of Mortgagee. Further, without Mortgagee's prior written consent,
Mortgagor shall not file or subject any part of the Real Estate or the
Improvements to any declaration of condominium or co-operative or convert any
part of the Real Estate or the Improvements to a condominium, co-operative or
other form of multiple ownership and governance.
1.18 Financial Statements and Books and Records. Mortgagor shall
keep accurate books and records of account of the Property and its own
financial affairs sufficient to permit the preparation of financial statements
therefrom in accordance with generally accepted accounting principles (or such
other accounting basis reasonably acceptable to Mortgagee). Mortgagee and its
duly authorized representatives shall have the right to examine, copy and
audit Mortgagor's records and books of account at all reasonable times. So
long as this Mortgage continues in effect, Mortgagor shall provide to
Mortgagee, in addition to any other financial statements required hereunder or
under any of the other Loan Documents, the following financial statements and
information, all of which must be certified to Mortgagee as being true and
correct by Mortgagor or
25
<PAGE>
the entity to which they pertain, as applicable, be prepared in accordance
with generally accepted accounting principles consistently applied and be
in form and substance acceptable to Mortgagee:
(a) copies of all tax returns filed by Mortgagor, within thirty
(30) days after the date of filing;
(b) semi-annual operating statements for the Property within
forty-five (45) days after the end of each June and December;
(c) annual balance sheets for the Property and annual financial
statements for Mortgagor, each principal or general partner in Mortgagor, and
each indemnitor and guarantor under any indemnity or guaranty executed in
connection with the loan secured hereby within ninety (90) days after the end
of each calendar year;
(d) such other information with respect to the Property,
Mortgagor, the general partners in Mortgagor, and each indemnitor and
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby, which may be requested from time to time by Mortgagee, within
a reasonable time after the applicable request; and
(e) monthly operating statements for the Property within ten
(10) days after the end of each month during the first six (6) months of the
term of the loan secured hereby.
If any of the aforementioned materials are not furnished to Mortgagee within
the applicable time periods or Mortgagee is dissatisfied with the contents of
any of the foregoing, in addition to any other rights and remedies of
Mortgagee contained herein, Mortgagee shall have the right, but not the
obligation, to obtain the same by means of an audit by an independent
certified public accountant selected by Mortgagee, in which event Mortgagor
agrees to pay, or to reimburse Mortgagee for, any expense of such audit and
further agrees to provide all necessary information to said accountant and to
otherwise cooperate in the making of such audit.
1.19 Further Documentation. Mortgagor shall, on the request of
Mortgagee and at the expense of Mortgagor: (a) promptly correct any defect,
error or omission which may be discovered in the contents of this Mortgage or
in the contents of any of the other Loan Documents; (b) promptly execute,
acknowledge, deliver and record or file such further instruments (including,
without limitation, further mortgages, deeds of trust, security deeds,
security agreements, financing statements, continuation statements and
assignments of rents or leases) and promptly do such further acts as may be
reasonably necessary, desirable or proper to carry out more effectively the
purposes of this Mortgage and the other Loan Documents and to subject to the
liens and security interests hereof and thereof any property intended by the
terms hereof and thereof to be covered hereby and thereby, including
specifically, but without limitation, any renewals, additions, substitutions,
replacements or appurtenances to the Property; (c) promptly execute,
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed reasonably advisable
by Mortgagee to protect, continue or perfect the liens or the security
interests hereunder against the rights or interests of third persons; and (d)
promptly furnish to Mortgagee, upon Mortgagee's request, a duly acknowledged
written statement and estoppel
26
<PAGE>
certificate addressed to such party or parties as directed by Mortgagee
and in form and substance supplied by Mortgagee, setting forth all amounts
due under the Note, stating whether any event has occurred which, with the
passage of time or the giving of notice or both, would constitute an event
of default hereunder, stating whether any offsets or defenses exist against
the indebtedness secured hereby and containing such other matters as
Mortgagee may reasonably require. Within fifteen (15) days of Mortgagor's
request, Mortgagee shall furnish to Mortgagor a duly acknowledged
written statement and estoppel certificate addressed to such party as
directed by Mortgagor and in form and substance satisfactory to Mortgagee,
setting forth all amounts due under the Note, stating to the best of its
knowledge whether any defaults beyond any applicable grace and cure period
have occurred and are continuing, and whether any offsets or defenses
exist against the indebtedness secured thereby.
1.20 Payment of Costs; Reimbursement to Mortgagee. Mortgagor
shall pay all costs and expenses of every character incurred in connection
with the closing of the loan evidenced by the Note and secured hereby or
otherwise attributable or chargeable to Mortgagor as the owner of the
Property, including, without limitation, appraisal fees, recording fees,
documentary, stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, uniform commercial
code/tax lien/litigation search fees, escrow fees and reasonable attorneys'
fees. If Mortgagor defaults in any such payment, which default is not cured
within any applicable grace or cure period, Mortgagee may pay the same and
Mortgagor shall reimburse Mortgagee on demand for all such costs and expenses
incurred or paid by Mortgagee, together with such interest thereon at the
Default Interest Rate from and after the date of Mortgagee's making such
payment until reimbursement thereof by Mortgagor. Any such sums disbursed by
Mortgagee, together with such interest thereon, shall be additional
indebtedness of Mortgagor secured by this Mortgage and by all of the other
Loan Documents securing all or any part of the indebtedness evidenced by the
Note. Further, Mortgagor shall promptly notify Mortgagee in writing of any
litigation or threatened litigation affecting the Property, or any other
demand or claim which, if enforced, could impair Mortgagee's security
hereunder. Without limiting or waiving any other rights and remedies of
Mortgagee hereunder, if Mortgagor fails to perform any of its covenants or
agreements contained in this Mortgage or in any of the other Loan Documents
and such failure is not cured within any applicable grace or cure period, or
if any action or proceeding of any kind (including, but not limited to, any
bankruptcy, insolvency, arrangement, reorganization or other debtor relief
proceeding) is commenced which might affect Mortgagee's interest in the
Property or Mortgagee's right to enforce its security, then Mortgagee may, at
its option, with or without notice to Mortgagor, make any appearances,
disburse any sums and take any actions as may be necessary or desirable to
protect or enforce the security of this Mortgage or to remedy the failure of
Mortgagor to perform its covenants and agreements (without, however, waiving
any default of Mortgagor). Mortgagor agrees to pay on demand all expenses of
Mortgagee incurred with respect to the foregoing (including, but not limited
to, reasonable fees and disbursements of counsel), together with interest
thereon at the Default Interest Rate from and after the date on which
Mortgagee incurs such expenses until reimbursement thereof by Mortgagor. Any
such expenses so incurred by Mortgagee, together with interest thereon as
provided above, shall be additional indebtedness of Mortgagor secured by this
Mortgage and by all of the other Loan Documents securing all or any part of
the indebtedness evidenced by the Note. The necessity for any such actions
and of the amounts to be paid shall be determined by Mortgagee in its
discretion. Mortgagee is hereby empowered to enter and to
27
<PAGE>
authorize others to enter upon the Property or any part thereof for the
purpose of performing or observing any such defaulted term, covenant or
condition (which default is not cured within any applicable grace or cure
period) without thereby becoming liable to Mortgagor or any person in
possession holding under Mortgagor. Mortgagor hereby acknowledges and
agrees that the remedies set forth in this Section 1.20 shall be exercisable
by Mortgagee, and any and all payments made or costs or expenses incurred
by Mortgagee in connection therewith shall be secured hereby and shall be,
without demand, immediately repaid by Mortgagor with interest thereon at
the Default Interest Rate, notwithstanding the fact that such remedies were
exercised and such payments made and costs incurred by Mortgagee after the
filing by Mortgagor of a voluntary case or the filing against Mortgagor of
an involuntary case pursuant to or within the meaning of the Bankruptcy
Reform Act of 1978, as amended, Title 11 U.S.C., or after any similar
action pursuant to any other debtor relief law (whether statutory, common
law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter, in effect, which may be or become applicable to Mortgagor,
Mortgagee, any guarantor or indemnitor, the secured indebtedness or any of the
Loan Documents. Mortgagor hereby indemnifies and holds Mortgagee harmless
from and against all loss, cost and expenses with respect to any default
hereof, any liens (i.e., judgments, mechanics' and materialmen's liens, or
otherwise), charges and encumbrances filed against the Property, and from any
claims and demands for damages or injury, including claims for property
damage, personal injury or wrongful death, arising out of or in connection
with any accident or fire or other casualty on the Real Estate or the
Improvements or any nuisance made or suffered thereon, including, in any case,
reasonable attorneys' fees, costs and expenses as aforesaid, whether at
pretrial, trial or appellate level, and such indemnity shall survive payment
in full of the indebtedness secured hereby. This Section shall not be
construed to require Mortgagee to incur any expenses, make any appearances or
take any actions.
1.21 Security Interest. This Mortgage is also intended to
encumber and create a security interest in, and Mortgagor hereby grants to
Mortgagee a security interest in all sums on deposit with Mortgagee pursuant
to the provisions of Sections 1.6 and 1.8 hereof or any other Section hereof
and all fixtures, chattels, accounts, equipment, inventory, contract rights,
general intangibles and other personal property included within the Property
(owned by Mortgagor), all renewals, replacements of any of the aforementioned
items, or articles in substitution therefor or in addition thereto or the
proceeds thereof (said property is hereinafter referred to collectively as the
"Collateral"), whether or not the same shall be attached to the Real Estate or
the Improvements in any manner. It is hereby agreed that to the extent
permitted by law, all of the foregoing property is to be deemed and held to be
a part of and affixed to the Real Estate and the Improvements. The foregoing
security interest shall also cover Mortgagor's leasehold interest in any of
the foregoing property which is leased by Mortgagor. Notwithstanding the
foregoing, all of the foregoing property shall be owned by Mortgagor and no
leasing or installment sales or other financing or title retention agreement
in connection therewith shall be permitted without the prior written approval
of Mortgagee. Mortgagor shall, from time to time upon the request of
Mortgagee, supply Mortgagee with a current inventory of all of the property in
which Mortgagee is granted a security interest hereunder, in such detail as
Mortgagee may reasonably require. Mortgagor shall promptly replace all of the
Collateral subject to the lien or security interest of this Mortgage when worn
or obsolete with Collateral comparable to the worn out or obsolete Collateral
when new and will not, without the prior written consent of Mortgagee, remove
from the Real Estate or the Improvements any of the Collateral subject to the
lien or security interest of this Mortgage except such as is replaced by
28
<PAGE>
an article of equal suitability and value as above provided, owned by
Mortgagor free and clear of any lien or security interest except that
created by this Mortgage and the other Loan Documents and except as
otherwise expressly permitted by the terms of Section 1.13 of this Mortgage.
All of the Collateral shall be kept at the location of the Real
Estate except as otherwise required by the terms of the Loan Documents.
Mortgagor shall not use any of the Collateral in violation of any applicable
statute, ordinance or insurance policy.
1.22 Security Agreement. This Mortgage constitutes a security
agreement between Mortgagor and Mortgagee with respect to the Collateral in
which Mortgagee is granted a security interest hereunder, and, cumulative of
all other rights and remedies of Mortgagee hereunder, Mortgagee shall have all
of the rights and remedies of a secured party under any applicable Uniform
Commercial Code. Mortgagor hereby agrees to execute and deliver on demand and
hereby irrevocably constitutes and appoints Mortgagee the attorney-in-fact of
Mortgagor to execute and deliver and, if appropriate, to file with the
appropriate filing officer or office such security agreements, financing
statements, continuation statements or other instruments as Mortgagee may
request or require in order to impose, perfect or continue the perfection of
the lien or security interest created hereby. Except with respect to Rents
and Profits to the extent specifically provided herein to the contrary,
Mortgagee shall have the right of possession of all cash, securities,
instruments, negotiable instruments, documents, certificates and any other
evidences of cash or other property or evidences of rights to cash rather than
property, which are now or hereafter a part of the Property and Mortgagor
shall promptly deliver the same to Mortgagee, endorsed to Mortgager, without
further notice from Mortgagee. Mortgagor agrees to furnish Mortgagee with
notice of any change in the name, identity, corporate structure, residence, or
principal place of business or mailing address of Mortgagor within ten (10)
days of the effective date of any such change. Upon the occurrence of any
default hereunder not cured within any applicable grace or cure period,
Mortgagee shall have the rights and remedies as prescribed in the Mortgage, or
as prescribed by general law, or as prescribed by any applicable Uniform
Commercial Code, all at Mortgagee's election. Any disposition of the
Collateral may be conducted by an employee or agent of Mortgagee. Any person,
including both Mortgagor and Mortgagee, shall be eligible to purchase any part
or all of the Collateral at any such disposition. Expenses of retaking,
holding, preparing for sale, selling or the like (including, without
limitation, Mortgagee's attorneys' fees and legal expenses), together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be paid by Mortgagor on
demand and shall be secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.
Mortgagee shall have the right to enter upon the Real Estate and the
Improvements or any real property where any of the property which is the
subject of the security interest granted herein is located to take possession
of, assemble and collect the same or to render it unusable, or Mortgagor, upon
demand of Mortgagee, shall assemble such property and make it available to
Mortgagee at the Real Estate, a place which is hereby deemed to be reasonably
convenient to Mortgagee and Mortgagor. If notice is required by law,
Mortgagee shall give Mortgagor at least ten (10) days' prior written notice of
the time and place of any public sale of such property or of the time of or
after which any private sale or any other intended disposition thereof is to
be made, and if such notice is sent to Mortgagor, as the same is provided for
the mailing of notices herein, it is hereby deemed that such notice shall be
and is reasonable notice to Mortgagor. No such notice is necessary for any
such property which is perishable, threatens to decline speedily in value or
is of a type customarily sold
29
<PAGE>
on a recognized market. Any sale made pursuant to the provisions of this
Section shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held contemporaneously with the foreclosure sale as
provided in Section 3.1(e) hereof upon giving the same notice with respect to
the sale of the Property hereunder as is required under said Section 3.1(e).
Furthermore, to the extent permitted by law, in conjunction with, in
addition to or in substitution for the rights and remedies available to
Mortgagee pursuant to any applicable Uniform Commercial Code:
(a) In the event of a foreclosure sale, the Property may, at the
option of Mortgagee, be sold as a whole; and
(b) It shall not be necessary that Mortgagee take possession of
the aforementioned Collateral, or any part thereof, prior to the time that any
sale pursuant to the provisions of this Section is conducted and it shall not
be necessary that said Collateral, or any part thereof, be present at the
location of such sale; and
(c) Mortgagee may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Mortgagee, including the sending of notices and the conduct of the sale, but
in the name and on behalf of Mortgagee.
The name and address of Mortgagor (as Debtor under any applicable Uniform
Commercial Code) are:
Pickwick Place AP XII, L.P.
c/o IFGP Corporation
One Insignia Financial Plaza
Greenville, South Carolina 29602
Attention: Steve Schoenbaechler
The name and address of Mortgagee (as Secured Party under any applicable
Uniform Commercial Code) are:
First Union National Bank of North Carolina
One First Union Center, TW-8
Charlotte, North Carolina 28288
1.23 Easements and Rights-of-Way. Mortgagor shall not grant any
easement or right-of-way with respect to all or any portion of the Real Estate
or the Improvements without the prior written consent of Mortgagee which
consent shall not be unreasonably withheld. The purchaser at any foreclosure
sale hereunder may, at its discretion, disaffirm any easement or right-of-way
granted in violation of any of the provisions of this Mortgage and may take
immediate possession of the Property free from, and despite the terms of, such
grant of easement or right-of-way. If Mortgagee consents to the grant of an
easement or right-of-way, Mortgagee agrees to grant such consent provided that
Mortgagee is paid a standard review fee together with all other
30
<PAGE>
expenses, including, without limitation, attorneys' fees, incurred by
Mortgagee in the review of Mortgagor's request and in the preparation of
documents effecting the subordination.
1.24 Compliance with Laws. Mortgagor shall at all times comply
with all statutes, ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants now or hereafter
relating to the ownership, construction, use or operation of the Property,
including, but not limited to, those concerning any environmental or
ecological requirements, even if such compliance shall require structural
changes to the Property; provided, however, that, Mortgagor may, upon
providing Mortgagee with security satisfactory to Mortgagee, proceed
diligently and in good faith to contest the validity or applicability of any
such statute, ordinance, regulation or requirement so long as during such
contest the Property shall not be subject to any lien, charge, fine or other
liability and shall not be in danger of being forfeited, lost or closed.
Mortgagor shall not use or occupy, or allow the use or occupancy of, the
Property in any manner which violates any lease of or any other agreement
applicable to the Property or any applicable law, rule, regulation or order or
which constitutes a public or private nuisance or which makes void, voidable
or cancelable, or increases the premium of, any insurance then in force with
respect thereto.
1.25 Additional Taxes. In the event of the enactment after this
date of any law of the state where the Property is located or of any other
governmental entity deducting from the value of the Property for the purpose
of taxation any lien or security interest thereon, or imposing upon Mortgagee
the payment of the whole or any part of the taxes or assessments or charges or
liens herein required to be paid by Mortgagor, or changing in any way the laws
relating to the taxation of mortgages or security agreements or debts secured
by mortgages or security agreements or the interest of the Mortgagee or
secured party in the property covered thereby, or the manner of collection of
such taxes, so as to adversely affect this Mortgage or the indebtedness
secured hereby or Mortgagee, then, and in any such event, Mortgagor, upon
demand by Mortgagee, shall pay such taxes, assessments, charges or liens, or
reimburse Mortgagee therefor; provided, however, that if in the opinion of
counsel for Mortgagee (a) it might be unlawful to require Mortgagor to make
such payment, or (b) the making of such payment might result in the imposition
of interest beyond the maximum amount permitted by law, then and in either
such event, Mortgagee may elect, by notice in writing given to Mortgagor, to
declare all of the indebtedness secured hereby to be and become due and
payable in full thirty (30) days from the giving of such notice.
1.26 Secured Indebtedness and Future Advances. It is understood
and agreed that this Mortgage shall secure payment of not only the
indebtedness evidenced by the Note but also any and all substitutions,
replacements, renewals and extensions of the Note, any and all indebtedness
and obligations arising pursuant to the terms hereof and any and all
indebtedness and obligations arising pursuant to the terms of any of the other
Loan Documents, up to a maximum amount of two (2) times the original principal
amount of the Note ("Maximum Amount Secured Hereby"), and all other amounts
payable by the Mortgagor, or advanced by Mortgagee for the account, or on
behalf, of the Mortgagor, pursuant to this Mortgage or the other Loan
Documents, including, without limitation, amounts advanced with respect to the
Property for the payment of taxes, assessments, insurance premiums and other
costs and impositions incurred for the protection of the Property to the same
extent as if the future obligations and advances were made on the date of
execution of this Mortgage, all of which indebtedness is equally secured with
and has the same priority as any
31
<PAGE>
amounts advanced as of the date hereof. It is agreed that any future advances
made by Mortgagee to or for the benefit of Mortgagor from time to time
under this Mortgage or the other Loan Documents and whether or not such
advances are obligatory or are made at the option of Mortgagee, or
otherwise, made for any purpose, within twenty (20) years from the date
hereof, and all interest accruing thereon, shall be equally secured by this
Mortgage and shall have the same priority as all amounts, if any, advanced
as of the date hereof and shall be subject to all of the terms and
provisions of this Mortgage. Nothing herein shall be deemed a waiver by
Mortgagor of the execution of judgment as provided in IC 32-8-16-1.5.
1.27 Mortgagor's Waivers. To the full extent permitted by law,
Mortgagor agrees that Mortgagor shall not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, moratorium or extension, or
any law now or hereafter in force providing for the reinstatement of the
indebtedness secured hereby prior to any sale of the Property to be made
pursuant to any provisions contained herein or prior to the entering of any
decree, judgment or order of any court of competent jurisdiction, or any right
under any statute to redeem all or any part of the Property so sold.
Mortgagor, for Mortgagor and Mortgagor's successors and assigns, and for any
and all persons ever claiming any interest in the Property, to the full extent
permitted by law, hereby knowingly, intentionally and voluntarily with and
upon the advice of competent counsel: (a) waives, releases, relinquishes and
forever forgoes all rights of valuation, appraisement, stay of execution,
reinstatement and notice of election or intention to mature or declare due the
secured indebtedness (except such notices as are specifically provided for
herein); (b) waives, releases, relinquishes and forever forgoes all right to a
marshalling of the assets of Mortgagor, including the Property, to a sale in
the inverse order of alienation, or to direct the order in which any of the
Property shall be sold in the event of foreclosure of the liens and security
interests hereby created and agrees that any court having jurisdiction to
foreclose such liens and security interests may order the Property sold as an
entirety; and (c) waives, releases, relinquishes and forever forgoes all
rights and periods of redemption provided under applicable law. To the full
extent permitted by law, Mortgagor shall not have or assert any right under
any statute or rule of law pertaining to the exemption of homestead or other
exemption under any federal, state or local law now or hereafter in effect,
the administration of estates of decedents or other matters whatever to
defeat, reduce or affect the right of Mortgagee under the terms of this
Mortgage to a sale of the Property, for the collection of the secured
indebtedness without any prior or different resort for collection, or the
right of Mortgagee under the terms of this Mortgage to the payment of the
indebtedness secured hereby out of the proceeds of sale of the Property in
preference to every other claimant whatever. Mortgagor covenants and agrees
that upon the commencement of a voluntary or involuntary bankruptcy proceeding
by or against Mortgagor, Mortgagor shall not seek a supplemental stay or
otherwise shall not seek pursuant to 11 U.S.C. (Section Mark)105 or any other
provision of the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law, or otherwise) of
any jurisdiction whatsoever, now or hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or inhibit the ability of
Mortgagee to enforce any rights of Mortgagee against any guarantor or indemnitor
of the secured obligations or any other party liable with respect thereto by
virtue of any indemnity, guaranty or otherwise.
1.28 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
32
<PAGE>
(a) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY
KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE OF
INDIANA OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THE NOTE, THIS MORTGAGE OR ANY OTHER OF THE LOAN DOCUMENTS, (ii)
AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN MARION COUNTY, INDIANA,
(iii) SUBMITS TO THE JURISDICTION OF SUCH COURTS, AND, (iv) TO THE FULLEST
EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING ANY ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
MORTGAGEE TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM).
MORTGAGOR FURTHER CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY REGISTERED OR
CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE MORTGAGOR AT THE ADDRESS FOR
NOTICES DESCRIBED IN SECTION 4.5 HEREOF, AND CONSENTS AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT
NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN
ANY OTHER MANNER PERMITTED BY LAW).
(b) MORTGAGEE AND MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVE, RELINQUISH AND FOREVER FORGO THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THE INDEBTEDNESS SECURED HEREBY OR ANY CONDUCT, ACT OR OMISSION OF
MORTGAGEE OR MORTGAGOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH
MORTGAGEE OR MORTGAGOR, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE.
1.29 Contractual Statute of Limitations. Mortgagor hereby agrees
that any claim or cause of action by Mortgagor against Mortgagee, or any of
Mortgagee's directors, officers, employees, agents, accountants or attorneys,
based upon, arising from or relating to the indebtedness secured hereby, or
any other matter, cause or thing whatsoever, whether or not relating thereto,
occurred, done, omitted or suffered to be done by Mortgagee or by Mortgagee's
directors, officers, employees, agents, accountants or attorneys, whether
sounding in contract or in tort or otherwise, shall be barred unless asserted
by Mortgagor by the commencement of an action or proceeding in a court of
competent jurisdiction by the filing of a complaint within one (1) year after
Mortgagor first acquires actual knowledge of the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based and service of a summons and compliant on an officer of Mortgagee or any
other person authorized to accept service of process on behalf of Mortgagee,
within thirty (30) days thereafter. Mortgagor agrees that such one (1) year
period of time is reasonable and sufficient time for a borrower to investigate
and act upon any such claim or cause of action. The one (1) year period
provided herein shall not be waived, tolled or extended except
33
<PAGE>
by the specific written agreement of Mortgagee. This provision shall survive
any termination of this Mortgage or any of the other Loan Documents.
1.30 Management. The management of the Property shall be by
either: (a) Mortgagor or an entity affiliated with Mortgagor approved by
Mortgagee for so long as Mortgagor or said affiliated entity is managing the
Property in a first class manner; or (b) a professional property management
company approved by Mortgagee (Mortgagee hereby approves Insignia Management
Group, L.P. as manager of the Property). Such management by an affiliated
entity or a professional property management company shall be pursuant to a
written agreement approved by Mortgagee. In no event shall any manager be
removed or replaced or the terms of any management agreement modified or
amended without the prior written consent of Mortgagee. In the event of
default hereunder or under any management contract then in effect, which
default is not cured within any applicable grace or cure period, Mortgagee
shall have the right to terminate, or to direct Mortgagor to terminate, such
management contract upon thirty (30) days' notice and to retain, or to direct
Mortgagor to retain, a new management agent approved by Mortgagee. All Rents
and Profits generated by or derived from the Property shall first be utilized
solely for current expenses directly attributable to the ownership and
operation of the Property, including, without limitation, current expenses
relating to Mortgagor's liabilities and obligations with respect to this
Mortgage and the other Loan Documents, and none of the Rents and Profits
generated by or derived from the Property shall be diverted by Mortgagor and
utilized for any other purposes unless all such current expenses attributable
to the ownership and operation of the Property have been fully paid and
satisfied.
1.31 Hazardous Waste and Other Substances.
(a) Mortgagor hereby represents and warrants to Mortgagee that, as
of the date hereof: (i) to the best of Mortgagor's knowledge, information and
belief, the Property is not in direct or indirect violation of any local,
state or federal law, rule or regulation pertaining to environmental
regulation, contamination or clean-up (collectively, "Environmental Laws")
except as otherwise disclosed in that certain phase 1 environmental report
dated April 13, 1995 and prepared by IVI Environmental, Inc. (the
"Environmental Report"), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
(Section Mark)9601 et seq. and 40 CFR (Section Mark)302.1 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. (Section Mark)6901
et seq.), the Federal Water Pollution Control Act (33 U.S.C. (Section Mark)1251
et seq. and 40 CFR (Section Mark)116.1 et seq.), and the Hazardous Materials
Transportation Act (49 U.S.C. (Section Mark)1801 et seq.), and the
regulations promulgated pursuant to said laws, all as amended; (ii) to the
best of Mortgagor's knowledge, information and belief, no hazardous, toxic or
harmful substances, wastes, materials, pollutants or contaminants (including,
without limitation, asbestos, polychlorinated biphenyls, petroleum products,
flammable explosives, radioactive materials, infectious substances or raw
materials which include hazardous constituents) or any other substances or
materials which are included under or regulated by Environmental Laws (except
for minimal quantities of the foregoing substances stored or used in
connection with the operation of the Property in the ordinary course of
business as an apartment complex, which storage and use is in substantial
compliance with the Environmental Laws) (collectively, "Hazardous Substances")
are located on or have been handled, generated, stored, processed or disposed
of on or released or discharged from the Property (including underground
contamination) except as otherwise disclosed in the Environmental Report;
(iii) the
34
<PAGE>
Property is not subject to any private or governmental lien or
judicial or administrative notice or action relating to Hazardous Substances;
(iv) to the best of Mortgagor's knowledge, information and belief, there are
no existing or closed underground storage tanks or other underground storage
receptacles for Hazardous Substances on the Property; (v) Mortgagor has
received no notice of, and to the best of Mortgagor's knowledge and belief,
there exists no investigation, action, proceeding or claim by any agency,
authority or unit of government or by any third party which could result in
any liability, penalty, sanction or judgment under any Environmental Laws with
respect to any condition, use or operation of the Property nor does Mortgagor
know of any basis for such a claim; (vi) none of the Property is within the
definition of the term "property" contained in Section 6 (IC 13-7-22.5-6) of
the Indiana Responsible Property Transfer Law ("IRPTL") (IC 13-7-22.5), and
Mortgagor shall observe, perform and comply with the requirements of IRPTL in
connection with the Mortgage and the transactions evidenced by this Mortgage,
and (vii) Mortgagor has received no notice of and, to the best of Mortgagor's
knowledge and belief, there has been no claim by any party that any use,
operation or condition of the Property has caused any nuisance or any other
liability or adverse condition on any other property nor does Mortgagor know
of any basis for such a claim.
(b) Mortgagor shall, to the extent required by and within the time
periods provided in the Environmental Laws, keep or cause the Property to be
kept free from Hazardous Substances. Mortgagor shall keep or cause the
Property to be kept in compliance with all Environmental Laws, shall not
install or use any underground storage tanks, shall expressly prohibit the
use, generation, handling, storage, production, processing and disposal of
Hazardous Substances by all tenants of space in the Improvements, and, without
limiting the generality of the foregoing, during the term of this Mortgage,
shall not install in the Improvements or permit to be installed in the
Improvements asbestos or any substance containing asbestos.
(c) Mortgagor shall promptly notify Mortgagee if Mortgagor shall
become aware of the possible existence of any Hazardous Substances on the
Property or if Mortgagor shall become aware that the Property is or may be in
direct or indirect violation of any Environmental Laws. Further, immediately
upon receipt of the same, Mortgagor shall deliver to Mortgagee copies of any
and all orders, notices, permits, applications, reports, and other
communications, documents and instruments pertaining to the actual, alleged or
potential presence or existence of any Hazardous Substances at, on, about,
under, within, near or in connection with the Property. Mortgagor shall,
promptly and when and as required by Mortgagee, at Mortgagor's sole cost and
expense, take all actions as shall be necessary or advisable for the clean-up
of any and all portions of the Property or other affected property, including,
without limitation, all investigative, monitoring, removal, containment and
remedial actions in accordance with all applicable Environmental Laws (and in
all events in a manner reasonably satisfactory to Mortgagee), and shall
further pay or cause to be paid, at no expense to Mortgagee, all clean-up,
administrative and enforcement costs of applicable governmental agencies which
may be asserted against the Property. In the event Mortgagor fails to do so
after any applicable grace or cure periods, Mortgagee may, but shall not be
obligated to, cause the Property or other affected property to be freed from
any Hazardous Substances or otherwise brought into conformance with
Environmental Laws and any and all costs and expenses incurred by Mortgagee in
connection therewith, together with interest thereon at the Default Interest
Rate from the date incurred by Mortgagee until actually paid by Mortgagor,
shall be immediately paid by Mortgagor on demand and shall be secured by this
Mortgage and by all of the other Loan
35
<PAGE>
Documents securing all or any part of the indebtedness evidenced by the
Note. In furtherance of the foregoing and after Mortgagor's failure to comply
with any applicable grace or cure periods, Mortgagor hereby grants to
Mortgagee and its agents and employees access to the Property and a license
to remove any items deemed by Mortgagee to be Hazardous Substances and to
do all things Mortgagee shall deem necessary to bring the Property in
conformance with Environmental Laws. Mortgagor covenants and agrees, at
Mortgagor's sole cost and expense, to indemnify, defend (at trial and
appellate levels, and with attorneys, consultants and experts acceptable to
Mortgagee), and hold Mortgagee harmless from and against any and all liens,
damages, losses, liabilities, obligations, settlement payments, penalties,
assessments, citations, directives, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses of any
kind or of any nature whatsoever (including, without limitation, reasonable
attorneys', consultants' and experts' fees and disbursements actually
incurred in investigating, defending, settling or prosecuting any claim,
litigation or proceeding) which may at any time be imposed upon, incurred
by or asserted or awarded against Mortgagee or the Property, and arising
directly or indirectly from or out of: (i) the presence, release or
threat of release of any Hazardous Substances on, in, under or affecting
all or any portion of the Property or any surrounding areas, regardless
of whether or not caused by or within the control of Mortgagor; (ii)
the violation of any Environmental Laws relating to or affecting the
Property, whether or not caused by or within the control of Mortgagor;
(iii) the failure by Mortgagor to comply fully with the terms and conditions
of this Section 1.31; (iv) the breach of any representation or warranty
contained in this Section 1.31; or (v) the enforcement of this Section
1.31, including, without limitation, the cost of assessment,
containment and/or removal of any and all Hazardous Substances from all or any
portion of the Property or any surrounding areas, the cost of any actions
taken in response to the presence, release or threat of release of any
Hazardous Substances on, in, under or affecting any portion of the Property or
any surrounding areas to prevent or minimize such release or threat of release
so that it does not migrate or otherwise cause or threaten danger to present
or future public health, safety, welfare or the environment, and costs
incurred to comply with the Environmental Laws in connection with all or any
portion of the Property or any surrounding areas. The indemnity set forth in
this Section 1.31(c) shall also include any loss incurred by Mortgagee as a
result of a diminution in the value of the security afforded by the Property
or any future reduction in the sales price of the Property by reason of any
matter set forth in this Section 1.31(c). The foregoing indemnity shall
specifically not include any such costs relating to Hazardous Substances which
are initially placed on, in or under the Property after foreclosure or other
taking of title to the Property by Lender, its successor, assignee or
designee. Mortgagee's rights under this Section shall survive payment in full
of the indebtedness secured hereby and shall be in addition to all other
rights of Mortgagee under this Mortgage, the Note and the other Loan
Documents.
(d) Upon Mortgagee's request, at any time after the occurrence of
a default beyond any applicable grace or cure period under this Mortgage, or
at such other time as Mortgagee has reasonable grounds to believe that
Hazardous Substances are or have been released, stored or disposed of on or
around the Property or that the Property may be in violation of the
Environmental Laws, Mortgagor shall provide, at Mortgagor's sole cost and
expense, an inspection or audit of the Property prepared by a hydrogeologist
or environmental engineer or other appropriate consultant approved by
Mortgagee indicating the presence or absence of Hazardous Substances on the
Property or an inspection or audit of the Improvements prepared by an
engineering or consulting firm
36
<PAGE>
approved by Mortgagee indicating the presence or absence of friable
asbestos or substances containing asbestos on the Property. If Mortgagor
fails to provide such inspection or audit within thirty (30) days after
such request, Mortgagee may order the same, and Mortgagor hereby grants
to Mortgagee and its employees and agents access to the Property and a license
to undertake such inspection or audit. The cost of such inspection or
audit, together with interest thereon at the Default Interest Rate from
the date incurred by Mortgagee until actually paid by Mortgagor, shall
be immediately paid to Mortgagee by Mortgagor on demand and shall be secured
hereby and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.
1.32 Indemnification; Subrogation.
(a) Mortgagor shall indemnify, defend and hold Mortgagee
harmless against: (i) any and all claims for brokerage, leasing, finders or
similar fees which may be made relating to the Property or the secured
indebtedness, and (ii) any and all liability, obligations, losses, damages,
penalties, claims, actions, suits, costs and expenses (including Mortgagee's
reasonable attorneys' fees, together with reasonable appellate counsel fees,
if any) of whatever kind or nature which may be asserted against, imposed on
or incurred by Mortgagee in connection with the secured indebtedness, this
Mortgage, the Property, or any part thereof, or the exercise by Mortgagee of
any rights or remedies granted to it under this Mortgage; provided, however,
that nothing herein shall be construed to obligate Mortgagor to indemnify,
defend and hold harmless Mortgagee from and against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, suits, costs and
expenses enacted against, imposed on or incurred by Mortgagee by reason of
Mortgagee's willful misconduct or gross negligence.
(b) If Mortgagee is made a party defendant to any litigation or
any claim is threatened or brought against Mortgagee concerning the secured
indebtedness, this Mortgage, the Property, or any part thereof, or any
interest therein, or the construction, maintenance, operation or occupancy or
use thereof, then Mortgagor shall indemnify, defend and hold Mortgagee
harmless from and against all liability by reason of said litigation or
claims, including reasonable attorneys' fees (together with reasonable
appellate counsel fees, if any) and expenses incurred by Mortgagee in any such
litigation or claim, whether or not any such litigation or claim is prosecuted
to judgment. If Mortgagee commences an action against Mortgagor to enforce
any of the terms hereof or to prosecute any breach by Mortgagor of any of the
terms hereof or to recover any sum secured hereby, Mortgagor shall pay to
Mortgagee its reasonable attorneys' fees (together with reasonable appellate
counsel, fees, if any) and expenses. The right to such attorneys' fees
(together with reasonable appellate counsel fees, if any) and expenses shall
be deemed to have accrued on the commencement of such action, and shall be
enforceable whether or not such action is prosecuted to judgment. If
Mortgagor breaches any term of this Mortgage, Mortgagee may engage the
services of an attorney or attorneys to protect its rights hereunder, and in
the event of such engagement following any breach by Mortgagor, Mortgagor
shall pay Mortgagee reasonable attorneys' fees (together with reasonable
appellate counsel fees, if any) and expenses incurred by Mortgagee, whether or
not an action is actually commenced against Mortgagor by reason of such
breach, All references to "attorneys" in this Subsection and elsewhere in this
Mortgage shall include without limitation any attorney or law firm engaged by
Mortgagee and Mortgagee's in-house counsel, and all references to "fees and
expenses" in this Subsection and elsewhere in this Mortgage shall include
without
37
<PAGE>
limitation any fees of such attorney or law firm and any allocation
charges and allocation costs of Mortgagee's in-house counsel.
(c) A waiver of subrogation shall be obtained by Mortgagor from
its insurance carrier and, consequently, Mortgagor waives any and all right to
claim or recover against Mortgagee, its officers, employees, agents and
representatives, for loss of or damage to Mortgagor, the Property, Mortgagor's
property or this property of others under Mortgagor's control from any cause
insured against or required to be insured against by the provisions of this
Mortgage.
1.33 Negative Covenants with Respect to Indebtedness,
Operations and Fundamental Changes of Mortgagor. Mortgagor hereby represents,
warrants and covenants, as of the date hereof and until such time as the
indebtedness secured hereby is paid in full, that Mortgagor:
(a) will not dissolve or terminate or materially amend the terms
of its certificate of incorporation or partnership agreement;
(b) will not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation or
dissolution), or acquire by purchase or otherwise all or substantially all the
business or assets of, or any stock or other evidence of beneficial ownership
of, any entity;
(c) has not and will not guarantee or otherwise become liable on
or in connection with any other person or entity;
(d) does not own and will not own any encumbered asset other
than (i) the Property, and (ii) incidental personal property necessary for the
operation of the Property;
(e) is not engaged and will not engage in any business other
than the ownership, management and operation of the Property;
(f) will not enter into any contract or agreement with any
general partner, principal or affiliate of the Mortgagor or any affiliate of
the general partner of the Mortgagor except upon terms and conditions that are
commercially reasonable and substantially similar to those that would be
available on an arms-length basis with third parties other than an affiliate;
(g) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the indebtedness secured hereby, and (ii) affiliate advances or trade
payables or accrued expenses incurred in the ordinary course of business of
operating the Property; no other debt may be secured (senior, subordinate or
pari passu) by the Property;
(h) has not made and will not make any loans or advances to any
third party (including any affiliate);
38
<PAGE>
(i) is and will be solvent and pay its debt from its assets as
the same shall become due;
(j) has done or caused to be done and will do all things
necessary to preserve its existence, and will not, nor will any partner,
limited or general, or shareholder thereof, amend, modify or otherwise change
its partnership certificate, partnership agreement, articles of incorporation
or bylaws in a manner which adversely affects the Mortgagor's existence as a
single purpose entity;
(k) will conduct and operate its business as presently conducted
and operated;
(l) will maintain books and records and bank accounts separate
from those of its affiliates, including its general partners;
(m) will be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other entity (including any
affiliate thereof, including the general partner or any affiliate of the
general partner of the Mortgagor);
(n) will file its own tax returns;
(o) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
(p) will not seek the dissolution or winding up, in whole or in
part, of the Mortgagor;
(q) will not commingle the funds and other assets of Mortgagor
with those of any general partner, any affiliate or any other person;
(r) has and will maintain its assets in such a manner that it is
not costly or difficult to segregate, ascertain or identify its individual
assets from those of any affiliate or any other person;
(s) does not and will not hold itself out to be responsible for
the debts or obligations of any other person;
(t) will not do any act which would make it impossible to carry
on the ordinary business of Mortgagor;
(u) will not possess or assign the Property or incidental
personal property necessary for the operation of the Property for other than a
business or company purpose;
39
<PAGE>
(v) except as otherwise permitted under Section 1.13 of this
Mortgage, will not sell, encumber or otherwise dispose of all or substantially
all of the Property or incidental personal property necessary for the
operation of the Property;
(w) will not hold title to Mortgagor's assets other than in
Mortgagor's name; and
(x) will not institute proceedings to be adjudicated bankrupt or
insolvent; or consent to the institution of bankruptcy or insolvency
proceedings against it; or file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law relating to
bankruptcy; or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Mortgagor or a
substantial part of Mortgagor's property; or make any assignment for the
benefit of creditors; or admit in writing its inability to pay its debts
generally as they become due; or take any action in furtherance of any such
action.
ARTICLE II
EVENTS OF DEFAULT
2.1 Events of Default. The occurrence of any of the following
events shall be a default hereunder:
(a) Mortgagor fails to punctually perform any covenant,
agreement,obligation, term or condition hereof which requires payment of any
money to Mortgagee (except those regarding payments to be made under the Note,
which failure is subject to any grace periods set forth in the Note) for five
(5) business days after any such amounts are due and payable if a time period
for payment is set forth in this Mortgage or in any of the other Loan
Documents, or if no such time period is set forth, if any such amounts are not
paid within five (5) business days after notice has been given to Mortgagor.
(b) Mortgagor fails to provide insurance as required by Section
1.4 hereof or fails to perform any covenant, agreement, obligation, term or
condition set forth in Section 1.15 or 1.31 hereof (provided, however, that
interest on the indebtedness shall accrue from the time of such default at the
Default Interest Rate only if such default is not cured within five (5)
business days after written notice thereof from Mortgagee to Mortgagor,
provided, further, that Mortgagee's failure to send such notice shall not
affect or impair the existence of such default and Mortgagee's right to
exercise its other remedies as a result thereof).
(c) Mortgagor fails to perform any other covenant, agreement,
obligation, term or condition set forth herein or in any of the other Loan
Documents (other than those otherwise described in this Section 2.1 or in the
Hazardous Substances Indemnity Agreement of even date herewith) and, to the
extent such failure or default is susceptible of being cured, the continuance
of such failure or default for thirty (30) days after written notice thereof
from Mortgagee to Mortgagor; provided, however, that if such default is
susceptible of cure but such cure cannot be accomplished with
40
<PAGE>
reasonable diligence within said period of time, and if Mortgagor commences
to cure such default promptly after receipt of notice thereof from Mortgagee,
and thereafter
prosecutes the curing of such default with reasonable diligence, such period of
time shall be extended for such period of time as may be necessary to cure such
default with reasonable diligence, but not to exceed an additional sixty (60)
days.
(d) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the loan evidenced by
the Note, or in any of the other Loan Documents to Mortgagee by Mortgagor, by
any general partner in Mortgagor or by any indemnitor or guarantor under any
indemnity or guaranty executed in connection with the loan secured hereby is
determined by Mortgagee to have been false or misleading in any material
respect at the time made.
(e) There shall be a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage, granting of a security
interest in or other transfer or further encumbrancing of the Property,
Mortgagor or its general partners, or any portion thereof or any interest
therein, in violation of Section 1.13 hereof and same has not been cured within
fifteen (15) days after written notice thereof from Mortgagee to Mortgagor.
(f) Intentionally Omitted Prior to Execution.
(g) Mortgagor, general partner in Mortgagor or any indemnitor or
guarantor under any indemnity or guaranty executed in connection with the loan
secured hereby becomes insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors, shall file
a petition in bankruptcy, shall voluntarily be adjudicated insolvent or
bankrupt or shall admit in writing the inability to pay debts as they mature,
shall petition or apply to any tribunal for or shall consent to or shall not
contest the appointment of a receiver, trustee, custodian or similar officer
for Mortgagor, general partner of Mortgagor or indemnitor or guarantor or for a
substantial part of the assets of Mortgagor, of general partner of Mortgagor or
of any such indemnitor or guarantor, or shall commence any case, proceeding or
other action under any bankruptcy, reorganization, arrangement, readjustment or
debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect.
(h) A petition is filed or any case, proceeding or other action
is commenced against Mortgagor, general partner of Mortgagor or against any
indemnitor or guarantor under any indemnity or guaranty executed in connection
with the loan secured hereby seeking to have an order for relief entered
against it as debtor or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or other relief
under any law relating to bankruptcy, insolvency, arrangement, reorganization,
receivership or other debtor relief under any law or statute of any
jurisdiction whether now or hereafter in effect or a court of competent
jurisdiction enters an order for relief against Mortgagor, general partner of
Mortgagor or against any indemnitor or guarantor under any indemnity or
guaranty executed in connection with the loan secured hereby, as debtor, or an
order, judgment or decree is entered appointing, with or without the consent of
Mortgagor, general partner of Mortgagor or of any such indemnitor or guarantor,
a receiver, trustee, custodian or similar officer for Mortgagor, general
partner of
41
<PAGE>
Mortgagor or for any such indemnitor or guarantor, or for any substantial
part of any of the properties of Mortgagor, general partner of Mortgagor
or of any such indemnitor or guarantor, and if any such event shall
occur, such petition, case, proceeding, action, order, judgment or decree shall
not be dismissed within sixty (60) days after being commenced.
(i) The Property or any part thereof shall be taken on execution
or other process of law in any action against Mortgagor.
(j) Mortgagor abandons all or a portion of the Property.
(k) The holder of any lien or security interest on the Property
(without implying the consent of Mortgagee to the existence or creation of any
such lien or security interest), whether superior or subordinate to this
Mortgage or any of the other Loan Documents, declares a default and such
default is not cured within any applicable grace or cure period set forth in
the applicable document or such holder institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder.
(l) The Property, or any part thereof, is subjected to actual or
threatened waste or to removal, demolition or material alteration so that the
value of the Property is materially diminished thereby and Mortgagee determines
(in its subjective determination) that it is not adequately protected from any
loss, damage or risk associated therewith.
(m) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of Mortgagor, or any general partner.
(n) Mortgagor's failure to timely complete the Deferred
Maintenance (as defined in Exhibit D) in accordance with Exhibit D attached
hereto and made a part hereof.
ARTICLE III
REMEDIES
3.1 Remedies Available. If there shall occur a default under
this Mortgage, and such default has not been cured within any applicable grace
or cure period, then this Mortgage is subject to foreclosure as provided by law
and Mortgagee may, at its option and by or through a trustee, nominee, assignee
or otherwise, to the fullest extent permitted by law, exercise any or all of
the following rights, remedies and recourses, either successively or
concurrently:
(a) Acceleration. Accelerate the maturity date of the Note and
declare any or all of the indebtedness secured hereby to be immediately due and
payable without any presentment, demand, protest, notice, or action of any kind
whatever (each of which is hereby expressly waived by Mortgagor), whereupon the
same shall become immediately due and payable. Upon any such acceleration,
payment of such accelerated amount shall constitute a prepayment of the
principal balance of the Note and any applicable prepayment fee provided for in
the Note shall then be immediately due and payable.
42
<PAGE>
(b) Entry on the Property. Either in person or by agent, with or
without bringing any action or proceeding, or by a receiver appointed by a
court and without regard to the adequacy of its security, enter upon and take
possession of the Property, or any part thereof, without force or with such
force as is permitted by law and without notice or process or with such notice
or process as is required by law unless such notice and process is waivable, in
which case Mortgagor hereby waives such notice and process, and do any and all
acts and perform any and all work which may be desirable or necessary in
Mortgagee's judgment to complete any unfinished construction on the Real
Estate, to preserve the value, marketability or rentability of the Property, to
increase the income therefrom, to manage and operate the Property or to protect
the security hereof and all sums expended by Mortgagee therefor, together with
interest thereon at the Default Interest Rate, shall be immediately due and
payable to Mortgagee by Mortgagor on demand and shall be secured hereby and by
all of the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.
(c) Collect Rents and Profits. With or without taking possession
of the Property, sue or otherwise collect the Rents and Profits, including
those past due and unpaid.
(d) Appointment of Receiver. Upon, or at any time prior or
after, initiating the exercise of any power of sale, instituting any judicial
foreclosure or instituting any other foreclosure of the liens and security
interests provided for herein or any other legal proceedings hereunder, make
application to a court of competent jurisdiction for appointment of a receiver
for all or any part of the Property, as a matter of strict right and without
notice to Mortgagor and without regard to the adequacy of the Property for the
repayment of the indebtedness secured hereby or the solvency of Mortgagor or
any person or persons liable for the payment of the indebtedness secured
hereby, and Mortgagor does hereby irrevocably consent to such appointment,
waives any and all notices of and defenses to such appointment and agrees not
to oppose any application therefor by Mortgagee, but nothing herein is to be
construed to deprive Mortgagee of any other right, remedy or privilege
Mortgagee may now have under the law to have a receiver appointed, provided,
however, that, the appointment of such receiver, trustee or other appointee by
virtue of any court order, statute or regulation shall not impair or in any
manner prejudice the rights of Mortgagee to receive payment of the Rents and
Profits pursuant to other terms and provisions hereof. Any such receiver shall
have all of the usual powers and duties of receivers in similar cases,
including, without limitation, the full power to hold, develop, rent, lease,
manage, maintain, operate and otherwise use or permit the use of the Property
upon such terms and conditions as said receiver may deem to be prudent and
reasonable under the circumstances as more fully set forth in Section 3.3
below. Such receivership shall, at the option of Mortgagee, continue until
full payment of all of the indebtedness secured hereby or until title to the
Property shall have passed by foreclosure sale under this Mortgage or deed in
lieu of foreclosure.
(e) Foreclosure. Immediately commence an action to foreclose
this Mortgage or to specifically enforce its provisions or any of the
indebtedness secured hereby pursuant to the statutes in such case made and
provided and sell the Property or cause the Property to be sold in accordance
with the requirements and procedures provided by said statutes in a single
parcel or in several parcels at the option of Mortgagee.
43
<PAGE>
(1) In the event foreclosure proceedings are filed by
Mortgagee, all expenses incident to such proceeding, including, but
not limited to, attorneys' fees and costs, shall be paid by
Mortgagor and secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by
the Note. The secured indebtedness and all other obligations
secured by this Mortgage, including, without limitation, interest
at the Default Interest Rate (as defined in the Note), any
prepayment charge, fee or premium required to be paid under the
Note in order to prepay principal (to the extent permitted by
applicable law), attorneys' fees and any other amounts due and
unpaid to Mortgagee under the Loan Documents, may be bid by
Mortgagee in the event of a foreclosure sale hereunder. In the
event of a judicial sale pursuant to a foreclosure decree, it is
understood and agreed that Mortgagee or its assigns may become the
purchaser of the Property or any part thereof.
(2) Mortgagee may, by following the procedures and
satisfying the requirements prescribed by applicable law, foreclose
on only a portion of the Property and, in such event, said
foreclosure shall not affect the lien of this Mortgage on the
remaining portion of the Property foreclosed.
(f) Other. Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.
3.2 Application of Proceeds. To the fullest extent permitted by
law, the proceeds of any sale under this Mortgage shall be applied to the
extent funds are so available to the following items in such order as Mortgagee
in its discretion may determine:
(a) To payment of the costs, expenses and fees of taking
possession of the Property, and of holding, operating, maintaining, using,
leasing, repairing, improving, marketing and selling the same and of otherwise
enforcing Mortgagee's right and remedies hereunder and under the other Loan
Documents, including, but not limited to, receivers' fees, court costs,
attorneys', accountants', appraisers', managers' and other professional fees,
environmental audit charges, title charges and transfer taxes.
(b) To payment of all sums expended by Mortgagee under the terms
of any of the Loan Documents and not yet repaid, together with interest on such
sums at the Default Interest Rate.
(c) To payment of the secured indebtedness and all other
obligations secured by this Mortgage, including, without limitation, interest
at the Default Interest Rate and, to the extent permitted by applicable law,
any prepayment fee, charge or premium required to be paid under the Note in
order to prepay principal, in any order that Mortgagee chooses in its sole
discretion.
The remainder, if any, of such funds shall be disbursed to Mortgagor or
to the person or persons legally entitled thereto.
3.3 Right and Authority of Receiver or Mortgage in the Event of
Default: Power of Attorney. Upon the occurrence of a default hereunder, which
default is not cured within any
44
<PAGE>
applicable grace or cure period, and entry upon the Property pursuant to
Section 3.1(b) hereof or appointment of a receiver pursuant to Section
3.1(b) hereof, and under such terms and conditions as may be prudent and
reasonable under the circumstances in Mortgagee's or the receiver's
sole discretion, all at Mortgagor's expense, Mortgagee or said
receiver, or such other persons or entities as they shall hire, direct or
engage, as the case may be, may do or permit one or more of the following,
successively or concurrently: (a) enter upon and take possession and control of
any and all of the Property; (b) take and maintain possession of all documents,
books, records, papers and accounts relating to the Property; (c) exclude
Mortgagor and its agents, servants and employees wholly from the Property; (d)
manage and operate the Property; (e) preserve and maintain the Property; (f)
make repairs and alterations to the Property; (g) complete any construction or
repair of the Improvements, with such changes, additions or modifications of
the plans and specifications or intended disposition and use of the
Improvements as Mortgagee may in its sole discretion deem appropriate or
desirable to place the Property in such condition as will, in Mortgagee's sole
discretion, make it or any part thereof readily marketable or rentable; (h)
conduct a marketing or leasing program with respect to the Property, or employ
a marketing or leasing agent or agents to do so, directed to the leasing or
sale of the Property under such terms and conditions as Mortgagee may in its
sole discretion deem appropriate or desirable; (i) employ such contractors,
subcontractors, materialmen, architects, engineers, consultants, managers,
brokers, marketing agents, or other employees, agents, independent contractors
or professionals, as Mortgagee may in its sole discretion deem appropriate or
desirable to implement and effectuate the rights and powers herein granted; (j)
execute and deliver, in the name of Mortgagee as attorney-in-fact and
45
<PAGE>
agent of Mortgagor or in its own name as Mortgagee, such documents and
instruments as are necessary or appropriate to consummate authorized
transactions; (k) enter into such leases, whether of real or personal
property, or tenancy agreements, under such terms and conditions as
Mortgagee may in its sole discretion deem appropriate or desirable;
(l) collect and receive the Rents and Profits from the Property; (m)
eject tenants or repossess personal property, as provided by law, for
breaches of the conditions of their leases or other agreements; (n)sue for
unpaid Rents and Profits, payments, income or proceeds in the name of
Mortgagor or Mortgagee; (o) maintain actions in forcible entry and detainer,
ejectment for possession and actions in distress for rent; (p) compromise or
give acquittance for Rents and Profits, payments, income or proceeds that may
become due; (q) delegate or assign any and all rights and powers given to
Mortgagee by this Mortgage; and (r) do any acts which Mortgagee in its sole
discretion deems appropriate or desirable to protect the security hereof and
use such measures, legal or equitable, as Mortgagee may in its sole discretion
deem appropriate or desirable to implement and effectuate the provisions of
this Mortgage. This Mortgage shall constitute a direction to and full
authority to any lessee, or other third party who has heretofore dealt or
contracted or may hereafter deal or contract with Mortgagor or Mortgagee, at
the request of Mortgagee, to pay all amounts owing under any lease, contract,
concession, license or other agreement to Mortgagee without proof of the
default relied upon. Any such lessee or third party is hereby irrevocably
authorized to rely upon and comply with (and shall be fully protected by
Mortgagor in so doing) any request, notice or demand by Mortgagee for the
payment to Mortgagee of any Rents and Profits or other sums which may be or
thereafter become due under its lease, contract, concession, license or other
agreement, or for the performance of any undertakings under any such lease,
contract, concession, license or other agreement, and shall have no right or
duty to inquire whether any default under this Mortgage or under any of the
other Loan Documents has actually occurred or is then existing. Mortgagor
hereby constitutes and appoints Mortgagee, its assignees, successors,
transferees and nominees, as Mortgagor's true and lawful attorney-in-fact and
agent, with full power of substitution in the Property, in Mortgagor's name,
place and stead, to do or permit any one or more of the foregoing described
rights, remedies, powers and authorities, successively or concurrently, and
said power of attorney shall be deemed a power coupled with an interest and
irrevocable so long as any indebtedness secured hereby is outstanding. Any
money advanced by Mortgagee in connection with any action taken under this
Section 3.3, together with interest thereon at the Default Interest Rate from
the date of making such advancement by Mortgagee until actually paid by
Mortgagor, shall be a demand obligation owing by Mortgagor to Mortgagee and
shall be secured by this Mortgage and by every other instrument securing the
secured indebtedness.
3.4 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale, Mortgagor or
Mortgagor's representatives, successors or assigns, or any other persons
claiming any interest in the Property by, through or under Mortgagor (except
tenants of space in the Improvements subject to leases entered into prior to
the date hereof), are occupying or using the Property, or any part thereof,
then, to the extent not prohibited by applicable law, each and all shall, at
the option of Mortgagee or the purchaser at such sale, as the case may be,
immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day-to-day, terminable at the will of either landlord
or tenant, at a reasonable rental per day based upon the value of the Property
occupied or used, such rental to be due daily to the purchaser. Further, to
the extent permitted by applicable law, in the event the tenant fails to
surrender possession of the Property upon the termination of such tenancy, the
purchaser shall be entitled to institute and maintain an action for unlawful
detainer of the Property in the appropriate court of the county in which the
Real Estate is located.
3.5 Notice to Account Debtors. Mortgagee may, at any time after
a default suit hereunder, which default is not cured within any applicable
grace or cure period, notify the account debtors and obligors of any accounts,
chattel paper, negotiable instruments or other evidences of indebtedness, to
Mortgagor included in the Property to pay Mortgagee directly. Mortgagor shall
at any time or from time to time upon the request of Mortgagee provide to
Mortgagee a current list of all such account debtors and obligors and their
addresses.
3.6 Cumulative Remedies. All remedies contained in this Mortgage
are cumulative and Mortgagee shall also have all other remedies provided at law
and in equity or in any other Loan Documents. Such remedies may be pursued
separately, successively or concurrently at the sole subjective direction of
Mortgagee and may be exercised in any order and as often as occasion therefor
shall arise. No act of Mortgagee shall be construed as an election to proceed
under any particular provisions of this Mortgage to the exclusion of any other
provision of this Mortgage or as an election of remedies to the exclusion of
any other remedy which may then or thereafter be available to Mortgagee. No
delay or failure by Mortgagee to exercise any right or remedy under this
Mortgage shall be construed to be a waiver of that right or remedy or of any
default hereunder. Mortgagee may exercise any one or more of its rights and
remedies at its option without regard to the adequacy of its security.
3.7 Payment of Expenses. Mortgagor shall pay on demand all of
Mortgagee's expenses incurred in any efforts to enforce any terms of this
Mortgage, whether or not any lawsuit is filed and whether or not foreclosure is
commenced but not completed, including, but not limited to,
46
<PAGE>
legal fees and disbursements, foreclosure costs and title charges,
together with interest thereon from and after the date incurred by
Mortgagee until actually paid by Mortgagor at the Default Interest Rate,
and the same shall be secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the indebtedness evidenced by the Note.
3.8 Unavailability of Remedies. To the extent the laws of
Indiana limit (i) the availability of the exercise of any of the remedies set
forth herein, including, without limitation the remedies involving a power of
sale on the part of the Mortgagee and the right of the Mortgagee to exercise
self-help in connection with the enforcement of the terms of this Mortgage, or
(ii) the enforcement of waivers and indemnities made by the Mortgagor, such
remedies, waivers, or indemnities shall be exercisable or enforceable, any
provisions in this Mortgage to the contrary notwithstanding, if, and to the
extent, permitted by the laws in force at the time of the exercise of such
remedies or the enforcement of such waivers or indemnities without regard to
the enforceability of such remedies, waivers or indemnities at the time of the
execution and delivery of this Mortgage.
ARTICLE IV
MISCELLANEOUS TERMS AND CONDITIONS
4.1 Time of Essence. Time is of the essence with respect to all
provisions of this Mortgage.
4.2 Release of Mortgage. If all of the secured indebtedness be
paid, then and in that event only, all rights under this Mortgage shall
terminate except for those provisions hereof which by their terms survive, and
the Property shall become wholly clear of the liens, security interests,
conveyances and assignments evidenced hereby, which shall be released by
Mortgagee in due form at Mortgagor's cost. No release of this Mortgage or the
lien hereof shall be valid unless executed by Mortgagee.
4.3 Certain Rights of Mortgagee. Without affecting Mortgagor's
liability for the payment of any of the indebtedness secured hereby, Mortgagee
may from time to time and without notice to Mortgagor: (a) release any person
liable for the payment of the indebtedness secured hereby; (b) extend or modify
the terms of payment of the indebtedness secured hereby; (c) accept additional
real or personal property of any kind as security or alter, substitute or
release any property securing the indebtedness secured hereby; (d) recover any
part of the Property; (e) consent in writing to the making of any subdivision
map or plat thereof; (f) join in granting any easement therein; or (g) join in
any extension agreement of the Mortgage or any agreement subordinating the lien
hereof.
4.4 Waiver of Certain Defenses. No action for the enforcement of
the lien hereof or of any provision hereof shall be subject to any defense
which would not be good and available to the party interposing the same in an
action at law upon the Note or any of the other Loan Documents.
4.5 Notices. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have
47
<PAGE>
been validly given or served by delivery of the same in person to the
intended addressee, or by depositing the same with Federal Express or
another reputable private courier service for next business day delivery.
All notices, demands and requests to be sent to Mortgagee shall be addressed
to the attention of the Capital Markets Group. All notices, demands and
requests shall be effective upon such personal delivery, or one (1) business
day after being deposited with the private courier service. Rejection or
other refusal to accept or the inability to deliver because of changed
address of which no notice was given as herein required shall be deemed
to be receipt of the notice, demand or request sent. By giving to the other
party hereto at least fifteen (15) days prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the
right from time to time to change their respective addresses and each shall
have the right to specify as its address any other address within the United
States of America.
4.6 Successors and Assigns. The terms, provisions (including the
non-recourse language of Section 4.27 hereof), indemnities, covenants and
conditions hereof shall be binding upon Mortgagor and the successors and
assigns of Mortgagor, including all successors in interest of Mortgagor in and
to all or any part of the Property, and shall inure to the benefit of
Mortgagee, its directors, officers, shareholders, employees and agents and
their respective successors and assigns and shall constitute covenants running
with the land. All references in this Mortgage to Mortgagor or Mortgagee shall
be deemed to include all such parties' successors and assigns, and the term
"Mortgagee" as used herein shall also mean and refer to any lawful holder or
owner, including pledgees and participants, of any of the indebtedness secured
hereby. If Mortgagor consists of more than one person or entity, each will be
jointly and severally liable to perform the obligations of Mortgagor.
4.7 Severability. A determination that any provision of this
Mortgage is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application of
any provision of this Mortgage to any person or circumstance is illegal or
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
4.8 Gender. Within this Mortgage, words of any gender shall be
held and construed to include any other gender, and words in the singular shall
be held and construed to include the plural, and vice versa, unless the context
otherwise requires.
4.9 Waiver: Discontinuance of Proceedings. Mortgagee may waive
any single default by Mortgagor hereunder without waiving any other prior or
subsequent default. Mortgagee may remedy any default by Mortgagor hereunder
without waiving the default remedied. Neither the failure by Mortgagee to
exercise, nor the delay by Mortgagee in exercising, any right, power or remedy
upon any default by Mortgagor hereunder shall be construed as a waiver of such
default or as a waiver of the right to exercise any such right, power or remedy
at a later date. No single or partial exercise by Mortgagee of any right,
power or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder may
be exercised at any time and from time to time. No modification or waiver of
any provision hereof nor consent to any departure by Mortgagor therefrom shall
in any event be effective unless the same shall be in writing and signed by
Mortgagee, and then such waiver or consent shall be effective only
48
<PAGE>
in the specific instance and for the specific purpose given. No notice to
nor demand on Mortgagor in any case shall of itself entitle Mortgagor to
any other or further notice or demand in similar or other circumstances.
Acceptance by Mortgagee of any payment in an amount less than the amount
then due on any of the secured indebtedness shall be deemed an acceptance
on account only and shall not in any way affect the existence of a
default hereunder. In case Mortgagee shall have proceeded to invoke
any right, remedy or recourse permitted hereunder or under the other
Loan Documents and shall thereafter elect to discontinue or abandon the same
for any reason, Mortgagee shall have the unqualified right to do so and, in
such an event, Mortgagor and Mortgagee shall be restored to their former
positions with respect to the indebtedness secured hereby, the Loan Documents,
the Property and otherwise, and the rights, remedies, recourses and powers
of Mortgagee shall continue as if the same had
never been invoked.
4.10 Section Headings. The headings of the sections and
paragraphs of this Mortgage are for convenience of reference only, are not to
be considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
4.11 Governing Law. This Mortgage will be governed by and
construed in accordance with the laws of the State of Indiana provided that to
the extent any of such laws may now or hereafter be preempted by Federal law,
in which case such Federal law shall so govern and be controlling; and provided
further that the laws of the state in which the Real Estate is located shall
govern as to the creation, priority and enforcement of liens and security
interests in property located in such state.
4.12 Counting of Days. The term "days" when used herein shall
mean calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Real Estate is located, the
period shall be deemed to end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in Indiana are
authorized by law to be closed.
4.13 Relationship of the Parties. The relationship between
Mortgagor and Mortgagee is that of a borrower and a lender only and neither of
those parties is, nor shall it hold itself out to be, the agent, employee,
joint venturer or partner of the other party.
4.14 Application of the Proceeds of the Note. To the extent that
proceeds of the Note are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Property, such
proceeds have been advanced by Mortgagee at Mortgagor's request and Mortgagee
shall be subrogated to any and all rights, security interests and liens owned
by any owner or holder of such outstanding liens, security interests, charges
or encumbrances, irrespective of whether said liens, security interests,
charges or encumbrances are released.
4.15 Unsecured Portion of Indebtedness. If any part of the
secured indebtedness cannot be lawfully secured by this Mortgage or if any part
of the Property cannot be lawfully subject to the lien and security interest
hereof to the full extent of such indebtedness, then all payments made
49
<PAGE>
shall be applied on said indebtedness first in discharge of that portion
thereof which is unsecured by this Mortgage.
4.16 Cross Default. A default hereunder which has not been cured
within any applicable grace or cure period shall be a default under each of the
other Loan Documents.
4.17 Interest After Sale. In the event the Property or any part
thereof shall be sold upon foreclosure as provided hereunder, to the extent
permitted by law, the sum for which the same shall have been sold shall, for
purposes of redemption (pursuant to the laws of the state in which the Property
is located), bear interest at the Default Interest Rate.
4.18 Inconsistency with Other Loan Documents. In the event of any
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions selected by Mortgagee
in its sole subjective discretion shall be controlling.
4.19 Construction of this Document. This document may be
construed as a mortgage, security deed, deed of trust, chattel mortgage,
conveyance, assignment, security agreement, pledge, financing statement,
hypothecation or contract, or any one or more of the foregoing, in order to
fully effectuate the liens and security interests created hereby and the
purposes and agreements herein set forth.
4.20 No Merger. It is the desire and intention of the parties
hereto that this Mortgage and the lien hereof do not merge in fee simple title
to the Property. It is hereby understood and agreed that should Mortgagee
acquire any additional or other interests in or to the Property or the
ownership thereof, then, unless a contrary intent is manifested by Mortgagee as
evidenced by an appropriate document duly recorded, this Mortgage and the lien
hereof shall not merge in such other or additional interests in or to the
Property, toward the end that this Mortgage may be foreclosed as if owned by a
stranger to said other or additional interests.
4.21 Rights With Respect to Junior Encumbrances. Any person or
entity purporting to have or to take a junior mortgage or other lien upon the
Property or any interest therein shall be subject to the rights of Mortgagee to
amend, modify, increase, vary, alter or supplement this Mortgage, the Note or
any of the other Loan Documents and to extend the maturity date of the
indebtedness secured hereby and to increase the amount of the indebtedness
secured hereby up to the Maximum Amount Secured Hereby and to waive or forebear
the exercise of any of its rights and remedies hereunder or under any of the
other Loan Documents and to release any collateral or security for the
indebtedness secured hereby, in each and every case without obtaining the
consent of the holder of such junior lien and without the lien or security
interest of this Mortgage losing its priority over the rights of any such
junior lien.
4.22 Mortgagee May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Mortgagor or the principals or
general partners in Mortgagor, or their respective creditors or property,
Mortgagee, to the extent permitted by law, shall be entitled to file such
proofs of claim
50
<PAGE>
and other documents as may be necessary or advisable in order to have the
claims of Mortgagee allowed in such proceedings for the entire secured
indebtedness at the date of the institution of such proceedings and for
any additional amount which may become due and payable by Mortgagor hereunder
after such date.
4.23 Fixture Filing. This Mortgage shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Property which are or are to
become fixtures. The information provided in this paragraph is provided in
order that this Mortgage shall comply with the requirements of IC 26-1-9-402
for a mortgage instrument to be filed as a financing statement. The Mortgagor
is the "Debtor" and its name and mailing address are set forth in Section 1.22
of this Mortgage. The "Secured Party" is the Mortgagee and its name and
mailing address from which information concerning the security interest granted
herein may be obtained are as set forth in Section 1.22 of this Mortgage. A
statement describing the portion of the Property comprising of goods or other
personal property that may now be or hereafter become fixtures hereby secured
is set forth in the description of Property contained herein. The record owner
of the Property is the Mortgagor.
4.24 After-Acquired Property. All property acquired by Mortgagor
after the date of this Mortgage which by the terms of this Mortgage shall be
subject to the lien and the security interest created hereby, shall immediately
upon the acquisition thereof by Mortgagor and without further mortgage,
conveyance or assignment become subject to the lien and security interest
created by this Mortgage. Nevertheless, Mortgagor shall execute, acknowledge,
deliver and record or file, as appropriate, all and every such further
mortgages, security agreements, financing statements, assignments and
assurances, as Mortgagee shall require for accomplishing the purposes of this
Mortgage.
4.25 No Representation. By accepting delivery of any item
required to be observed, performed or fulfilled or to be given to Mortgagee
pursuant to the Loan Documents, including, but not limited to, any officer's
certificate, balance sheet, statement of profit and loss or other financial
statement, survey, appraisal or insurance policy, Mortgagee shall not be deemed
to have warranted, consented to, or affirmed the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance of delivery thereof shall not be or
constitute any warranty, consent or affirmation with respect thereto by
Mortgagee.
4.26 Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be effective only upon delivery and
thereafter shall be deemed an original, and all of which shall be taken to be
one and the same instrument, for the same effect as if all parties hereto had
signed the same signature page. Any signature page of this Mortgage may be
detached from any counterpart of this Mortgage without impairing the legal
effect of any signatures thereon and may be attached to another counterpart of
this Mortgage identical in form hereto but having attached to it one or more
additional signature pages.
4.27 Personal Liability. Notwithstanding anything to the contrary
contained in this Mortgage, the liability of Mortgagor and its general partners
for the indebtedness secured hereby and
51
<PAGE>
for the performance of the other agreements, covenants and obligations
contained herein and in the other Loan Documents shall be limited as set forth
in Section 1.05 of the Note.
4.28 Recording and Filing. Mortgagor will cause the Loan
Documents and all amendments and supplements thereto and substitutions therefor
to be recorded, filed, re-recorded and re-filed in such manner and in such
places as Mortgagee shall reasonably request, and will pay on demand all such
recording, filing, re-recording and re-filing taxes, fees and other charges.
Upon Mortgagee's request, Mortgagor shall immediately deliver to Mortgagee, or
its servicing agent, a verification of the status of payment of taxes and
assessments on the Property. If Mortgagor fails to deliver such verification
to Mortgagee, or its servicing agent, as the case may be, within five (5)
business days of such request, Mortgagor shall reimburse Mortgagee, or its
servicing agent, for the costs incurred in obtaining a tax service company to
verify the status of payment of taxes and assessments on the Property.
4.29 Entire Agreement and Modification. This Mortgage and the
other Loan Documents contain the entire agreements between the parties relating
to the subject matter hereof and thereof and all prior agreements relative
hereto and thereto which are not contained herein or therein are terminated.
This Mortgage and the other Loan Documents may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against which enforcement of the amendment,
revision, waiver, discharge, release or termination is asserted. Any alleged
amendment, revision, waiver, discharge, release or termination which is not so
documented shall not be effective as to any party.
4.30 Maximum Interest. The provisions of this Mortgage and of all
agreements between Mortgagor and Mortgagee, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Mortgagee for the use, forbearance or retention of the
money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or
fulfillment of any provision hereof or of any agreement between Mortgagor and
Mortgagee shall, at the time performance or fulfillment of such provision shall
be due, exceed the limit for Interest prescribed by law or otherwise transcend
the limit of validity prescribed by applicable law, then ipso facto the
obligation to be performed or fulfilled shall be reduced to such limit and if,
from any circumstance whatsoever, Mortgagee shall ever receive anything of
value deemed Interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive Interest shall be applied to the reduction of
the principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or at the option of Mortgagee be paid over to
Mortgagor, and not to the payment of Interest. All Interest (including any
amounts or payments deemed to be Interest) paid or agreed to be paid to
Mortgagee shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal balance of the Note so that the Interest thereon for such full
period will not exceed the maximum amount permitted by applicable law. This
paragraph will control all agreements between Mortgagor and Mortgagee.
52
<PAGE>
4.31 Interest Payable by Mortgagor. Mortgagee shall cause funds
in the Replacement Reserve to be deposited into an interest bearing account of
the type customarily maintained by Mortgagee or its servicing agent for the
investment of similar reserves, which account may not yield the highest
interest rate then available. Interest payable on such amounts shall be
computed based on the daily outstanding balance in the Replacement Reserve.
Such interest shall be calculated on a simple, non-compounded interest basis
based solely on contributions made to the Replacement Reserve by Mortgagor.
All interest earned on amounts contributed to the Replacement Reserve shall be
retained by Mortgagee and added to the balance in the Replacement Reserve and
shall be disbursed for payment of the items for which other funds in the
Replacement Reserve are to be disbursed.
4.32 Further Stipulations. The additional covenants, agreements
and provisions set forth in Exhibits C and D attached hereto and made a part
hereof, if any, shall be a part of this Mortgage and shall, in the event of any
conflict between such further stipulations and any of the other provisions of
this Mortgage, be deemed to control.
53
<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the day
and year first above written.
MORTGAGOR:
PICKWICK PLACE AP XII, L.P.,
a South Carolina limited partnership
By: Angeles Partners XII GP Limited
Partnership, a South Carolina limited
partnership, its sole general partner
By: GP Services III, Inc.,
a Delaware corporation,
its sole general partner
By: \s\Robert D. Long Jr.
Name:Robert D. Long Jr.
Title: CAO/Controller
54
<PAGE>
STATE OF SC )
) ss:
COUNTY OF Greenville )
Before me, a Notary Public in and for said County and State,
personally appeared Robert D. Long Jr, the CAO/Controller of GP Services III,
Inc., a Delaware corporation, said corporation being the sole General
Partner of Angeles Partners XII GP Limited Partnership, a South Carolina
limited partnership being the sole General Partner of Pickwick Place AP
XII, L.P., a South Carolina limited partnership and acknowledged the
execution of the foregoing instrument as such officer acting for and on
behalf of said corporation acting in its capacity as General Partner for
and on behalf of said limited partnership, and who having been duly sworn,
stated that any representations therein contained are true and correct.
Witness my hand and Notarial Seal this 17th day of April , 1995.
\s\Antoinette M. Wolf
(signature)
Antoinette M. Wolf
My Commission Expires: (printed name) Notary Public
Feb. 25, 2004 Resident of Greenville County
THIS INSTRUMENT WAS PREPARED BY BRIAN J. NEILINGER, ESQ.
OF ORRICK, HERRINGTON & SUTCLIFFE
55
<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
A-1
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
1. Taxes for the year 1995 payable 1996 are now a lien, but which
are not currently due and payable, and for subsequent years.
2. Subject to Solid Waste Assessment Number GG94274143 for the year 1994
in the amount of $5,376.00 each installment.
3. Easements for ditches and/or title drains for Hoover Run and water
retention area located as shown on the survey by Paul I. Cripe, Inc.,
dated March 25, 1975, last revised September 20, 1994, and last
re-certified on July 8, 1994.
4. Terms and provisions of a perpetual easement granted to the City
of Indianapolis by its Department of Public Works dated November 22,
1977 and recorded December 5, 1977 as Instrument No. 77-81369, in
the Office of the Recorder of Marion County, Indiana.
5. Rights, easements, covenants, agreements, terms and provisions of an
Easement for pipeline and incidental purposes in favor of E.A. Brown
recorded April 21, 1941 in Deed Record 1059, page 44; last assigned
of record to The Buckeye Pipe Line Company by assignment recorded April
13, 1967 as Instrument No. 67-14855; as Amended by Partial Release
and Agreement dated May 17, 1966 and recorded June 14, 1966 as
Instrument No. 66-29753, and by Partial Release and Agreement
dated January 5, 1973 and recorded January 29, 1973 as Instrument
No. 73-5357, in the Office of the Recorder of Marion County, Indiana.
6. Terms and provisions of an Electric Line Easement granted to
Indianapolis Power & Light Company dated February 1, 1973 and recorded
February 28, 1973 as Instrument No. 73-11864, in the Office of
the Recorder of Marion County, Indiana.
7. Rights of the Public, the State of Indiana, and the Municipality in
and to that part of the premises taken or used for Ditch Road located as
shown on the survey by Paul I. Cripe, Inc., dated March 25, 1975,
last revised September 20, 1994, and last re-certified on July 8, 1994.
8. Terms and provisions of an Electric Line Easement granted to
Indianapolis Power & Light Company dated March 5, 1971 and
recorded March 22, 1971 as Instrument No. 73-12368, in the Office
of the Recorder of Marion County, Indiana.
9. Easement for Ingress and Egress dated May 10, 1984 and recorded May 11,
1984 as Instrument No. 84-34867, in the Office of the Recorder of
Marion County, Indiana.
10. Declaration of Easement dated May 10, 1984 and recorded May 11,
1984 as Instrument No. 84-34868, in the Office of the Recorder of
Marion County, Indiana.
B-1
<PAGE>
11. Rights and easements granted to Indiana Bell Telephone Company,
Incorporated by instrument dated January 3, 1990 and recorded
February 28, 1990 as Instrument No. 90-18878, in the Office of
the Recorder of Marion County, Indiana.
12. Rights, easements, terms and provisions of Easement Agreement by and
between Angeles Partners XII and Whitehorse Investment Co., Inc. dated
September 25, 1987 and recorded September 30, 1987 as Instrument
No. 87-113526, in the office of the Recorder of Marion County, Indiana.
13 Survey by Paul I. Cripe, Inc., dated March 25, 1975, last revised
September 20, 1994, and last re-certified July 8, 1994 discloses the
following.
(a) Chain link fence along the property lines running outside the
property lines at several locations.
(b) Chain link fence along the property lines running inside the
property lines at several locations.
B-2
<PAGE>
EXHIBIT C
MORTGAGOR'S CERTIFICATE
PICKWICK PLACE AP XII, L.P. (the "Mortgagor") has made due investigation
as to the matters hereinafter set forth and does hereby certify the following
to induce FIRST UNION NATIONAL BANK OF NORTH CAROLINA, (the "Mortgagee") to
advance the aggregate sum of $__________________ (the "Disbursement")
[from the Replacement Reserve or Repair and Remediation Reserve] to the
Mortgagor pursuant to the terms of that certain Mortgage, Security Agreement
and Financing Statement (Fixture Filing), dated as of _____ __, 199_,
between the Mortgagee and the Mortgagor (together with any amendments,
modifications, supplements and replacements thereof or therefor, the
"Mortgage"), dated ____________, pursuant to that certain Disbursement request
which is being submitted to the Mortgagee. (Capitalized terms used
and not otherwise define shall have the respective meanings given to
them in the Mortgage.)
1. No default beyond any applicable notice and/or grace period exists
under the Mortgage or under any of the other Loan Documents.
2. The [Repairs or Deferred Maintenance] relative to the Disbursement
have been delivered or provided to Mortgagor and are properly, completely and
permanently installed on or about the Property [or otherwise properly
completed, as applicable--Not applicable if work in progress.]
3. All of the statements, invoices, receipts and information
delivered in connection with the Disbursement request being submitted to the
Mortgagee in connection herewith are true and correct as of the date hereof,
and the amount requested in said Disbursement request accurately reflects the
precise amounts due and payable during the period covered by such Disbursement
request. All of the funds to be received pursuant to such Disbursement
request shall be used solely for the purpose of reimbursing the Mortgagor for
items previously paid.
4. Nothing has occurred subsequent to the date of the Mortgage
which has or may result in the creation of any lien, charge or encumbrance
Estate or the Improvements or any part thereof, or anything affixed thereto or
used in connection therewith, or which has or may substantially and adversely
impair the ability of the Mortgagor to make any payments of principal and
interest on the Note or the ability of the Mortgagor to meet its obligations
under the Mortgage.
5. None of the labor, materials, overhead or other items of expense
specified in the Disbursement request submitted herewith has previously been
the basis of any Disbursement request by the Mortgagor or any payment by the
Mortgagee and, when added to all sums previously disbursed by Mortgagee on
account of the [Deferred Maintenance or Repairs], do not exceed the
costs of all [Deferred Maintenance or Repairs] services completed,
installed and/or delivered, as applicable, to the date of that certificate.
C-1
<PAGE>
6. The amount remaining in the [Account] allocated to the payment
of items on the [Deferred Maintenance or Repairs] will be sufficient to pay in
full the entire remaining cost of [Deferred Maintenance or Repairs] required
to be completed in accordance with the Mortgage.
7. All work required permits and approvals required to complete
the work which work is now in process or was previously completed have been
obtained.
8. All conditions to the Disbursement to be made in accordance
with the Disbursement request submitted herewith have been met in accordance
with the terms of the Mortgage.
By:__________________________
C-2
<PAGE>
EXHIBIT D
Additional Stipulations
Repair and Remediation Reserve. Prior to the execution of
this Mortgage, Mortgagee has caused the Property to be inspected and
such inspection has revealed that the Property is in need of
certain maintenance, repairs and/or remedial or corrective work.
Contemporaneously with the execution hereof, Mortgagor has
established with the Mortgagee a reserve in the amount of $866,250.00
[125% OF THE ESTIMATED COST TO COMPLETE] (the "Repair and
Remediation Reserve") by depositing such amount with Mortgagee.
Mortgagor shall cause each of the items described in Exhibit D-1
attached hereto and made a part hereof and as more particularly
described in that certain Engineering Report entitled, dated April
13, 1995 and prepared by Inspection & Valuation International (the
"Deferred Maintenance') to be completed, performed, remediated and
corrected to the satisfaction of Mortgagee and as necessary to bring
the Property into compliance with all applicable laws, ordinances,
rules and regulations on or before the expiration of 180 days after the
effective date hereof, as such time period may be extended by Mortgagee
in its sole discretion. So long as no default beyond any
applicable grace or cure period hereunder or under the other Loan
Documents has occurred and is continuing, all sums in the Repair and
Remediation Reserve shall be held by Mortgagee in the Repair and
Remediation Reserve to pay the costs and expenses of completing
the Deferred Maintenance. So long as no default beyond any
applicable grace or cure period hereunder or under the other Loan
Documents has occurred and is continuing, Mortgagee shall, to the
extent funds are available for such purpose in the Repair and
Remediation Reserve, disburse to Mortgagor the amount paid or
incurred by Mortgagor in completing, performing, remediating or
correcting the Deferred Maintenance upon (a) the receipt by
Mortgagee of a written request from Mortgagor for disbursement from
the Repair and Remediation Reserve and a certification by Mortgagor
in the form of Exhibit C that the work in connection with the
applicable item of Deferred Maintenance has been completed or is in
progress in accordance with the terms of this Mortgage, (b) delivery to
Mortgagee of invoices, receipts or other evidence satisfactory to
Mortgagee verifying the costs of the Deferred Maintenance to be
reimbursed, (c) for disbursement requests in excess of $10,000 per
month, delivery to Mortgagee of a certification from an inspecting
architect, engineer or other consultant reasonably acceptable to
Mortgagee describing the completed work, verifying the completion (or
the progress) of the work and the value of the work (whether completed
or in progress) and, if applicable, certifying that the Property is, as
a result of such work, in compliance with all applicable laws,
ordinances rules and regulations relating to the Deferred Maintenance so
performed, and (d) for disbursement requests in excess of $10,000
per month, delivery to Mortgagee of affidavits, lien waivers or
other evidence reasonably satisfactory to Mortgagee showing that all
materialmen, laborers, subcontractors and any other parties who might
or could claim statutory or common law liens and are furnishing or
have furnished materials or labor to the Property have been paid all
amounts due for such labor and materials furnished to the Property.
Mortgagee shall not be required to make advances from the Repair and
Remediation Reserve more frequently than once in any thirty (30) day
period. In making any payment from the Repair and Remediation Reserve,
Mortgagee shall be entitled to rely on such request from Mortgagor
without any inquiry into the accuracy, validity or contestability
of any such amount. Mortgagor hereby grants to Mortgagee, as
additional security for payment of the indebtedness secured hereby, a
security interest in the Repair and Remediation Reserve. In no
event may Mortgagor be entitled to reimbursement of any costs with
respect to each item of Deferred Maintenance in excess of the
applicable amount set forth in Exhibit D-1 attached hereto and
made part hereof. The Repair and Remediation Reserve
D-1
<PAGE>
shall not, unless otherwise explicitly required by applicable law, be
or be deemed to be escrow or trust funds, but at Mortgagee's option and
in Mortgagee's discretion, may either be held in a separate account or
be commingled by Mortgagee with the general funds of Mortgagee. No
interest on the funds contained in the Repair and Remediation Reserve
shall be paid by Mortgagee to Mortgagor. The Repair and Remediation
Reserve is solely for the protection of Mortgagee and entails no
responsibility on Mortgagee's part beyond the payment of the costs and
expenses described in this paragraph in accordance with the terms
hereof and beyond the allowing of due credit for the sums
actually received. In the event that the amounts on deposit or
available in the Repair and Remediation Reserve are inadequate to pay
the costs of the Deferred Maintenance, Mortgagor shall pay the amount of
such deficiency. Upon assignment of this Mortgage by Mortgagee, any
funds in the Repair and Remediation Reserve shall be turned over to the
assignee and any responsibility of Mortgagee, as assignor, with
respect thereto shall terminate. If there is a default under this
Mortgage which is not cured within any applicable grace or cure period,
Mortgagee may, but shall not be obligated to, apply at any time the
balance then remaining in the Repair and Remediation Reserve
against the indebtedness secured hereby in whatever order Mortgagee
shall subjectively determine. No such application of the Repair and
Remediation Reserve shall be deemed to cure any default hereunder.
Upon the earlier to occur of full payment of the indebtedness secured
hereby in accordance with its terms, the completion of the
Deferred Maintenance to the satisfaction of the Mortgagee or at
such earlier time as Mortgagee may elect, the balance of the
Repair and Remediation Reserve then in Mortgagee's possession shall be
paid over to Mortgagor and no other party shall have any right or claim
thereto.
D-2
<PAGE>
EXHIBIT E
"Permitted Investments" shall mean any one or more of
the following obligations or securities acquired at a purchase
price of not greater than par, including those issued by Mortgagee,
Servicer, REMIC Trustee or any of their respective affiliates:
(i) direct obligations of, or obligations fully
guaranteed as to payment of principal and interest by, (a)
the United States or any agency or instrumentality thereof
provided such obligations are backed by the full faith and
credit of the United States of America, or (b) FHLMC, FNMA,
the Federal Farm Credit System or the Federal Home Loan Banks
provided such obligations at the time of purchase or
contractual commitment for purchase are qualified by the
Rating Agencies as a Permitted Investment hereunder as evidenced
in writing;
(ii) fully FDIC-insured demand and time
deposits in.or certificates of deposit of, or bankers'
acceptances issued by, any bank or trust company, savings and
loan association or savings bank, provided that the commercial
paper and long-term unsecured debt obligations of such
depository institution or trust company have the highest
rating available for such securities by the Rating
Agencies, or such lower rating as will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency as evidenced in writing;
(iii) repurchase obligations with respect to
any security described in clause (i) above entered into with a
depository institution or trust company (acting as principal)
described in clause (ii) above;
(iv) general obligations of or obligations
guaranteed by any State of the United States or the District
of Columbia receiving the highest long-term unsecured debt
rating available for such securities by the Rating Agencies,
or such lower rating as will not result in the downgrading
or withdrawal of the rating then assigned to the
Certificates by any Rating Agency as evidenced in writing;
(v) securities bearing interest or sold at a discount
that are issued by any corporation incorporated under the
laws of the United States of America or any State thereof or
the District of Columbia and is rated by the Rating Agencies
in their highest long-term unsecured rating categories at the
time of such investment or contractual commitment
providing for such investment; provided, however, that
securities issued by any such corporation will not be
Permitted Investments to the extent that investment therein
will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the
Central Account to exceed 20% of the aggregate principal amount
of all Permitted Investments held in the Central Account;
(vi) commercial or finance company paper (including
both non- interest-bearing discount obligations and
interest-bearing obligations payable on demand or on a
specified
E-1
<PAGE>
date not more than one year after the date of issuance
thereof) that is rated by the Rating Agencies in their highest
short-term unsecured debt rating available at the time of such
investment or contractual commitment providing for such
investment, and is issued by a corporation the outstanding
senior long-term debt obligations of which are then rated
by the Rating Agencies in their highest rating available in
their short-term and long-term unsecured debt ratings, or such
lower rating as will not result in the downgrading or
withdrawal of the rating then assigned to the Certificates by
any Rating Agency as evidenced in writing;
(vii) guaranteed reinvestment agreements acceptable
to the Rating Agencies issued by any bank, insurance
company or other corporation rated in the highest long-term
unsecured rating levels available to such issuers by the
Rating Agencies throughout the duration of such
agreements, or such lower rating as will not result in the
downgrading or withdrawal of the rating then assigned to
the Certificates by any Rating Agency as evidenced in
writing;
(viii) units of taxable money market funds,
which funds are regulated investment companies, seek to
maintain a constant net asset value per share and invest
solely in obligations backed by the full faith and credit
of the United States, which funds have been designated in
writing by the Rating Agencies as Permitted Investments with
respect to this definition; and
(ix) if previously confirmed in writing to the REMIC
Trustee, any other demand, money market or time deposit,
or any other obligation, security or investment, that may be
acceptable to the Rating Agencies as a permitted
investment of funds backing securities having ratings
equivalent to their initial rating of the Certificates;
provided, however, that no instrument or security shall be a Permitted
Investment if (y) such instrument or security evidences a right to
receive only interest payments or (z) the right to receive
principal and interest payments derived from the underlying
investment provide a yield to maturity in excess of 120% of the yield to
maturity at par of such underlying investment.
E-2
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
PICKWICK PLACE AP XII, L.P.
AS ASSIGNOR
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
AS ASSIGNEE
City: Indianapolis
County: Marion
State: Indiana
Record and Return To:
Orrick, Herrington & Sutcliffe
599 Lexington Avenue
New York, New York 10022
Attention: Susan Inkeles
<PAGE>
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (this "Assignment") made
as of the 17th day of April, 1995, is by PICKWICK PLACE AP XII,
L.P., a South Carolina limited partnership ("Assignor"), whose
address is One Insignia Financial Plaza, Greenville, South Carolina
29602 in favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association ("Assignee"), whose address is One
First Union Center, TW-8, Charlotte, North Carolina 28288.
W I T N E S S E T H:
THAT, WHEREAS, Assignor has executed that certain
Promissory Note dated of even date herewith (the "Note"), payable to
the order of Assignee in the stated principal amount of Six million six
hundred thousand dollars------- ----------------_________
_____________________________ ($6,600,000 ); and
WHEREAS, the Note is secured by that certain Mortgage,
Security Agreement and Financing Statement (Fixture Filing) dated of
even date herewith (the "Mortgage"), from Assignor, as Mortgagor,
to Assignee, as Mortgagee, encumbering that certain real property
situated in the City of Indianapolis, County of Marion, State of
Indiana as is more particularly described on Exhibit A attached
hereto and incorporated herein by this reference and all buildings
and other improvements now or hereafter located thereon
(collectively, the "Improvements") (said real property and the
Improvements are hereinafter sometimes collectively referred to as the
"Property"); and
WHEREAS, Assignor is desirous of further securing to
Assignee the performance of the terms, covenants and agreements hereof
and of the Note, the Mortgage and each other document evidencing,
securing, guaranteeing or otherwise relating to the indebtedness
evidenced by the Note (the Note, the Mortgage and such other
documents, as each of the foregoing may from time to time be amended,
consolidated, renewed or replaced, being collectively referred to
herein as the "Loan Documents").
NOW, THEREFORE, in consideration of the making of
the loan evidenced by the Note by Assignee to Assignor and for other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Assignor does hereby irrevocably,
absolutely and unconditionally transfer, sell, assign, pledge and
convey to Assignee, its successors and assigns, all of the right, title
and interest of Assignor in and to:
(a) any and all leases, licenses, rental
agreements and occupancy agreements of whatever form now or
hereafter affecting all or any part of the Property and any and
all guarantees, extensions, renewals, replacements and modifications
thereof (collectively, the "Leases"); and
<PAGE>
(b) all deposits (whether for security or otherwise),
rents, issues, profits, revenues, royalties, accounts, rights, benefits
and income of every nature of and from the Property, including, without
limitation, minimum rents, additional rents, termination payments,
forfeited security deposits, liquidated damages following default and
all proceeds payable under any policy of insurance covering loss of
rents resulting from untenantability due to destruction or damage to
the Property, together with the immediate and continuing right to
collect and receive the same (subject to the terms hereof),
whether now due or hereafter becoming due, and together with all
rights and claims of any kind that Assignor may have against any
tenant, lessee or licensee under the Leases or against any other
occupant of the Property (collectively, the "Rents").
TO HAVE AND TO HOLD the same unto Assignee, its
successors and assigns.
IT IS AGREED that, notwithstanding that this
instrument is a present, absolute and executed assignment of the Rents
and of the Leases and a present, absolute and executed grant of the
powers herein granted to Assignee, Assignor is hereby granted a license
by Assignee, to retain possession of the Leases and to collect and
retain the Rents unless and until there shall be a default under the
terms of any of the Loan Documents, which default has not been cured
within any applicable grace or cure period. In the event of such
uncured default, the aforementioned license granted to Assignor
shall automatically terminate without notice to Assignor, and
Assignee may thereafter, without taking possession of the Property,
take possession of the Leases and collect the Rents. Further,
from and after such termination, Assignor shall be the agent of
Assignee in collection of the Rents, and any Rents so collected by
Assignor shall be held in trust by Assignor for the sole and exclusive
benefit of Assignee and Assignor shall, within one (1) business day
after receipt of any Rents, pay the same to Assignee to be applied
by Assignee as hereinafter set forth. Furthermore, from and after
such uncured default and termination of the aforementioned license,
Assignee shall have the right and authority, without any notice
whatsoever to Assignor and without regard to the adequacy of the
security therefor, to: (a) make application to a court of competent
jurisdiction for appointment of a receiver for all or any part of the
Property, as particularly set forth in the Mortgage; (b) manage and
operate the Property, with full power to employ agents to manage the
same; (c) demand, collect, receive and sue for the Rents, including
those past due and unpaid; and (d) do all acts relating to such
management of the Property, including, but not limited to, negotiation
of new Leases, making adjustments of existing Leases, contracting and
paying for repairs and replacements to the Improvements and to the
fixtures, equipment and personal property located in the Improvements or
used in any way in the operation, use and occupancy of the Property as
in the sole but reasonable judgment and discretion of Assignee may be
necessary to maintain the same in a tenantable condition, purchasing
and paying for such additional furniture and equipment as in
the sole but reasonable judgment of Assignee may be necessary to
maintain a proper rental income from the Property, employing
necessary managers and other employees, purchasing fuel, providing
utilities and paying for all other expenses incurred in the
operation of the Property, maintaining adequate insurance coverage
over hazards customarily insured against and paying the premiums
therefor. Assignee shall apply the Rents from the Property, after
deducting the costs of collection thereof, including, without
limitation, reasonable attorneys' fees and a management fee for any
management agent so employed, against amounts expended for repairs,
upkeep, maintenance, service, fuel, utilities, taxes, assessments,
insurance premiums and such other expenses as Assignee incurs in
connection with the operation of the Property and against interest,
principal,
2
<PAGE>
required escrow deposits and other sums which have or which may
become due, from time to time, under the terms of the Loan
Documents, in such order or priority as to any of the items so
mentioned as Assignee, in its sole but reasonable discretion, may
determine; provided, however, prior to the appointment of a
receiver Assignee shall remit to Assignor (while Assignor is in
possession of the Property) even though the license has been
terminated sufficient funds from the Rents and Profits to enable
Assignor to pay the foregoing expenses of the Property based on a
budget to be prepared by Assignor and reasonably approved by Assignee
(but in no event shall Assignee be liable for any deficiency in the
event there are insufficient funds to pay for such operating
expenses). The exercise by Assignee of the rights granted Assignee in
this paragraph, and the collection of,the Rents and the application
thereof as herein provided, shall not be considered a waiver by
Assignee of any default under the Loan Documents or prevent foreclosure
of any liens on the Property nor shall such exercise make Assignee
liable under any of the Leases, Assignee hereby expressly reserving all
of its rights and privileges under the Mortgage and the other
Loan Documents as fully as though this Assignment had not been entered
into.
Without limiting the rights granted hereinabove, in the
event Assignor shall fail to make any payment or to perform any act
required under the terms hereof and such failure shall not be cured
within any applicable grace or cure period, then Assignee may,
but shall not be obligated to, without prior notice to or demand on
Assignor, and without releasing Assignor from any obligation hereof,
make or perform the same in such manner and to such extent as
Assignee may deem necessary to protect the security hereof, including
specifically, without limitation, appearing in and defending any
action or proceeding purporting to affect the security hereof or the
rights or powers of Assignee, performing or discharging any
obligation, covenant or agreement of Assignor under any of the Leases,
and, in exercising any of such powers, paying all necessary costs
and expenses, employing counsel and incurring and paying
attorneys' fees. Any sum advanced or paid by Assignee for any such
purpose, including, without limitation, reasonable attorneys' fees,
together with interest thereon at the Default Interest Rate (as defined
in the Note) from the date paid or advanced by Assignee until
repaid by Assignor, shall immediately be due and payable to
Assignee by Assignor on demand and shall be secured by the
Mortgage and by all of the other Loan Documents securing all or any part
of the indebtedness evidenced by the Note.
IT IS FURTHER AGREED that this Assignment is made
upon the following terms, covenants and conditions:
1. This Assignment shall not operate to place
responsibility for the control, care, management or repair of the
Property upon Assignee, nor for the performance of any of the terms
and conditions of any of the Leases, nor shall it operate to make
Assignee responsible or liable for any waste committed on the
Property by the tenants or any other party or for any dangerous or
defective condition of the Property or for any negligence in the
management, upkeep, repair or control of the Property. Assignee shall
not be liable for any loss sustained by Assignor resulting from
Assignee's failure to let the Property or from any other act or omission
of Assignee in managing the Property. Assignor shall and does hereby
indemnify and hold Assignee harmless from and against any and all
liability, loss, claim, demand or damage which may or might be
incurred by reason of this Assignment, including, without limitation,
claims or demands for security deposits from tenants of space in the
Improvements deposited with Assignor, and from and against any 3
and all claims and demands whatsoever which may be asserted against
Assignee by reason of any alleged obligations or undertakings on its
part to perform or discharge any of the terms, covenants or
agreements contained in any of the Leases. Should Assignee incur any
liability by reason of this Assignment or in defense of any claim or
demand for loss or damage as provided above, the amount thereof,
including, without limitation, costs, expenses and reasonable
attorneys' fees, together with interest thereof at the Default
Interest Rate from the date paid or incurred by Assignee until repaid
by Assignor, shall be immediately due and payable to Assignee by
Assignor upon demand and shall be secured by the Mortgage and by all of
the other Loan Documents securing all or any part of the indebtedness
evidenced by the Note.
2. This Assignment shall not be construed as making
Assignee a mortgagee in possession.
3. Assignee is obligated to account to Assignor only
for such Rents as are actually collected or received by Assignee.
4. Assignor hereby further presently and absolutely
assigns to Assignee subject to the terms and provisions of this
Assignment: (a) any award or other payment which Assignor may
hereafter become entitled to receive with respect to any of the
Leases as a result of or pursuant to any bankruptcy, insolvency or
reorganization or similar proceedings involving the tenants under such
Leases; and (b) any and all payments made by or on behalf of any
tenant of any part of the Property in lieu of Rent. Assignor hereby
irrevocably appoints Assignee as its attorney-in-fact to, from and
after the occurrence of a default by Assignor hereunder or under any
of the other Loan Documents which has not been cured within any
applicable grace or cure period, appear in any such proceeding and to
collect any such award or payment, which power of attorney is coupled
with an interest by virtue of this Assignment and is irrevocable so long
as any sums are outstanding under the loan evidenced by the Note.
5. Assignor represents, warrants and covenants to and for the
benefit of Assignee: (a) that Assignor now is (or with respect to any
Leases not yet in existence, will be immediately upon the execution
thereof) the absolute owner of the landlord's interest in the Leases,
with full right and title to assign the same and the Rents due or to
become due thereunder; (b) that, other than this Assignment and those
assignments, if any, specifically permitted in the Mortgage, there are
no outstanding assignments of the Leases or Rents; (c) that no
Rents have been anticipated, discounted, released, waived, compromised
or otherwise discharged except for prepayment of rent of
of not more than one (1) month prior to the accrual thereof; (d) that
there are no material defaults now existing under any of the Leases by
the landlord or tenant, and there exists no state of facts which, with
the giving of notice or lapse of time or both, would constitute a
material default under any of the Leases by the landlord or tenant,
except as disclosed in writing to Assignee; (e) that Assignor has and
shall duly and punctually observe and perform all covenants, conditions
and agreements in the Leases on the part of the landlord to be
observed and performed thereunder and (f) the Leases are in full force
and effect and are the valid and binding obligations of Assignor, and,
to the knowledge of Assignor, are the valid and binding obligations
of the tenants thereto.
4
<PAGE>
6. Assignor covenants and agrees that Assignor
shall not, without the prior written consent of Assignee: (a)
exclusive of security deposits, accept any payment of Rent or
installments of Rent for more than one month in advance; (b) enter into
any Lease having a term in excess of thirteen months; (c) cancel or
terminate any Lease or amend or modify any Lease; (d) take or omit to
take any action right or option which would permit the tenant under any
Lease to cancel or terminate said Lease; (e) anticipate, discount,
release, waive, compromise or otherwise discharge any Rents payable or
other obligations under the Leases; (f) further pledge, transfer,
mortgage or otherwise encumber or assign the Leases or future payments
of Rents except as otherwise expressly permitted by the terms of
the Mortgage or incur any material indebtedness, liability or other
obligation to any tenant, lessee or licensee under the Leases; or (g)
permit any Lease to become subordinate to any lien other than the lien
of the Mortgage; provided, however, that Assignor may take any of the
actions described in subsection (c) or (e) above so long as such
actions are taken by Assignor in the ordinary course of business and are
consistent with sound customary leasing and management practices
for similar properties.
7. Assignor covenants and agrees that Assignor shall,
at its sole cost and expense, appear in and defend any action or
proceeding arising under, growing out of, or in any manner
connected with the Leases or the obligations, duties or liabilities of
the landlord or tenant thereunder, and shall pay on demand all costs
and expenses, including, without limitation, reasonable attorneys'
fees, which Assignee may incur in connection with Assignee's
appearance, voluntary or otherwise, in any such action or
proceeding, together with interest thereon at the Default Interest
Rate from the date incurred by Assignee until repaid by Assignor.
8. At any time, Assignee may, after the occurrence of a
default beyond any applicable grace or cure period, notify any
tenants or other parties of the existence of this Assignment.
Assignor does hereby specifically authorize, instruct and direct each
and every present and future tenant, lessee and licensee of the whole
or any part of the Property to pay all unpaid and future Rents to
Assignee upon receipt of demand from Assignee to so pay the same
and Assignor hereby agrees that each such present and future tenant,
lessee and licensee may rely upon such written demand from Assignee
to so pay said Rents without any inquiry into whether there exists a
default hereunder or under the other Loan Documents or whether
Assignee is otherwise entitled to said Rents. Assignor hereby waives
any right, claim or demand which Assignor may now or hereafter have
against any present or future tenant, lessee or licensee by reason of
such payment of Rents to Assignee, and any such payment shall
discharge such tenant's, lessee's or licensee's obligation to make
such payment to Assignor.
9. Assignee may take or release any security
for the indebtedness evidenced by the Note, may release any
party primarily or secondarily liable for the indebtedness
evidenced by the Note, may grant extensions, renewals or indulgences
with respect to the indebtedness evidenced by the Note and may
apply any other security therefor held by it to the satisfaction of
any indebtedness evidenced by the Note without prejudice to any of its
rights hereunder.
10. The acceptance of this Assignment and the collection
of the Rents in the event Assignor's license is terminated, as
referred to above, shall be without prejudice to Assignee. The rights
of Assignee hereunder are cumulative and concurrent, may be pursued
separately,
5
successively or together and may be exercised as often as occasion
therefor shall arise, it being agreed by Assignor that the exercise of
any one or more of the rights provided for herein shall not be
construed as a waiver of any of the other rights or remedies of
Assignee, at law or in equity or otherwise, so long as any
obligation under the Loan Documents remains unsatisfied.
11. All rights of Assignee hereunder shall inure to the
benefit of its successors and assigns; and all obligations of Assignor
shall bind its successors and assigns and any subsequent owner of the
Property. All rights of Assignee in, to and under this
Assignment shall pass to and may be exercised by any assignee of such
rights of Assignee. Assignor hereby agrees that if Assignee gives
notice to Assignor of an assignment of said rights, upon such notice
the liability of Assignor to the assignee of the Assignee shall be
immediate and absolute. Assignor will not set up any claim against
Assignee or any intervening assignee as a defense, counterclaim or
setoff to any action brought by Assignee or any intervening assignee for
any amounts due hereunder or for possession of or the exercise of
rights with respect to the Leases or the Rents.
12. It shall be a default hereunder (a) if any
representation or warranty made herein by Assignor is determined by
Assignee to have been false or misleading in any material respect
at the time made, or (b) upon any failure by Assignor in the
performance or observance of any other covenant or condition hereof
and, to the extent such failure described in this subsection (b) is
susceptible of being cured, the continuance of such failure for thirty
(30) days after written notice thereof from Assignee to Assignor;
provided, however, that if such default is susceptible of cure but
such cure cannot be accomplished with reasonable diligence within
said period of time, and if Assignor commences to cure such default
promptly after receipt of notice thereof from Assignee, and
thereafter prosecutes the curing of such default with reasonable
diligence, such period of time shall be extended for such period of
time as may be necessary to cure such default with reasonable
diligence, but not to exceed an additional sixty (60) days. Any such
default not so cured shall be a default under each of the other
Loan Documents, entitling Assignee to exercise any or all rights and
remedies available to Assignee under the terms hereof or of any or all
of the other Loan Documents, and any default under any other Loan
Documents which is not cured within any applicable grace or cure period
shall be deemed a default hereunder subject to no further grace or
cure period, entitling Assignee to exercise any or all rights provided
for herein.
13. Failure by Assignee to exercise any right which it
may have hereunder shall not be deemed a waiver thereof unless so
agreed in writing by Assignee, and the waiver by Assignee of any
default hereunder shall not constitute a continuing waiver or a waiver
of any other default or of the same default on any future occasion.
No collection by Assignee of any Rents pursuant to this Assignment
shall constitute or result in a waiver of any default then existing
hereunder or under any of the other Loan Documents.
14. If any provision under this Assignment or the
application thereof to any entity, person or circumstance shall be
invalid, illegal or unenforceable to any extent, the remainder of
this Assignment and the application of the provisions hereof
to other entities, persons or circumstances shall not be
affected thereby and shall be enforced to the fullest extent permitted
by law.
6
15. This Assignment may not be amended, modified or
otherwise changed except by a written instrument duly executed by
Assignor and Assignee.
16. This Assignment shall be in full force and
effect continuously from the date hereof to and until the payment,
discharge, and performance of any and all indebtedness and obligations
evidenced by the Note or secured or guaranteed by any of the Loan
Documents, and the release of the Mortgage shall, for all purposes,
automatically terminate this Assignment and render this Assignment null
and void and of no effect whatsoever.
17. In case of a conflict between any provision of
this Assignment and any provision of the other Loan Documents,
the provision selected by Assignee in its sole subjective discretion
shall prevail and be controlling.
18. All notices, demands, requests or other communications
to be sent by one party to the other hereunder or required by law shall
be given and become effective as provided in the Mortgage.
19. This Assignment shall be governed by and
construed in accordance with the laws of the State of Indiana, except
to the extent that any of such laws may now or hereafter be preempted
by Federal law, in which case such Federal law shall so govern and be
controlling.
20. This Assignment may be executed in any
number of counterparts, each of which shall be effective only
upon delivery and thereafter shall be deemed an original, and all of
which shall be taken to be one and the same instrument, for the same
effect as if all parties hereto had signed the same signature page.
Any signature page of this Assignment may be detached from any
counterpart of this Assignment without impairing the legal effect of any
signatures thereon and may be attached to another counterpart of
this Assignment identical in form hereto but having attached to it one
or more additional signature pages.
21. In addition to, but not in lieu of, any other
rights hereunder, Assignee shall have the right to institute suit
and obtain a protective or mandatory injunction against Assignor to
prevent a breach or default, or to reinforce the observance, of the
agreements, covenants, terms and conditions contained herein, as well as
the right to damages occasioned by any breach or default by Assignor.
22. This Assignment shall continue and remain in full
force and effect during any period of foreclosure with respect to the
Property.
23. Assignor hereby covenants and agrees that Assignee
shall be entitled to all of the rights, remedies and benefits available
by statute, at law, in equity or as a matter of practice for the
enforcement and perfection of the intents and purposes hereof.
Assignee shall, as a matter of absolute right, be entitled, upon
application to a court of applicable jurisdiction, to the appointment
of a receiver to obtain and secure the rights of Assignee hereunder
and the benefits intended to be provided to Assignee hereunder.
7
<PAGE>
24. Notwithstanding anything to the contrary contained
in this Assignment, the liability of Assignor and its general
partners for the indebtedness secured hereby and for the performance
of the other agreements, covenants and obligations contained herein
and in the Documents shall be limited as set forth in Section 1.05 of
the Note.
8
<PAGE>
IN WITNESS WHEREOF, Assignor has executed this Assignment
as of the day and year first above written.
PICKWICK PLACE AP XII, L.P., a South
Carolina limited partnership
By: Angeles Partners XII GP
Limited Partnership, a
South Carolina limited
partnership, its sole
general partner
By: GP Services III, Inc.,
a Delaware corporation,
its sole general partner
By: \s\ Robert D. Long Jr
Name: Robert D. Long Jr.
Title: CAO/Controller
9
<PAGE>
STATE OF SC )
) ss:
COUNTY OF Greenville__ )
Before me, a Notary Public in and for said County and
State, personally appeared Robert D. Long Jr._, the CAO/Controller
of GP Services III, Inc., a Delaware corporation, said corporation
being the sole General Partner of Angeles Partners XII GP Limited
Partnership, a South Carolina limited partnership being the sole
General Partner of Pickwick Place AP XII, L.P., a South Carolina
limited partnership and acknowledged the execution of the
foregoing instrument as such officer acting for and on behalf of
said corporation acting in its capacity as General Partner for and on
behalf of said limited partnership, and who having been duly sworn,
stated that any representations therein contained are true and correct.
Witness my hand and Notarial Seal this 17th day of April, 1995.
\s\Antoinette M. Wolf
(signature)
Antoinette M. Wolf
My Commission Expires: (printed name) Notary Public
Feb 25, 2004 Resident of Greenville County
THIS INSTRUMENT WAS PREPARED BY BRIAN J. NEILINGER, ESQ.
OF ORRICK, HERRINGTON & SUTCLIFFE
10
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
A-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners XII's 1995 Second quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 3,299,463
<SECURITIES> 0
<RECEIVABLES> 118,654
<ALLOWANCES> (23,248)
<INVENTORY> 0
<CURRENT-ASSETS> 7,124,250
<PP&E> 95,972,259
<DEPRECIATION> (48,751,322)
<TOTAL-ASSETS> 56,868,183
<CURRENT-LIABILITIES> 2,139,944
<BONDS> 73,652,844
<COMMON> 0
0
0
<OTHER-SE> (19,738,009)
<TOTAL-LIABILITY-AND-EQUITY> 56,868,183
<SALES> 0
<TOTAL-REVENUES> 10,474,687
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,869,892
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,097,621
<INCOME-PRETAX> (446,209)
<INCOME-TAX> 0
<INCOME-CONTINUING> (446,209)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (446,209)
<EPS-PRIMARY> (9.87)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
