<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1999
[ ] Transition Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________________ to _______________________
Commission File Number 1-6300
Pennsylvania Real Estate Investment Trust
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-6216339
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 South Broad Street, Third Floor, Philadelphia, PA 19102-3803
- ------------------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (215) 875-0700
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares of beneficial interest outstanding at May 10, 1999: 13,314,223
================================================================================
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets--March 31, 1999
and December 31, 1998 1
Consolidated Statements of Income--Three Months
Ended March 31, 1999 and March 31, 1998 2
Consolidated Statements of Cash Flows--Three Months
Ended March 31, 1999 and March 31, 1998 3
Notes to Consolidated Financial Statements 4-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Part II. Other Information 19
Item 1. Not Applicable -
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Not Applicable -
Item 4. Not Applicable -
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19-20
Signatures 21
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(Note 1)
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
INVESTMENTS IN REAL ESTATE, at cost:
Multifamily properties $232,256,000 $230,997,000
Retail properties 260,026,000 261,823,000
Industrial properties 5,078,000 5,078,000
Land and properties under development 18,480,000 11,508,000
------------ ------------
Total investments in real estate 515,840,000 509,406,000
Less- Accumulated depreciation 74,186,000 71,129,000
------------ ------------
441,654,000 438,277,000
INVESTMENT IN PREIT-RUBIN, INC. (Note 2) 6,833,000 5,372,000
INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES, at equity (Note 3)
13,282,000 13,439,000
ADVANCES TO PREIT-RUBIN, INC. 4,860,000 4,074,000
------------ ------------
466,629,000 461,162,000
Less- Allowance for possible losses 1,536,000 1,572,000
------------ ------------
465,093,000 459,590,000
OTHER ASSETS:
Cash and cash equivalents 2,998,000 6,135,000
Rents and sundry receivables (net of allowance for
doubtful accounts of $698,000 and $372,000, respectively) 3,353,000 3,498,000
Deferred costs, prepaid real estate taxes and expenses, net 15,395,000 12,392,000
------------ ------------
$486,839,000 $481,615,000
============ ============
LIABILITIES:
Mortgage notes payable $166,274,000 $167,003,000
Bank and other loans payable 142,973,000 135,273,000
Tenants' deposits and deferred rents 2,141,000 1,827,000
Accrued pension and retirement benefits 989,000 972,000
Accrued expenses and other liabilities 7,200,000 11,413,000
------------ ------------
319,577,000 316,488,000
------------ ------------
MINORITY INTEREST (Note 3) 30,228,000 28,045,000
COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (Note 4):
Shares of beneficial interest, $1 par; authorized
unlimited; issued and outstanding 13,314,223 shares
at March 31, 1999 and 13,299,723 shares at
December 31, 1998 13,314,000 13,300,000
Capital contributed in excess of par 145,428,000 145,103,000
Distributions in excess of net income (21,708,000) (21,321,000)
------------ ------------
137,034,000 137,082,000
------------ ------------
$486,839,000 $481,615,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
-1-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Note 1)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, March 31,
1999 1998
----------- -----------
<S> <C> <C>
REVENUES:
Gross revenues from real estate $21,100,000 $13,526,000
Interest and other income 163,000 121,000
----------- -----------
21,263,000 13,647,000
----------- -----------
EXPENSES:
Property operating expenses 7,377,000 5,093,000
Depreciation and amortization 3,216,000 2,138,000
General and administrative expenses 853,000 738,000
Interest expense 5,105,000 1,978,000
----------- -----------
16,551,000 9,947,000
----------- -----------
Income before equity in unconsolidated
entities, gains on sales of interests in real
estate and minority interest in operating
partnership
4,712,000 3,700,000
EQUITY IN LOSS OF PREIT-RUBIN, INC. (Note 2) (1,092,000) (358,000)
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES (Note 3) 1,466,000 1,475,000
GAINS ON SALES OF INTERESTS IN REAL ESTATE 1,346,000 --
----------- -----------
Income before minority interest in
operating partnership 6,432,000 4,817,000
MINORITY INTEREST IN OPERATING PARTNERSHIP (562,000) (224,000)
----------- -----------
NET INCOME $ 5,870,000 $ 4,593,000
=========== ===========
BASIC INCOME PER SHARE (Note 4) $ .44 $ .35
=========== ===========
DILUTED INCOME PER SHARE (Note 4) $ .44 $ .34
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTES 1 AND 6)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
March 31, March 31,
1999 1998
---------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,870,000 $ 4,593,000
Adjustments to reconcile net income to net cash
provided by operating activities-
Minority interest in operating partnership 562,000 224,000
Depreciation and amortization 3,216,000 2,138,000
Provision for doubtful accounts 326,000 10,000
Gains on sales of interests in real estate (1,346,000) --
Equity in loss of PREIT-RUBIN, Inc. 1,092,000 358,000
Decrease in allowance for possible losses (37,000) (47,000)
Change in assets and liabilities-
Rents and sundry receivables 181,000 (172,000)
Deferred costs, prepaid real estate taxes and expenses (2,274,000) (448,000)
Accrued pension and retirement benefits 16,000 (42,000)
Accrued expenses and other liabilities (1,329,000) (204,000)
Tenants' deposits and deferred rents 314,000 (124,000)
Others 93,000 53,000
---------- ------------
Net cash provided by operating activities 6,322,000 6,339,000
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly-owned real estate (3,765,000) (776,000)
Investments in property under development (5,133,000) (8,711,000)
Investment in and advances to PREIT-RUBIN, Inc. (786,000) (200,000)
Investments in partnerships and joint ventures (300,000) (1,121,000)
Cash proceeds from sale of interest in partnership 1,093,000 --
Cash distributions from partnerships and joint ventures
in excess of equity in income 267,000 272,000
---------- ------------
Net cash used in investing activities (8,624,000) (10,536,000)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (729,000) (562,000)
Repayment of mortgage notes payable -- (33,681,000)
Proceeds from bank loans payable 7,700,000 44,951,000
Shares of beneficial interest issued -- 113,000
Payment of deferred financing and equity offering costs (888,000) (934,000)
Distributions paid to shareholders (6,258,000) (6,248,000)
Distributions paid to OP Unit holders (529,000) (304,000)
Distributions to minority partners (131,000) (6,000)
---------- ------------
Net cash (used in) provided by financing activities (835,000) 3,329,000
---------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,137,000) (868,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,135,000 1,324,000
---------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,998,000 $ 456,000
========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999
1. BASIS OF PRESENTATION:
The Registrant prepared the consolidated financial statements pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Registrant believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated financial
statements be read in conjunction with the audited financial statements and the
notes thereto included in the Registrant's latest annual report on Form 10-K. In
the opinion of the Registrant, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the consolidated financial
position and the consolidated results of its operations and its cash flows, have
been included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
Certain prior period amounts have been reclassified to conform with current
period presentation.
2. INVESTMENT IN PREIT-RUBIN, INC.:
PREIT-RUBIN, Inc. ("PRI") is responsible for various activities, including
management, leasing and real estate development of certain of the Registrant's
properties and for properties on behalf of third parties. Total management fees
paid by the Registrant's properties to PRI are included in property operating
expenses in the accompanying consolidated statements of income and amounted to
$98,000 and $71,000 for the three-month periods ended March 31, 1999 and 1998,
respectively. The Registrant's properties also paid leasing and development fees
to PRI totaling $216,000 and $137,000 for the three-month periods ended March
31, 1999 and 1998.
Leasing and development fees paid by the Registrant's properties to PRI are
capitalized and amortized to expense in accordance with the Registrant's normal
accounting policies. Intercompany profits earned by PRI related to such
activities are deferred and will be amortized to income over these same periods
in order to more properly match revenues and expenses.
PRI also provides management, leasing and development services for partnerships
and other ventures in which certain officers of the Registrant and PRI have
either direct or indirect ownership interests. Total revenues earned by PRI for
such services were $847,000 and $850,000 for the three-month periods ended March
31, 1999 and 1998, respectively.
-4-
<PAGE>
Summarized unaudited financial information for PREIT-RUBIN, Inc. as of and for
the three-month periods ended March 31, 1999 and 1998 is as follows:
For the Three For the Three
Months Ended Months Ended
March 31, 1999 March 31, 1998
-------------- --------------
Total assets $10,644,000 $12,740,000
=========== ===========
Management fees $ 1,238,000 $ 1,278,000
Leasing commissions 1,070,000 1,224,000
Development fees 242,000 190,000
Other revenues 488,000 629,000
----------- -----------
Total revenue $ 3,038,000 $ 3,321,000
=========== ===========
Net loss $(1,150,000) $ (377,000)
=========== ===========
Registrant's share of net loss $(1,092,000) $ (358,000)
=========== ===========
3. INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES:
The following table presents summarized financial information as to the
Registrant's equity in the assets and liabilities of 18 partnerships and joint
ventures and 5 properties under development at March 31, 1999, and 24
partnerships and joint ventures and 4 properties under development at December
31, 1998, and the Registrant's equity in income for the three months ended
March 31, 1999 and 1998:
-5-
<PAGE>
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Investments in real estate, at cost:
Multifamily properties $ 54,663,000 $ 54,396,000
Retail properties 197,145,000 185,900,000
Industrial property -- 1,275,000
Properties under development 21,045,000 25,601,000
Land 926,000 926,000
------------ ------------
Total investments in real estate 273,779,000 268,098,000
Less- Accumulated depreciation 65,241,000 64,478,000
------------ ------------
208,538,000 203,620,000
Cash and cash equivalents 7,683,000 7,107,000
Deferred costs, prepaid real estate taxes and expenses,
and other assets, net 32,047,000 34,923,000
------------ ------------
Total assets $248,268,000 $245,650,000
============ ============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $222,038,000 218,278,000
Bank loans payable 3,315,000 3,260,000
Other liabilities 8,824,000 9,675,000
------------ ------------
Total liabilities 234,177,000 231,213,000
------------ ------------
Net equity 14,091,000 14,437,000
Less: Partners' share 809,000 998,000
------------ ------------
Investment in partnerships and joint ventures $ 13,282,000 $ 13,439,000
============ ============
</TABLE>
-6-
<PAGE>
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
Three Months Ended
----------------------------------
March 31, March 31,
1999 1998
----------- -----------
Gross revenues from real estate $14,158,000 $14,737,000
----------- -----------
Expenses:
Property operating expenses 4,852,000 5,403,000
Mortgage and bank loan interest 4,188,000 4,233,000
Depreciation and amortization 2,154,000 2,071,000
----------- -----------
11,194,000 11,707,000
----------- -----------
2,964,000 3,030,000
Partners' share (1,498,000) (1,555,000)
----------- -----------
Equity in income of partnerships
and joint ventures $ 1,466,000 $ 1,475,000
=========== ===========
4. EARNINGS PER SHARE:
Basic Earnings Per Share is based on the weighted average number of common
shares outstanding during the year. Diluted Earnings Per Share is based on the
weighted average number of shares outstanding during the year, adjusted to give
effect to common share equivalents. A reconciliation between basic and diluted
Earnings Per Share is shown below:
For the Three Months Ended
March 31, 1999
-----------------------------------------
Per Share
Income Shares Amount
---------- ---------- ---------
BASIC EARNINGS PER SHARE:
Net income $5,870,000 13,308,584 $ .44
========== ========== =========
DILUTED EARNINGS PER SHARE:
Net income $5,870,000 13,308,584
Share options issued -- 7,052
---------- ----------
$5,870,000 13,315,636 $ .44
========== ========== =========
-7-
<PAGE>
For the Three Months Ended
March 31, 1998
-----------------------------------------
Per Share
Income Shares Amount
---------- ---------- ---------
BASIC EARNINGS PER SHARE:
Net income $4,593,000 13,291,936 $ .35
========== ========== =========
DILUTED EARNINGS PER SHARE:
Net income $4,593,000 13,291,936
Share options issued -- 41,786
---------- ----------
$4,593,000 13,333,722 $ .34
========== ========== =========
5. DISTRIBUTIONS:
The per-share amount declared at the date of this report and the per-share
amount declared in the comparable period for distribution are as follows:
Amount
Per
Date Declared Record Date Payment Date Share
-------------- ------------ ------------- ------
April 29, 1999 May 28, 1999 June 15, 1999 $.47
April 30, 1998 May 31, 1998 June 15, 1998 $.47
6. CASH FLOW INFORMATION:
Cash paid for interest was $4,943,000 (net of capitalized interest of $419,000)
and $2,395,000 (net of capitalized interest of $311,000) for the three month
periods ended March 31, 1999 and March 31, 1998, respectively.
7. COMMITMENTS AND CONTINGENCIES:
Environmental matters have arisen at certain properties in which the Registrant
has an interest for which reserves have previously been established. In
management's opinion, no material incremental cost will be incurred on these
properties.
-8-
<PAGE>
As part of the merger with PREIT-RUBIN, Inc. (formerly The Rubin Organization,
Inc.), the Registrant entered into a contribution agreement (the "Contribution
Agreement") which includes a provision for PREIT Associates, L.P., the
Registrant's operating partnership, to issue up to 800,000 additional Class A
operating partnership ("OP") units over the five-year period, beginning October
1, 1997 and ending September 30, 2002 according to a formula based upon the
Registrant's adjusted funds from operations per share during the five-year
period. The Contribution Agreement establishes "hurdle" and "target" levels for
the Registrant's adjusted funds from operations per share during specified
earn-out periods to determine whether, and to what extent, the contingent OP
units will be issued. The Registrant intends to account for the issuance of
contingent OP units as additional purchase price when such amounts are
determinable.
At March 31, 1999, the Registrant had approximately $17.0 million committed to
complete current development and redevelopment projects. In connection with
certain development properties, PREIT Associates, L.P. may be required to issue
additional OP units upon the achievement of certain financial results.
8. SEGMENT INFORMATION:
In 1998, the Registrant adopted Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information." This
Statement established standards for reporting financial information about
operating segments in interim and annual financial reports and provides for a
"management approach" in identifying the reportable segments.
The Registrant has four reportable segments: (1) retail properties, (2)
multifamily properties, (3) other, and (4) corporate. The retail segment
includes the operation and management of 20 regional and community shopping
centers (10 wholly owned and 10 owned in joint venture form). The multifamily
segment includes the operation and management of 19 apartment communities (14
wholly owned and 5 owned in joint venture form). The other segment includes the
operation and management of 5 retail properties under development (3 wholly
owned and 2 owned in joint venture form), 5 industrial properties, (all wholly
owned) and 3 land parcels (1 wholly owned and 2 joint ventures). The corporate
segment is responsible for cash and investment management and certain other
general support functions.
The accounting policies for the segments are the same as those the Registrant
uses for its consolidated financial reporting, except that for segment reporting
purposes, the Registrant uses the "proportionate-consolidation method" of
accounting (a non-GAAP measure) for joint venture properties, instead of the
equity method of accounting. The Registrant calculates the
proportionate-consolidation method by applying its percentage ownership interest
to the historical financial statements of its equity method investments.
-9-
<PAGE>
<TABLE>
<CAPTION>
(In thousands)
Adjustments
to Equity Total
Three Months Ended March 31, 1999 Retail Multifamily Other Corporate Total Method Consolidated
- --------------------------------- --------- ----------- --------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate operating revenues $ 14,876 $ 12,804 $ 396 $ -- $ 28,076 $ (6,976) $ 21,100
Real estate operating expense 4,552 5,205 4 -- 9,761 (2,384) 7,377
-------- -------- ------- ------- -------- --------- --------
Net operating income 10,324 7,599 392 -- 18,315 (4,592) 13,723
-------- -------- ------- ------- -------- --------- --------
General and administrative expenses -- -- -- (853) (853) -- (853)
Interest income -- -- -- 163 163 -- 163
PRI net operating income -- -- -- (800) (800) 800 --
-------- -------- ------- ------- -------- --------- --------
EBIDTA 10,324 7,599 392 (1,490) 16,825 (3,792) 13,033
-------- -------- ------- ------- -------- --------- --------
Interest expense (4,595) (2,233) (163) (354) (7,345) 2,240 (5,105)
Depreciation and amortization (2,326) (1,839) (26) (307) (4,498) 1,282 (3,216)
PRI income taxes -- -- -- 104 104 (104) --
Gains on sales of interests in real
estate 445 -- 901 -- 1,346 -- 1,346
Minority interest in operating
partnership -- -- -- (562) (562) -- (562)
Equity in interest of partnerships
and joint ventures -- -- -- -- -- 1,466 1,466
Equity in loss of PRI -- -- -- -- -- (1,092) (1,092)
-------- -------- ------- ------- -------- --------- --------
Net income $ 3,848 $ 3,527 $ 1,104 $(2,609) $ 5,870 $ -- $ 5,870
-------- -------- ------- ------- -------- --------- --------
Investments in real estate, at cost $260,026 $232,256 $23,558 $ -- $515,840 $ -- $515,840
-------- -------- ------- ------- -------- --------- --------
Total assets $348,305 $203,715 $34,812 $15,777 $602,609 $(115,770) $486,839
-------- -------- ------- ------- -------- --------- --------
Recurring capital expenditures $ 137 $ 815 $ -- $ -- $ 952 $ (140) $ 812
-------- -------- ------- ------- -------- --------- --------
<CAPTION>
Adjustments
to Equity Total
Three Months Ended March 31, 1998 Retail Multifamily Other Corporate Total Method Consolidated
- --------------------------------- --------- ----------- --------- --------- --------- ----------- ------------
Real estate operating revenues $ 9,041 $ 11,222 $ 404 $ -- $ 20,667 $ (7,141) $ 13,526
Real estate operating expense 2,921 4,771 5 -- 7,697 (2,604) 5,093
-------- -------- ------- ------- -------- --------- --------
Net operating income 6,120 6,451 399 -- 12,970 (4,537) 8,433
-------- -------- ------- ------- -------- --------- --------
General and administrative expenses -- -- -- (738) (738) -- (738)
Interest income -- -- -- 122 122 (1) 121
PRI net operating income -- -- -- (221) (221) 221 --
-------- -------- ------- ------- -------- --------- --------
EBIDTA 6,120 6,451 399 (837) 12,133 (4,317) 7,816
-------- -------- ------- ------- -------- --------- --------
Interest expense (2,009) (1,730) (228) (210) (4,177) 2,199 (1,978)
Depreciation and amortization (1,345) (1,679) (29) (305) (3,358) 1,220 (2,138)
PRI income taxes -- -- -- 219 219 (219) --
Minority interest in operating
partnership -- -- -- (224) (224) -- (224)
Equity in interest of partnerships
and joint ventures -- -- -- -- -- 1,475 1,475
Equity in income of PRI -- -- -- -- -- (358) (358)
-------- -------- ------- ------- -------- --------- --------
Net income $ 2,766 $ 3,042 $ 142 $(1,357) $ 4,593 $ -- $ 4,593
-------- -------- ------- ------- -------- --------- --------
Investments in real estate, at cost $120,347 $161,907 $15,120 $ -- $297,374 $ -- $297,374
-------- -------- ------- ------- -------- --------- --------
Total assets $176,165 $169,947 $29,841 $ 9,746 $385,699 $(112,303) $273,396
-------- -------- ------- ------- -------- --------- --------
Recurring capital expenditures $ 112 $ 541 $ -- $ -- $ 653 $ (165) $ 488
-------- -------- ------- ------- -------- --------- --------
</TABLE>
-10-
<PAGE>
9. RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. This Statement will be effective for the
Registrant's calendar year 2000. This Statement must be applied to (a)
derivative instruments and (b) certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after December
31, 1997. The Registrant does not expect the adoption of this statement to have
a material impact on its financial position or results of operations.
10. SUBSEQUENT EVENT:
On April 13, 1999, the Registrant completed the financing of eight multifamily
communities with $108 million of permanent, fixed-rate, long-term debt. The
financing replaces short-term floating rate debt with loans with a weighted
average fixed interest rate of 6.77%. The loans, secured with the eight
properties, amortize over 30 years and mature May 2009. Approximately an $88
million portion of the proceeds was used to repay outstanding amounts under the
Registrant's Credit Facility. As a result of this repayment, a balance of
approximately $60 million of the Registrant's Credit Facility remained
outstanding. The balance of the proceeds was used to pay off a short-term
floating rate loan of approximately $17 million which was secured by the
recently acquired Northeast Tower Center located in Philadelphia, Pennsylvania
and fund the financing costs of approximately $3 million.
The Properties secured by this permanent debt are as follows:
<TABLE>
<CAPTION>
Property Name Location Units Loan Amount (1)
- ------------------------- ------------------ ----- ---------------
<S> <C> <C> <C>
Boca Palms Apartments Boca Raton, FL 522 $ 22,600,000
Cobblestone Apartments Pompano Beach, FL 384 13,850,000
Palms of Pembroke Pembroke Pines, FL 348 16,600,000
Marylander Apartments Baltimore, MD 508 12,300,000
Hidden Lakes Apartments Dayton, OH 360 10,700,000
Kenwood Gardens Toledo, OH 504 7,250,000
Lakewood Hills Apartments Harrisburg, PA 562 18,750,000
2031 Locust Street Philadelphia, PA 87 5,950,000
----- ------------
3,275 $108,000,000
===== ============
</TABLE>
(1) Each loan is non-recourse and the loans are not cross-collateralized.
-11-
<PAGE>
Item 2.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Registrant expects to meet its short-term liquidity requirements generally
through its available working capital and net cash provided by operations. The
Registrant believes that the net cash provided by operations will be sufficient
to make distributions to continue to qualify as a REIT under the Internal
Revenue Code. The Registrant also believes that the foregoing sources of
liquidity will be sufficient to fund its short-term liquidity needs for the
foreseeable future, including capital expenditures, tenant improvements and
leasing commissions.
The Registrant expects to meet certain long-term liquidity requirements such as
property acquisitions, scheduled debt maturities, renovations, expansions and
other non-recurring capital improvements through long-term secured and unsecured
indebtedness and the issuance of additional equity securities.
The Credit Facility
As of March 31, 1999, $146.2 million of borrowings under the Credit Facility
were outstanding ($143.0 million directly by the Registrant and $3.2 million
through partnerships and joint ventures) and, subject to the terms and
conditions of the Credit Facility, up to $3.8 million was available to fund
property acquisitions, scheduled debt maturities and other uses. At March 31,
1999 the interest rate on the Credit Facility was 6.81%.
-12-
<PAGE>
Mortgage Notes
In order to secure additional funds for its acquisition and development
activities, on April 13, 1999, the Registrant concluded the financing of eight
multifamily communities with $108 million of permanent, fixed-rate, long-term
debt. With the financing, the Registrant replaced short-term floating rate debt
with fixed rate, mortgage debt. The new debt carries a weighted average fixed
interest rate of approximately 6.77%, equating to a spread of 158 basis points
over the yield on the ten year U. S. Treasury Notes at the time rates were
locked. The eight properties (see Note 10 of the Consolidated Financial
Statements) secure the non-recourse loans, which amortize over 30 years and
mature in May 2009. Proceeds from these newly-placed loans were used to 1) repay
approximately $88 million of the Credit Facility, 2) pay off a short-term
floating rate loan of approximately $17 million and 3) fund approximately $3
million in closing costs. As a result of the repayment of the Registrant's
Credit Facility, a balance of approximately $60 million of the Registrant's
Credit Facility remained outstanding.
In addition to amounts due under the Credit Facility prior to December 31, 2000,
construction and mortgage loans, secured by properties owned by four
partnerships in which the Registrant has an interest, mature by their terms.
Balloon payments on these loans total $26 million of which the Registrant's
proportionate share is $13 million. Construction and mortgage loans on
properties wholly-owned by the Registrant also mature by their terms. Balloon
payments on these loans total $32 million.
Funds from Operations
Funds from operations (FFO) increased by $1,411,000 for the three months ended
March 31, 1999, as compared to the three months ended March 31, 1998, as
follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 31, March 31,
Funds from Operations(1) 1999 1998
- -------------------------------------------------------- ----------- -----------
<S> <C> <C>
Income before minority interest in operating partnership $6,432,000 $ 4,817,000
Less: Gains on sales of interests in real estate (1,346,000) --
Add:
Depreciation and amortization-
Wholly-owned and consolidated partnerships 3,156,000 2,088,000
Unconsolidated partnerships and joint ventures 1,059,000 998,000
Excess purchase price over net assets acquired 53,000 29,000
Less:
Depreciation of non-real estate assets (60,000) (58,000)
Amortization of deferred financing costs (139,000) (130,000)
----------- -----------
Funds from operations $ 9,155,000 $ 7,744,000
=========== ===========
Weighted average number of shares outstanding 13,308,584 13,291,936
Weighted average effect of full conversion of OP Units 1,273,514 646,286
----------- -----------
14,582,098 13,938,222
=========== ===========
</TABLE>
-13-
<PAGE>
(1) Funds from operations ("FFO") is defined as income before gains (losses) on
investments and extraordinary items (computed in accordance with generally
accepted accounting principles "GAAP") plus real estate depreciation and similar
adjustments for unconsolidated joint ventures after adjustments for non-real
estate depreciation and amortization of financing costs. FFO should not be
construed as an alternative to net income (as determined in accordance with
GAAP) as an indicator of the Registrant's operating performance, or to cash
flows from operating activities (as determined in accordance with GAAP) as a
measure of liquidity. In addition, the Registrant's measure of FFO as presented
may not be comparable to similar measures reported by other companies.
Cash Flows
During the three months ended March 31, 1999, the Registrant generated $6.3
million in cash flow from operating activities. Investing activities used cash
of $9.0 million including (i) $5.1 million in investments in property under
development, (ii) $3.8 million in investments in wholly-owned real estate
assets, (iii) $1.0 million in investments in the affiliated management company
and partnerships, offset by (iv) cash proceeds from the sale of a partnership
interest of $1.0 million and (v) distributions from partnerships in excess of
equity in income of $0.3 million. Financing activities used cash flow of $0.8
million and included (i) $7.7 million in borrowings under the Company's Credit
Facility, offset by (ii) $6.9 million of distributions to shareholders, OP unit
holders and minority interests, (iii) payments of deferred financing costs of
$0.9 million, and (iv) principal installments on mortgages of $0.7 million.
Commitments
At March 31, 1999, the Registrant had approximately $17 million committed to
complete current development and redevelopment projects. In connection with
certain development properties, PREIT Associates, L.P. may be required to issue
additional OP units upon the achievement of certain financial results.
-14-
<PAGE>
Interest Rate Protection
In order to reduce exposure to variable interest rates, the Registrant entered
into a six-year interest rate swap agreement with First Union, on $20 million of
indebtedness which fixes a rate of 6.12% per annum versus 30-day LIBOR until
2001.
Contingent Liability
The Registrant along with certain of its joint venture partners has guaranteed
debt totaling $7 million.
Results of Operations
Three Month Periods Ended March 31, 1999 and March 31, 1998
Gross revenues from real estate increased by $7,574,000 to $21,100,000 for the
three-month period ended March 31, 1999, as compared to the corresponding period
in 1998. The 1999 period included $7,234,000 of revenues attributable to the
acquisitions made by the Registrant during 1998 (the "1998 Acquisitions") as
described in the Registrant's 1998 Form 10-K. Revenues from properties owned
during both periods increased by $341,000 primarily as a result of an increase
in apartment revenues.
Property operating expenses increased by $2,284,000 to $7,377,000. The 1999
period included $2,266,000 of expenses attributable to the 1998 Acquisitions.
Operating expenses from properties owned during both periods increased by
$19,000.
Depreciation and amortization increased by $1,078,000 to $3,216,000 primarily as
a result of 1998 Acquisitions and increased amortization of financing costs.
Depreciation for properties owned during both periods decreased by $73,000.
Interest expense increased by $3,127,000 to $5,105,000. Interest expense
attributable to mortgaged properties increased by $1,754,000 due to the 1998
Acquisitions. Interest expense incurred against the Registrant's Credit Facility
increased by $1,373,000 also due to the 1998 Acquisitions.
Equity in income of partnerships and joint ventures decreased by $9,000 to
$1,466,000. The 1999 period includes $194,000 of equity in income attributable
to the 1998 Acquisitions. The 1999 period also includes loss from properties
sold during 1998 in the amount of $58,000. Equity in income of properties owned
during both periods decrease by $145,000 as a result of a decrease of $178,000
in net income from Whitehall Mall which is currently being redeveloped.
Equity in net loss of PREIT-RUBIN, Inc. for the 1999 period was $1,092,000 as
compared to $358,000 in the 1998 period.
Minority interest in the operating partnership increased by $338,000 to $562,000
as a result of OP units issued in connection with five acquisitions during 1998
and additional contingent OP units issued under the Contribution Agreement.
-15-
<PAGE>
Net income for the quarter ended March 31, 1999 increased to $1,277,000 from
$5,870,000 as reported in the comparable period in the prior year.
Acquisitions
The Registrant is actively involved in pursing and evaluating a number of
individual property and portfolio acquisition opportunities. In addition, the
Registrant has stated that a key strategic goal is to obtain managerial control
of all of its assets. In certain cases where existing joint venture assets are
managed by outside partners, the Registrant is considering the possible
acquisition of these outside interests. In certain cases where that opportunity
does not exist, the Registrant is considering the disposition of its interests.
There can be no assurance that the Registrant will consummate any such
acquisition or disposition.
Dispositions
Consistent with management's stated long-term strategic plan to review and
evaluate all joint venture real estate holdings, on March 2, 1999 the Registrant
sold its 50% interest in 135 Commerce Drive located in Fort Washington,
Pennsylvania. The gain on the sale of this industrial property was approximately
$1.8 million, of which $0.9 million was the Registrant's share. The proceeds
from this sale were applied to reduce outstanding borrowings under the
Registrant's Credit Facility.
Development, Expansions and Renovations
The Registrant is involved in a number of development and redevelopment
projects, which may require equity funding by the Registrant or third-party debt
or equity financing. In each case, the Registrant will evaluate the financing
opportunities available to it at the time a project requires funding. In cases
where the project is undertaken with a joint venture partner, the Registrant's
flexibility in funding the project may be governed by the joint venture
agreement or the covenants existing in its line of credit which limit the use of
borrowed funds in joint venture projects.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year in the
date field. Those programs were designed and developed at a time when data
storage was expensive, and the impact of the upcoming century change was not
considered. If not corrected, many programs may fail or provide inaccurate
results at and after the turn of the century. The Registrant (and tenants that
provide the Registrant with a significant percentage of its income) use
information systems and control systems which may be affected by the two digit
date.
The Registrant established a Year 2000 Remediation Plan consisting of the
following phases: inventorying systems and devices including information
technology ("IT") and non-IT systems that are vulnerable to the Year 2000
problem, assessment of the criticality of the inventoried items, remediation of
the noncompliant items, and testing of the corrections that have been applied.
The Registrant has completed the first phase of its Remediation Plan for IT
systems and has determined that its accounting and payroll systems, which the
Registrant believes to be its mission critical systems, are year 2000 compliant.
In addition, the Registrant has begun the first phase of its Remediation Plan
for its non-IT systems (such as elevators, HVAC and lighting systems) and is
currently completing an inventory of non-IT systems and
-16-
<PAGE>
assessing the potential risks of noncompliance. Some of the Registrant's
business partners, suppliers and tenants are also being surveyed relative to
their Year 2000 compliance to mitigate the potential impact of Year 2000 issues.
The amount of remediation effort is not anticipated to be extensive due to the
Registrant's use of readily available, off-the-shelf software and hardware
products that are supported by the manufacturers. After evaluating the
Registrant's compliance efforts, appropriate contingency plans will be developed
based on the outcome of the assessment phase and the survey of some of its major
suppliers and tenants. The Registrant expects to complete the Year 2000
Remediation Plan, including final testing by the beginning of the fourth quarter
of 1999.
Management has determined the approximate total cost of its Year 2000
Remediation Plan and the potential related impact on operations. Amounts
incurred to date have been less than $100,000 and the estimated remaining
expenses of Year 2000 remediation are expected to be less than $200,000.
Costs associated with a Year 2000 issue could have a material impact on the
operations of the Registrant.
Forward-Looking Statements
The matters discussed in this report, as well as news releases issued from time
to time by the Registrant include use of forward-looking terminology such as
"may," "will," "should," "expect," "anticipate," "estimate," "plan," or
"continue" or the negative thereof or other variations thereon, or comparable
terminology which constitute "forward-looking statements." Such forward-looking
statements (including without limitation, information concerning the
Registrant's planned acquisition, development and divestiture activities, short-
and long-term liquidity position, ability to raise capital through public and
private offerings of debt and/or equity securities, availability of adequate
funds at reasonable cost, revenues and operating expenses for some or all of the
properties, leasing activities, occupancy rates, changes in local market
conditions or other competitive factors) involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Registrant's results to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. The Registrant disclaims any obligation to update
any such factors or to publicly announce the result of any revisions to any of
the forward-looking statements contained herein to reflect future events or
developments.
-17-
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the net financial instrument position or
sensitivity to market risk since December 31, 1998 as reported by
the Registrant in its Form 10-K for the year ended December 31, 1998.
-18-
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(b) The Registrant's Board of Trustees adopted a Rights Agreement dated
as of April 30, 1999 by and between the Registrant and American Stock Transfer
and Trust Company as Rights Agent (the "Rights Agreement"). The Registrant
incorporates the relevant information pertaining to the Rights Agreement by
reference to its current report on Form 8-K filed on May 3, 1999 and its
registration statement on Form 8-A filed on May 3, 1999.
Item 5. Other Information
The Registrant issued a press release on April 13, 1999 containing
financial information for the quarter ended March 31, 1999. A copy of the press
release is attached hereto as Exhibit 99.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 Form of the Registrant's share certificate, as amended
April 14, 1999.
10.1 Promissory Note, dated April 13, 1999, by and between
the Registrant and GMAC Commercial Mortgage Corporation,
a California corporation ("GMAC").
10.2 Mortgage and Security Agreement, dated April 13, 1999,
by and between the Registrant and GMAC.
10.3 Promissory Note, dated April 13, 1999, by and between PR
Marylander LLC, a Delaware limited liability company
("PR Marylander"), and GMAC.
10.4 Indemnity Deed of Trust and Security Agreement, dated
April 13, 1999, by and between PR Marylander and GMAC.
10.5 Promissory Note, dated April 13, 1999, by and between PR
Kenwood Gardens LLC, a Delaware limited liability
company ("PR Kenwood Gardens"), and GMAC.
10.6 Mortgage and Security Agreement, dated April 13, 1999,
by and between PR Kenwood Gardens and GMAC.
-19-
<PAGE>
10.7 Promissory Note, dated April 13, 1999, by and between GP
Stones Limited Partnership, a Florida limited
partnership ("GP Stones"), and GMAC.
10.8 Mortgage and Security Agreement, dated April 13, 1999,
by and between GP Stones and GMAC.
10.9 Promissory Note, dated April 13, 1999, by and between PR
Boca Palms LLC, a Delaware limited liability company
("PR Boca Palms"), and GMAC.
10.10 Mortgage and Security Agreement, dated April 13, 1999,
by and between PR Boca Palms and GMAC.
10.11 Promissory Note, dated April 13, 1999, by and between PR
Pembroke LLC, a Delaware limited liability company ("PR
Pembroke"), and GMAC.
10.12 Mortgage and Security Agreement, dated April 13, 1999,
by and between PR Pembroke and GMAC.
10.13 Promissory Note, dated April 13, 1999, by and between PR
Hidden Lakes LLC, a Delaware limited liability company
("PR Hidden Lakes"), and GMAC.
10.14 Mortgage and Security Agreement, dated April 13, 1999,
by and between PR Hidden Lakes and GMAC.
10.15 Promissory Note, dated April 13, 1999, by and between
PREIT Associates L.P., a Delaware limited partnership
("PREIT Associates"), and GMAC.
10.16 Mortgage and Security Agreement, dated April 13, 1999,
by and between PREIT Associates and GMAC.
27. Financial Data Schedule (included in electronic filing
format).
99. Press Release, issued May 13, 1999, containing financial
information for the quarter ended March 31, 1999.
(b) Reports on Form 8-K
(i) Report on Form 8-K dated December 23, 1998 and filed on
January 7, 1999, as amended by Form 8-K/A-1 dated
December 23, 1998 and filed on March 8, 1999.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
By: /s/ Ronald Rubin
-------------------------------------
Ronald Rubin
Chief Executive Officer
By: /s/ Edward A. Glickman
-------------------------------------
Edward A. Glickman
Executive Vice President
and Chief Financial Officer
By: /s/ Dante J. Massimini
-------------------------------------
Dante J. Massimini
Senior Vice President
and Treasurer
May 14, 1999
-21-
<PAGE>
Exhibit Index
Exhibit
Number Description
- ------- -----------
4 Form of the Registrant's share certificate, as amended April 14,
1999.
10.1 Promissory Note, dated April 13, 1999, by and between the Registrant
and GMAC Commercial Mortgage Corporation, a California corporation
("GMAC").
10.2 Mortgage and Security Agreement, dated April 13, 1999, by and
between the Registrant and GMAC.
10.3 Promissory Note, dated April 13, 1999, by and between PR Marylander
LLC, a Delaware limited liability company ("PR Marylander"), and
GMAC.
10.4 Indemnity Deed of Trust and Security Agreement, dated April 13,
1999, by and between PR Marylander and GMAC.
10.5 Promissory Note, dated April 13, 1999, by and between PR Kenwood
Gardens LLC, a Delaware limited liability company ("PR Kenwood
Gardens"), and GMAC.
10.6 Mortgage and Security Agreement, dated April 13, 1999, by and
between PR Kenwood Gardens and GMAC.
10.7 Promissory Note, dated April 13, 1999, by and between GP Stones
Limited Partnership, a Florida limited partnership ("GP Stones"),
and GMAC.
10.8 Mortgage and Security Agreement, dated April 13, 1999, by and
between GP Stones and GMAC.
10.9 Promissory Note, dated April 13, 1999, by and between PR Boca Palms
LLC, a Delaware limited liability company ("PR Boca Palms"), and
GMAC.
10.10 Mortgage and Security Agreement, dated April 13, 1999, by and
between PR Boca Palms and GMAC.
10.11 Promissory Note, dated April 13, 1999, by and between PR Pembroke
LLC, a Delaware limited liability company ("PR Pembroke"), and GMAC.
10.12 Mortgage and Security Agreement, dated April 13, 1999, by and
between PR Pembroke and GMAC.
10.13 Promissory Note, dated April 13, 1999, by and between PR Hidden
Lakes LLC, a Delaware limited liability company ("PR Hidden Lakes"),
and GMAC.
-22-
<PAGE>
10.14 Mortgage and Security Agreement, dated April 13, 1999, by and
between PR Hidden Lakes and GMAC.
10.15 Promissory Note, dated April 13, 1999, by and between PREIT
Associates L.P., a Delaware limited partnership ("PREIT
Associates"), and GMAC.
10.16 Mortgage and Security Agreement, dated April 13, 1999, by and
between PREIT Associates and GMAC.
27. Financial Data Schedule (included in electronic filing format).
99. Press Release, issued May 13, 1999, containing financial information
for the quarter ended March 31, 1999.
-23-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SHARES SHARES
OF BENEFICIAL INTEREST OF BENEFICIAL INTEREST
(PAR VALUE $1.00 PER SHARE) (PAR VALUE $1.00 PER SHARE)
A PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
NUMBER CUSIP 709102 10 7
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS SHARES
LOGO
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF BENEFICIAL INTEREST OF
Pennsylvania Real Estate Investment Trust (hereinafter called the "Trust"), a business trust
established under a Trust Agreement, dated December 27, 1960 as amended from time to time, a copy
of which is on file with the Transfer Agent and Registrar, and applicable provisions of the Laws
of the Commonwealth of Pennsylvania.
The holder and every transferee or assignee of this certificate or of the shares represented
hereby or of any interest therein accepts and agrees to be bound by the provision of said Trust
Agreement as from time to time amended in the manner therein provided, as though a party thereto.
This certificate and the shares represented hereby are transferable only on the books of the Trust
by the registered holder hereof in person or by attorney upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar. Further provisions relating to ownership and transfer of shares of
beneficial interest in the Trust are set forth on the reverse hereof.
In Witness Whereof, the Trust has caused this certificate to be executed in its name and behalf by
its duly authorized representatives.
Dated:
COUNTERSIGNED AND REGISTERED: LOGO
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.) TRANSFER AGENT
American AND REGISTRAR
Bank Note BY
Company AUTHORIZED OFFICER SECRETARY CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they
were written out in full according to applicable laws or regulations:
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-.............Custodian..................
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.................
in common (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED__________________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
| |
|______________________________________|
__________________________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
__________________________________________________________________________________________________
__________________________________________________________________________________________________
____________________________________________________________________________________________shares
of beneficial interest represented by the within Certificate, and do hereby irrevocably constitute
and appoint
__________________________________________________________________________________________Attorney
to transfer the said shares on the books of the within named Trust with full power of substitution
in the premises.
Dated_______________________
________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION, (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM PURSUANT TO S.E.C. RULE 17Ad-15.
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OF ANY CHANGE
WHATEVER.
The Shares presented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Trust's
maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"). No
Person may Beneficially Own or Constructively Own Shares in excess of 9.9% in value (or such greater percentage as may be determined
by the Board of Trustees) of the outstanding Shares (exclusive of any Preferred Shares) of the Trust. Any Person who attempts to
Beneficially Own or Constructively Own Shares in excess of the above limitation must immediately notify the Trust. In addition, if
any Person attempts to acquire beneficial ownership of any Shares and the result of such acquisition would be Shares being
beneficially owned by fewer than 100 persons, such purported transfer shall be void ab initio and the intended transferee shall
acquire no rights to such Shares. All capitalized terms used in this legend have the meanings set forth in the Trust Agreement, a
copy of which, including the restrictions on ownership and transfer, will be sent without charge to each Shareholder who so
requests. If the restrictions on ownership and transfer are violated, the Shares represented hereby will be automatically exchanged
for Excess Shares which will be held in trust by the Trust.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR DESTROYED, THE TRUST WILL REQUIRE
A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
This certificate also evidences and entitles the holder hereof to the same number of Rights (subject to adjustment) as the
number of Shares of Beneficial Interest represented by this certificate, such Rights being on the terms provided under the Rights
Agreement between Pennsylvania Real Estate Investment Trust and American Stock Transfer and Trust Company (the "Rights Agent"),
dated as of April 30, 1999, as it may be amended from time to time (the "Rights Agreement") the terms of which are incorporated
herein by reference and a copy of which is on file at the principal executive offices of Pennsylvania Real Estate Investment Trust.
Under certain circumstances, as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and shall
no longer be evidenced by this certificate. Pennsylvania Real Estate Investment Trust shall mail to the registered holder of this
certificate a copy of the Rights Agreement without charge within five days after receipt of a written request therefor. Rights
issued to or Beneficially Owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights
Agreement) or any subsequent holder of such Rights shall be null and void and may not be exercised by any such Person, as and to
the extent provided in Section 7(e) of the Rights Agreement.
</TABLE>
<PAGE>
Exhibit 10.1
PROMISSORY NOTE
$18,750,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, a Pennsylvania business trust
("Borrower"), promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation ("Lender"), at Lender's office located at
650 Dresher Road, P.O. Box 809, Horsham, Pennsylvania 19044-0809, Attn:
Servicing - Accounting Manager, or at such other place as Lender may designate
to Borrower in writing from time to time, the principal sum of EIGHTEEN MILLION
SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($18,750,000.00), or so much
thereof as is outstanding and unpaid, together with interest thereon at the rate
of 6.773% per annum ("Interest Rate"), in lawful money of the United States of
America, which, at the time of payment, shall be legal tender in payment of all
debts and dues, public and private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay
principal and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments
of principal and interest in the amount of $123,160.75 (each a "Monthly
Amount"), beginning on the tenth day of June, 1999 ("First Payment Date"), and
continuing on the tenth day of each and every successive month thereafter (each
a "Payment Date") through and including the Payment Date immediately prior to
the Maturity Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the
entire outstanding principal balance hereof, together with all accrued but
unpaid interest thereon and any other amounts due under the Note or the other
Loan Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a
date other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days from and including the date of
this Note to and including the ninth day of such month (or if the date of this
Note is after the ninth day of the month, then the next following month) (b) by
a daily rate based on the Interest Rate calculated for a 360 day year.
<PAGE>
2.03 Method of Payment. Each payment due hereunder shall not
be deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall
be applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05,
or as required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying a date ("Defeasance Date") which
shall be a Payment Date, on which the amount required to defease the Loan
("Defeasance Deposit") is to be made and on which the Defeasance is to occur, as
well as the anticipated outstanding principal amount of this Note as of the
Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and
unpaid interest on the outstanding principal balance of this Note to but not
including the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums,
not including scheduled interest or principal payments, then due under this
Note, the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the
Defeasance Date.
(v) Borrower shall pay to Lender the required
Defeasance Deposit for the Defeasance, or at Borrower's option, Borrower shall
deliver to Lender U.S. Government Securities which provide payments on or prior
to, but as close as possible to, all successive Payment Dates after the
Defeasance Date (including the outstanding principal balance of this Note due on
the Maturity Date), and in amounts equal to the full amounts due on each Payment
Date under this Note.
(vi) Borrower shall execute and deliver one or more
security agreements in form and substance satisfactory to Lender (collectively,
"Security Agreement"), creating a first priority lien on, and security interest
in, the Defeasance Deposit and the U.S. Government Securities purchased with
Defeasance Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies,
Borrower also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification
from Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
(xi) Borrower shall pay all reasonable costs and
expenses of Lender incurred in connection with the Defeasance, including any
costs and expenses associated with the Release Instruments (as defined in
Section 2.05(f) hereof) and reasonable attorneys fees and expenses.
<PAGE>
(xii) Borrower shall deliver to Lender a
confirmation, in form and substance satisfactory to Lender, by a "Big Five"
independent certified public accounting firm, that Defeasance Deposit is
sufficient to pay all Scheduled Defeasance Payments and other amounts required
to be paid by Borrower hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation,
in form and substance satisfactory to Lender, that all conditions to Defeasance
have been met from any applicable Rating Agency that has required as a condition
to Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with
the Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee. The Successor Borrower shall assume in
writing the obligations under this Note, the Security Agreement and the other
Loan Documents, by agreements in form and substance satisfactory to Lender,
whereupon Borrower shall, pursuant to the express terms of such agreement, be
relieved of its obligations thereunder. Borrower shall pay $10 to any such
Successor Borrower as consideration for assuming Borrower's obligations under
the Note and the Security Agreement. Notwithstanding anything in this Note or
the Security Instrument to the contrary, no other assumption fee shall be
payable upon a transfer of this Note in accordance with this Section 2.05(d),
but Borrower shall pay all out-of-pocket costs and expenses incurred by Lender,
including Lender's reasonable attorneys fees and expenses, incurred in
connection therewith.
<PAGE>
(e) Repayment Upon Default. If all or any part of the
principal amount of this Note is prepaid upon acceleration of this Note
following the occurrence of an Event of Default prior to the Optional Defeasance
Date, then, in addition to such principal payment, Borrower shall be required to
make such payments ("Yield Maintenance Payments") in an amount equal to the
greater of (i) one percent (1%), or (ii) the excess, if any, of (A) the
aggregate respective present values of all scheduled interest and principal
payments payable on each Payment Date in respect of this Note for the period
from the date of such prepayment upon acceleration to the Maturity Date,
discounted monthly at a rate equal to the Treasury Constant Maturity Yield Index
(defined below) and based on a 360-day year of twelve 30-day months over (B) the
then current outstanding principal amount of this Note. For purposes hereof,
"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) ("FRB Release") published during the second full week
preceding the Prepayment Date for instruments having a maturity coterminous with
the remaining term of this Note. In the event the FRB Release is no longer
published, Lender shall select a comparable publication to determine the
Treasury Constant Maturity Yield Index. If there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with the
remaining term of this Note, then 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 shall be used, 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). The Yield
Maintenance Payments to be paid in connection with any prepayment under this
Section 2.05(e) shall be determined by Lender and shall be conclusive and
binding on Borrower (absent manifest error). For purposes of this Section
2.05(e), the unpaid principal amount due on this Note on the date of prepayment
shall be determined after giving effect to any payment of scheduled amortization
made on such date.
(f) Release of the Mortgaged Property. No repayment,
prepayment or Defeasance of all or any portion of this Note shall cause, give
rise to a right to require, or otherwise result in, the release of the real or
personal property subject to the lien or mortgage created by the Security
Instrument (referred to in this Section 2.05(f) as "Mortgaged Property"), except
as follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Mortgaged Property
shall be released from the lien and mortgage created by the Security Instrument,
whereupon the U.S. Government Securities pledged pursuant to the Security
Agreement shall be the sole source of Borrower's collateral securing this Note.
Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the
Security Instrument shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release of the
Mortgaged Property (and related Loan Documents approved by Lender) for execution
by Lender which shall be in a form appropriate in the applicable state and
otherwise satisfactory to Lender in its reasonable discretion, along with all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following
shall constitute an event of default ("Event of Default") under this Note: (a)
if any payment of principal and interest or any other payment required under
this Note is not received by Lender on or before the date such payment is due;
or (b) if any default should occur under any of the other Loan Documents which
is not fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
<PAGE>
4.02 Late Charges. If any payment is not received by Lender on
or before the date on which such payment originally was due, then, in addition
to any default interest payments due hereunder, Borrower also shall pay to
Lender a late charge in an amount equal to five percent (5.0%) of the amount of
such overdue payment to defray the expenses incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of the
use of the delinquent payment. Such late charge shall be immediately due and
payable, without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full
on or before the Maturity Date or the date on which the due date of the
indebtedness has been accelerated pursuant to the provisions hereof, the unpaid
principal and accrued interest and other amounts then due shall bear interest at
a rate per annum ("Default Interest Rate") equal to the lesser of (a) five
percent (5.0%) in excess of the Interest Rate or (b) the maximum rate of
interest, if any, which may be charged or collected from Borrower under
applicable law. In addition, Lender shall have the right, without acceleration
of the indebtedness, to collect interest at the Default Interest Rate on any
payment due hereunder (including without limitation late charges and fees for
legal counsel) which is not received by Lender on or before the date on which
such payment originally was due. Interest at the Default Interest Rate shall be
immediately due and payable from the due date specified herein and shall accrue
until all Events of Default have been fully cured or full payment is received,
as applicable.
4.04 Interest on Judgments. Interest shall accrue on any
judgment obtained by Lender in connection with the enforcement or collection of
this Note from the date any such judgment becomes due until such judgment amount
is paid in full at a rate equal to the greater of (a) the Default Interest Rate
or (b) the legal rate applicable to judgments within such jurisdiction;
provided, however, that interest shall not accrue at a rate in excess of the
maximum rate of interest, if any, which may be charged or collected from
Borrower under applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of
Lender in this Note and in the other Loan Documents, or at law or in equity,
shall be cumulative and concurrent, and may be pursued singly, successively or
together in Lender's sole discretion and as often as occasion therefor shall
arise. If Borrower's obligations under this Note or any of the other Loan
Documents are enforced by Lender through an attorney-at-law, or any payment due
under this Note or the other Loan Documents is collected by or through an
attorney-at-law or collection agency, Borrower agrees to pay all costs incurred
by Lender in connection therewith, including, but not limited to, reasonable
fees and disbursements of legal counsel (whether with respect to a retained firm
or Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
<PAGE>
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
<PAGE>
7.02 Borrower's Waivers. Borrower, for itself and all others
who may become liable for payment of all or any part of the indebtedness
evidenced by this Note, hereby waives presentment for payment, demand, protest,
and notice of dishonor, protest, nonpayment, demand, intent to accelerate, and
acceleration. Borrower, for itself and all others who may become liable for
payment of all or any part of the indebtedness evidenced by this Note, 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 party and property (real and
personal), against the enforcement and collection of the obligations evidenced
by this Note or the other Loan Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full
power, authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note
shall be deemed a negotiable instrument, even though this Note, absent this
paragraph, may not otherwise qualify as a negotiable instrument under applicable
law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
<PAGE>
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this
Note or under the other Loan Documents are to be in writing, addressed to the
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
Borrower: Pennsylvania Real Estate Investment Trust
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together
with the other Loan Documents and Lender's commitment letter to Borrower,
contain the entire agreements between Borrower and Lender relating to the
subject matter hereof and thereof, and supersede all prior discussions and
agreements (oral or written) relative hereto and thereto which are not contained
herein or therein. Borrower represents and warrants that it is not relying on
any promises, covenants, representations or agreements in connection with this
Note or the other Loan Documents, other than as expressly set forth herein or
therein. In the event of any conflict between the terms of the Loan Documents,
the following order of priority shall be used to resolve such conflict: The Note
shall control over the Security Instrument and the Security Instrument shall
control over all other Loan Documents. Time is of the essence with respect to
all provisions of this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party against whom enforcement thereof is
sought and then only to the extent expressly set forth in such writing. No
person other than a duly authorized officer or agent of Lender shall be deemed
an agent of Lender nor have any authority to waive, modify, supplement or
terminate in any manner whatsoever any of the terms of this Note.
<PAGE>
8.04 Binding Effect; Joint and Several Obligations. The terms
and provisions of this Note and the other Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or
the other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this
Note nor any uncertainty or ambiguity herein shall be construed or resolved
against Lender by virtue of the fact that such document has originated with
Lender as drafter. Borrower acknowledges that it has reviewed this Note and has
had the opportunity to consult with counsel on same. This Note, therefore, shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of the parties hereto.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other
words of similar import refer to this Note as a whole and not to any particular
section, paragraph or other subdivision; "Section" refers to the entire section
and not to any particular subsection, paragraph of other subdivision. Reference
to days for performance shall mean calendar days unless Business Days are
expressly indicated.
8.07 Governing Law. This Note and the other Loan Documents
shall be interpreted, construed and enforced according to the laws of the state
in which the real property encumbered by the Security Instrument is located
(without giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its
acceptance of this Note, agree and consent to the exclusive jurisdiction and
venue of any state or federal court sitting in the county and state where the
real property encumbered by the Security Instrument is located with respect to
any legal action, proceeding, or controversy between them and hereby expressly
waive any and all rights under applicable law or in equity to object to the
jurisdiction and venue of said courts. Borrower further irrevocably consents to
service of process by certified mail, return receipt requested, to Borrower at
the address for Borrower last provided to Lender in accordance with the notice
provision of this Note and agrees that such service shall be effective ten (10)
days after mailing. Nothing herein shall, however, preclude or prevent Lender
from bringing any one or more actions against Borrower in any other jurisdiction
as may be necessary to enforce or realize upon the Security or other collateral
provided for this Note.
<PAGE>
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN
ANY LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
a Pennsylvania business trust
By: /s/ Jeffrey A. Linn
-----------------------------------
Name: Jeffrey A. Linn
Title: Senior Vice President
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Date:
---------------------------------
<PAGE>
Exhibit 10.2
================================================================================
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST, as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 821 Sequoia Road
Harrisburg, PA
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Intentionally Deleted. 17
Section 4.4 Restoration After Casualty/Condemnation. 17
Article 5 - REPRESENTATIONS AND WARRANTIES 21
Section 5.1 Warranty of Title. 21
Section 5.2 Authority. 21
Section 5.3 Legal Status and Authority. 21
<PAGE>
Section 5.4 Validity of Documents. 22
Section 5.5 Litigation. 22
Section 5.6 Status of Property. 22
Section 5.7 No Foreign Person. 24
Section 5.8 Separate Tax Lot. 24
Section 5.9 ERISA Compliance. 24
Section 5.10 Leases. 24
Section 5.11 Financial Condition. 25
Section 5.12 Business Purposes. 25
Section 5.13 Taxes. 25
Section 5.14 Mailing Address. 25
Section 5.15 No Change in Facts or Circumstances. 25
Section 5.16 Disclosure. 25
Section 5.17 Third Party Representations. 26
Section 5.18 Illegal Activity. 26
Section 5.19 FUNB Line of Credit. 26
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 26
Section 6.1 Relationship of Borrower and Lender. 26
Section 6.2 Servicing of the Loan. 26
Article 7 - FURTHER ASSURANCES 26
Section 7.1 Recording of Security Instrument, Etc. 26
Section 7.2 Further Acts, Etc. 27
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws. 27
Section 7.4 Estoppel Certificates. 28
Section 7.5 Flood Insurance. 28
Section 7.6 Splitting of Security Instrument. 28
Section 7.7 Replacement Documents. 29
Section 7.8 Amended Financing Statements. 29
Article 8 - DUE ON SALE/ENCUMBRANCE 29
Section 8.1 No Sale/Encumbrance. 29
Section 8.2 Sale/Encumbrance Defined. 30
Section 8.3 Lender's Rights. 31
Section 8.4 Right To Substitute Property 31
Article 9 - PREPAYMENT 31
Section 9.1 Prepayment Only in Accordance with Note. 31
Article 10 - DEFAULT 31
Section 10.1 Events of Default. 31
<PAGE>
Article 11 - RIGHTS AND REMEDIES 33
Section 11.1 Remedies. 33
Section 11.2 Application of Proceeds. 36
Section 11.3 Right to Cure Defaults. 36
Section 11.4 Actions and Proceedings. 36
Section 11.5 Recovery of Sums Required To Be Paid. 36
Section 11.6 Examination of Books and Records. 36
Section 11.7 Other Rights, Etc. 37
Section 11.8 Right to Release Any Portion of the Property. 37
Section 11.9 Violation of Laws. 38
Section 11.10 Right of Entry. 38
Article 12 - ENVIRONMENTAL HAZARDS 38
Section 12.1 Environmental Representations and Warranties. 38
Section 12.2 Environmental Covenants. 39
Section 12.3 Lender's Rights. 40
Article 13 - INDEMNIFICATION 41
Section 13.1 General Indemnification. 41
Section 13.2 Mortgage and/or Intangible TAX. 42
Section 13.3 ERISA Indemnification. 42
Section 13.4 Environmental Indemnification. 42
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. 43
Article 14 - WAIVERS 44
Section 14.1 Waiver of Counterclaim. 44
Section 14.2 Marshalling and Other Matters. 44
Section 14.3 Waiver of Notice. 44
Section 14.4 Waiver of Statute of Limitations. 44
Section 14.5 Sole Discretion of Lender. 44
Section 14.6 Survival. 45
Section 14.7 Waiver of Trial By Jury. 45
Article 15 - EXCULPATION 45
Section 15.1 Exculpation. 45
Section 15.2 Reservation of Certain Rights. 46
Section 15.3 Exceptions to Exculpation. 46
Section 15.4 Recourse. 46
Section 15.5 Bankruptcy Claims. 47
Article 16 - NOTICES 47
Section 16.1 Notices. 47
<PAGE>
Article 17 - APPLICABLE LAW 48
Section 17.1 Choice of Law. 48
Section 17.2 Usury Laws. 48
Section 17.3 Provisions Subject to Applicable Law. 49
Section 17.4 Inapplicable Provision. 49
Article 18 - SECONDARY MARKET 49
Section 18.1 Dissemination of Information. 49
Article 19 - COSTS 50
Section 19.1 Performance at Borrower's Expense. 50
Section 19.2 Attorney's Fees for Enforcement. 50
Article 20 - DEFINITIONS 51
Section 20.1 General Definitions. 51
Section 20.2 Headings, Etc. 51
Article 21 - MISCELLANEOUS PROVISIONS 51
Section 21.1 No Oral Change. 51
Section 21.2 Liability. 51
Section 21.3 Duplicate Originals; Counterparts. 51
Section 21.4 Number and Gender. 52
Section 21.5 Subrogation. 52
Section 21.6 Entire Agreement. 52
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
o ADA: Subsection 3.10(a);
o Applicable Law: Subsection 3.10(a);
o Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
o Bankruptcy Code: Subsection 1.1(f);
o Borrower: Preamble;
o Business Day: Section 16.1;
o Casualty Consultant: Subsection 4.4(b)(iii);
o Casualty Retainage: Subsection 4.4(b)(iii);
o Collateral: Section 1.3;
o Debt: Section 2.1;
o Default Rate: Section 10.3;
o Environmental Indemnity: Subsection 10.1(c);
o Environmental Law: Section 12.1;
o Environmental Liens: Section 12.2;
o Environmental Report: Section 12.1;
o ERISA: Subsection 4.2(a);
o Escrow Fund: Section 3.5;
o Event: Section 19.1;
o Event of Default: Section 10.1;
o Exculpated Parties: Section 15.1;
o Force Majeure: Subsection 4.4(b);
o Guarantor: Section 5.5;
o Hazardous Substances: Section 12.1;
o Improvements: Subsection 1.1(c);
o Indemnified Parties: Section 13.1;
o Indemnitor: Subsection 10.1(c);
o Independent Director: Subsection 4.3(c);
o Insurance Premiums: Subsection 3.3(b);
o Investor: Section 18.1;
o Land: Subsection 1.1(a);
o Lease Guaranty: Subsection 3.7(a);
o Leases: Subsection 1.1(f);
o Lender: Preamble;
o Loan Application: Section 5.15;
o Losses: Section 13.1;
<PAGE>
o Net Proceeds: Subsection 4.4(b);
o Net Proceeds Deficiency: Subsection 4.4(b)(v);
o Note: Recitals;
o Obligations: Section 2.3;
o Other Charges: Subsection 3.4(a);
o Other Obligations: Section 2.2;
o Other Security Documents: Section 3.2;
o Participations: 18.1;
o Permitted Exceptions: Section 5.1;
o Person: Section 20.1;
o Personal Property: Subsection 1.1(e);
o Policies/Policy: Subsection 3.3(b), 3.3(b);
o Property: Section 1.1;
o Qualified Insurer: Subsection 3.3(b);
o Rating Agency: Subsection 3.3(b);
o Registrar: Section 18.2;
o Release: Section 12.1;
o Remediation: Section 12.1;
o Rents: Subsection 1.1(f);
o Restoration: Subsection 3.3(d);
o Securities: Section 18.1;
bd Securitization: Section 18.1;
o Security Instrument: Preamble;
o Servicer: Section 6.2;
o Taxes: Subsection 3.4(a); and
o Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security
Instrument") is made as of the 13th day of April, 1999, by PENNSYLVANIA REAL
ESTATE INVESTMENT TRUST, a Pennsylvania business trust, having its principal
place of business at The Bellevue, Suite 300, 200 South Broad Street,
Philadelphia, Pennsylvania 19102, as mortgagor ("Borrower"), to GMAC COMMERCIAL
MORTGAGE CORPORATION, a California corporation, having an address at 650 Dresher
Road, Horsham, Pennsylvania 19044-8015, as mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given
to Lender is indebted to Lender in the principal sum of $18,750,000 in lawful
money of the United States of America (the note together with all extensions,
renewals, modifications, consolidations, substitutions, replacements,
restatements and increases thereof shall collectively be referred to as the
"Note"), with interest from the date thereof at the rates set forth in the Note,
principal and interest to be payable in accordance with the terms and conditions
provided in the Note.
Borrower desires to secure the payment of the Debt (as
defined in Article 2) and the performance of all of its obligations under the
Note and the Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section . Property Mortgaged. Borrower does hereby
irrevocably (i) mortgage, grant, bargain, sell, pledge, assign, warrant,
transfer and convey to Lender and to its successors and assigns with power of
sale in accordance with the terms and conditions hereof, for the use and benefit
of Lender, and (ii) grant a security interest to Lender and to its successors
and assigns with power of sale, in accordance with the terms and conditions
hereof, for the use and benefit of Lender, in, the following property, rights,
interests and estates now owned, or hereafter acquired by Borrower
(collectively, the "Property"):
() Land. The real property described in Exhibit A attached
hereto and made a part hereof (the "Land");
() Additional Land. All additional lands, estates and
development rights hereafter acquired by Borrower for use in
connection with the Land and the development of the Land that may,
from time to time, by supplemental mortgage or otherwise be expressly
made subject to the lien of this Security Instrument;
() Improvements. The buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located on
the Land (the "Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights,
strips and gores of land, streets, ways, alleys, passages, sewer
rights, water, water courses, water rights and powers, air rights and
development rights, and all estates, rights, titles, interests,
privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way now or hereafter
belonging, relating or pertaining to the Land and the Improvements and
the reversion and reversions, remainder and remainders, and all land
lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the
estates, rights, titles, interests, dower and rights of dower, curtesy
and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Borrower of, in and to the
Land and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment,
fixtures (including, but not limited to all heating, air conditioning,
plumbing, lighting, communications and elevator fixtures) and other
property of every kind and nature whatsoever owned by Borrower, or in
which Borrower has or shall have an interest, now or hereafter located
upon the Land or the Improvements, or appurtenant thereto, and used in
connection with the present or future operation and occupancy of the
Land and the Improvements and all building equipment, materials and
supplies of any nature whatsoever owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located upon
the Land and the Improvements, or appurtenant thereto, or used in
connection with the present or future operation and occupancy of the
Land and the Improvements (collectively, the "Personal Property"), and
the right, title and interest of Borrower in and to any of the
Personal Property which may be subject to any security interests, as
defined in the Uniform Commercial Code, as adopted and enacted by the
state or states where any of the Property is located (the "Uniform
Commercial Code"), superior in lien to the lien of this Security
Instrument and all proceeds and products of the above;
() Leases and Rents. All leases and other agreements
affecting the use, enjoyment or occupancy of all or any part of the
Land or the Improvements heretofore or hereafter entered into whether
before or after the filing by or against Borrower of any petition for
relief under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code"), as the
same may be amended from time to time (the "Leases") and all right,
title and interest of Borrower, its successors and assigns therein and
thereunder, including, without limitation, all guarantees, letters of
credit and any other credit support given by any guarantor in
connection therewith, cash or securities deposited under the Leases to
secure the performance by the lessees of their obligations thereunder
and all rents, additional rents, revenues, issues and profits
(including all oil and gas or other mineral royalties and bonuses)
from the Land and the Improvements whether paid or accruing before or
after the filing by or against Borrower of any petition for relief
under the Bankruptcy Code (the "Rents") and all
<PAGE>
proceeds from the sale or other disposition of the Leases and the
right to receive and apply the Rents to the payment of the Debt;
() Condemnation Awards. All awards or payments, including
interest thereon, which may heretofore and hereafter be made with
respect to the Property, whether from the exercise of the right of
eminent domain (including, but not limited to any transfer made in
lieu of or in anticipation of the exercise of the right), or for a
change of grade, or for any other injury to or decrease in the value
of the Property;
() Insurance Proceeds. All proceeds of and any unearned
premiums on any insurance policies covering the Property, including,
without limitation, the right to receive and apply the proceeds of any
insurance judgments, or settlements made in lieu thereof, for damage
to the Property;
() Tax Certiorari. All refunds, rebates or credits in
connection with a reduction in real estate taxes and assessments
charged against the Property as a result of tax certiorari or any
applications or proceedings for reduction;
() Rights. The right, in the name and on behalf of Borrower,
to commence any action or proceeding to protect the interest of Lender
in the Property and while an Event of Default (defined in Section
10.1) remains uncured, to appear in and defend any action or
proceeding brought with respect to the Property;
() Agreements. All agreements, contracts, certificates,
instruments, franchises, permits, licenses, plans, specifications and
other documents, now or hereafter entered into, and all rights therein
and thereto, respecting or pertaining to the use, occupation,
construction, management or operation of the Land and any part thereof
and any Improvements or respecting any business or activity conducted
on the Land and any part thereof and all right, title and interest of
Borrower therein and thereunder, including, without limitation, the
right, while an Event of Default remains uncured, to receive and
collect any sums payable to Borrower thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims,
deposits, trade names, trademarks, servicemarks, logos, copyrights,
goodwill, books and records and all other general intangibles specific
to or used in connection with the operation of the Property, if any;
and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation,
proceeds of insurance and condemnation awards, into cash or
liquidation claims;
() Other Rights. Any and all other rights of Borrower in and
to the items set forth in Subsections (a) through (m) above.
<PAGE>
Section . Assignment of Leases and Rents. Borrower hereby
absolutely and unconditionally assigns to Lender Borrower's right, title and
interest in and to all current and future Leases and Rents; it being intended by
Borrower that this assignment constitutes a present, absolute assignment and not
an assignment for additional security only. Nevertheless, subject to the terms
of this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable
license to collect and receive the Rents. Borrower shall hold the Rents, or a
portion thereof, sufficient to discharge all current sums due on the Debt, for
use in the payment of such sums.
Section . Security Agreement. This Security Instrument is
both a real property mortgage and a "security agreement" within the meaning of
the Uniform Commercial Code. The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. By executing and delivering this Security
Instrument, Borrower hereby grants to Lender, as security for the Obligations
(defined in Section 2.3), a security interest in the Property to the full extent
that the Property may be subject to the Uniform Commercial Code (said portion of
the Property so subject to the Uniform Commercial Code, the "Collateral").
Section . Pledge of Monies Held. Borrower hereby pledges to
Lender, and grants to Lender a security interest in, any and all monies now or
hereafter held by Lender, including, without limitation, any sums deposited in
the Escrow Fund (defined in Section 3.5) and the Net Proceeds (defined in
Section 4.4), as additional security for the Obligations until expended or
applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
unto the Lender and its successors and assigns, with power of sale in accordance
with the terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Borrower shall well and truly pay to Lender the Debt at the
time and in the manner provided in the Note and this Security Instrument, shall
well and truly perform the Other Obligations as set forth in this Security
Instrument and shall well and truly abide by and comply with each and every
covenant and condition set forth herein and in the Note, these presents and the
estate hereby granted shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section . Debt. This Security Instrument and the grants,
assignments and transfers made in Article 1 are given for the purpose of
securing the following, in such order
<PAGE>
of priority as Lender may determine in its sole discretion (the "Debt"):
() the payment of the indebtedness evidenced by the Note in
lawful money of the United States of America;
() the payment of interest, default interest, late charges
and other sums, as provided in the Note, this Security Instrument or
the Other Security Documents (defined in Section 3.2);
() the payment of any prepayment consideration, defeasance
payment, exit fee or similar fees provided in the Note;
() the payment of all other monies agreed or provided to be
paid by Borrower in the Note, this Security Instrument or the Other
Security Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the
security interest created hereby; and
() the payment of all sums advanced and costs and expenses
incurred by Lender in connection with the Debt or any part thereof,
any renewal, extension, modification, consolidation, change,
substitution, replacement, restatement or increase of the Debt or any
part thereof, or the acquisition or perfection of the security
therefor, whether made or incurred at the request of Borrower or
Lender.
Section . Other Obligations. This Security Instrument and the
grants, assignments and transfers made in Article 1 are also given for the
purpose of securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower
contained herein;
() the performance of each obligation of Borrower contained
in the Note in addition to the payment of the Debt and of Borrower and
of any Guarantor (defined in Section 5.5) contained in the Other
Security Documents; and
() the performance of each obligation of Borrower and any
Guarantor contained in any renewal, extension, modification,
consolidation, change, substitution, replacement for, restatement or
increase of all or any part of the Note, this Security Instrument or
the Other Security Documents.
Section . Debt and Other Obligations. Borrower's obligations
for the payment of the Debt and the performance of the Other Obligations shall
be referred to collectively below as the "Obligations."
<PAGE>
Section . Payments. Unless payments are made in the required
amount in immediately available funds at the place where the Note is payable,
remittances in payment of all or any part of the Debt shall not, regardless of
any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Lender in funds immediately available at the
place where the Note is payable (or any other place as Lender, in Lender's sole
discretion, may have established by delivery of written notice thereof to
Borrower) and shall be made and accepted subject to the condition that any check
or draft may be handled for collection in accordance with the practice of the
collecting bank or banks. Acceptance by Lender of any payment in an amount less
than the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section . Payment of Debt. Borrower will pay the Debt at the
time and in the manner provided in the Note and in this Security Instrument.
Section . Incorporation by Reference. All the covenants,
conditions and agreements contained in (a) the Note and (b) all and any of the
documents other than the Note or this Security Instrument now or hereafter
executed by Borrower and/or others and by or in favor of Lender, which wholly or
partially secure or guaranty payment of the Note or the other Obligations (the
"Other Security Documents"), are hereby made a part of this Security Instrument
to the same extent and with the same force as if fully set forth herein.
Section . Insurance.
() Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and the Property providing at least the
following coverages:
() Property Insurance. Insurance with respect to the
Improvements and building equipment insuring against any peril included within
the classification "All Risks of Physical Loss" in amounts at all times
sufficient to prevent Lender from becoming a co-insurer within the terms of the
applicable policies and under applicable law, but in any event such insurance
shall be maintained in an amount equal to the full insurable value of the
Improvements and building equipment, the term "full insurable value" to mean the
actual replacement cost of the Improvements and building equipment (without
taking into account any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) determined annually by an insurer, a
recognized independent insurance broker or an independent appraiser selected and
paid by Borrower and in no event less than the coverage required pursuant to the
terms of any Lease. Absent such
<PAGE>
annual adjustment, each policy shall contain inflation guard coverage insuring
that the policy limit will be increased over time to reflect the effect of
inflation. Borrower shall also maintain insurance against loss or damage to such
furniture, furnishings, fixtures, equipment and other items (whether personalty
or fixtures) included in the Property and owned by Borrower from time to time,
to the extent applicable, in the amount of the cost of replacing the same, in
each case, with inflation guard coverage to reflect the effect of inflation, or
annual valuation. Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the operation of
any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Lender's approval. The maximum deductible shall be $10,000.00;
() Liability Insurance. Comprehensive general liability
insurance, including personal injury, bodily injury, death and property damage
liability, insurance against any and all claims, including all legal liability
to the extent insurable and imposed upon Lender and all court costs and
attorneys' fees and expenses, arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of the Property in such
amounts as are generally available at commercially reasonable premiums and are
generally required by institutional lenders for properties comparable to the
Property but in no event for a combined single limit of less than $5,000,000.
During any construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers'
compensation insurance with respect to any work on or about the Property
covering all persons subject to the workers' compensation laws of the state in
which the Property is located;
() Business Interruption. Business interruption and/or
loss of "rental income" insurance in an amount sufficient to avoid any
co-insurance penalty and to provide proceeds which will cover a period of not
less than one (1) year from the date of casualty or loss with a six month
extended period of indemnity, the term "rental income" to mean the sum of (A)
the total then ascertainable Rents payable under the Leases and (B) the total
ascertainable amount of all other amounts to be received by Borrower from third
parties which are the legal obligation of the tenants, reduced to the extent
such amounts would not be received because of operating expenses not incurred
during a period of non-occupancy of that portion of the Property then not being
occupied. The amount of coverage shall be adjusted annually to reflect the rents
payable during the succeeding twelve (12) month period.
() Boiler and Machinery Insurance. Broad form boiler
and machinery
<PAGE>
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000 or such other amount reasonably determined
by Lender. If one or more large HVAC units is in operation at the Property,
"System Breakdowns" coverage shall be required, as determined by Lender. Minimum
liability coverage per accident must equal the value of such unit(s);
() Flood Insurance. If required by Subsection 5.6(a)
hereof, flood insurance in an amount at least equal to the lesser of (A) the
minimum amount required, under the terms of coverage, to compensate for any
damage or loss on a replacement basis (or the unpaid balance of the indebtedness
secured hereby if replacement cost coverage is not available for the type of
building insured); or (B) the maximum insurance available under the appropriate
National Flood Insurance Administration program. The deductible may not exceed
$25,000.
() During the period of any construction, renovation or
alteration of the Improvements, the cost of which exceeds the lesser of 10% of
the principal amount of the Note or $500,000, at Lender's request, a completed
value, "All Risk" Builder's Risk form, or "Course of Construction" insurance
policy in non-reporting form for any Improvements under construction, renovation
or alteration in an amount approved by Lender may be required. During the period
of any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect
to the Property or on any replacements or substitutions thereof or additions
thereto as may from time to time be required by Lender against other insurable
hazards or casualties which at the time are commonly insured against in the case
of property similarly situated, including, without limitation, sinkhole, mine
subsidence, earthquake and environmental insurance, due regard being given to
the height and type of buildings, their construction, location, use and
occupancy.
() All insurance provided for in Subsection 3.3(a)
hereof shall be obtained under valid and enforceable policies (the "Policies" or
in the singular, the "Policy"), and shall be issued by one or more domestic
primary insurer(s) having (i) an investment grade rating of "A" or better ("AA"
or better for Loans of $25 million or more), or a comparable claims paying
ability assigned by S & P of equivalent one or more credit rating agencies
approved by Lender (a "Rating Agency"), (each such insurer shall be referred to
below as a "Qualified Insurer"). All insurers providing insurance required by
this Security Instrument shall be authorized to issue insurance in the state in
which the Property is located. The Policy referred to in Subsection 3.3(a)(ii)
above shall name Lender as an additional named
<PAGE>
insured and the Policy referred to in Subsection 3.3(a)(i), (iv), (v) and (vi)
above shall provide that all proceeds be payable to Lender as set forth in
Section 4.4 hereof. The Policies referred to in Subsections 3.3(a)(i), (v) and
(vi) shall also contain: (i) a standard "non-contributory mortgagee" endorsement
or its equivalent relating, inter alia, to recovery by Lender notwithstanding
the negligent or willful acts or omission of Lender. All Policies described in
Subsection 3.3(a) above shall contain (i) a provision that such Policies shall
not be canceled or terminated, nor shall they expire, without at least thirty
(30) days' prior written notice to Lender in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any mortgage, loss payees, additional insureds and named insureds
(other than Borrower). In the event that the Property or the Improvements
constitutes a legal non-conforming use under applicable building, zoning or land
use laws or ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with
a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. Certificates of insurance with respect to all renewal
and replacement Policies shall be delivered to Lender not less than thirty (30)
days prior to the expiration date of any of the Policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums (the "Insurance Premiums"). Originals or certificates of
such replacement Policies shall be delivered to Lender promptly after Borrower's
receipt thereof but in any case within thirty (30) days after the effective date
thereof. If Borrower fails to maintain and deliver to Lender copies of the
Policies or certificates of insurance required by this Security Instrument, upon
ten (10) days' prior notice to Borrower, Lender may procure such insurance at
Borrower's sole cost and expense.
() Borrower shall comply with all insurance requirements and
shall not bring or keep or permit to be brought or kept any article upon any of
the Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or
in part, by fire or other casualty, Borrower shall give prompt notice of such
damage to Lender and provided that Borrower shall have received the Net
Proceeds, Borrower shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such fire or other
casualty, with such alterations as may be approved by Lender (the "Restoration")
and otherwise in accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may
be effected under a blanket policy or policies covering the Property and other
properties and assets not constituting a part of the security hereunder;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of
<PAGE>
such policy that is allocated to the Property, and any sublimit in such blanket
policy applicable to the Property, and shall in any case comply in all other
respects with the requirements of this Section 3.3.
() The insurance coverage required under Subsection
3.3(a)(ii) may be satisfied by a layering of Commercial General Liability,
Umbrella and Excess Liability Policies, but in no event will the Commercial
General Liability policy be written for an amount less than $1,000,000 per
occurrences and $2,000,000 aggregate for bodily injury and property damage
liability.
() The delivery to Lender of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance as relating to the Property by
Borrower to Lender as further security for the indebtedness secured hereby. In
the event of foreclosure of this Security Instrument, 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 Borrower 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 Lender or other
transferee in the event of such other transfer of title. Approval of any
insurance by Lender shall not be a representation of the solvency of any insurer
or the sufficiency of any amount of insurance.
() Lender 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 Lender has caused the insurance to be placed with the
insurer after failure of Borrower to furnish such insurance. Borrower shall not
obtain insurance for the Property in addition to that required by Lender without
the prior written consent of Lender, which consent will not be unreasonably
withheld provided that (i) Lender is named insured on such insurance, (ii)
Lender receives complete copies of all policies evidencing such insurance, and
(iii) such insurance complies with all of the applicable requirements set forth
herein.
Section . Payment of Taxes, Etc. () Subject to the terms and
conditions of Section 3.5 hereof, Borrower shall pay by their due date all
taxes, assessments, water rates, sewer rents, governmental impositions, and
other charges, including, without limitation, vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have
<PAGE>
been deposited with Lender in accordance with the terms of this Security
Instrument, Borrower shall furnish to Lender paid receipts for the payment of
the Taxes and Other Charges prior to the date the same shall become delinquent.
() After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Taxes, provided that (i) no Event
of Default has occurred and is continuing under the Note, this Security
Instrument or any of the Other Security Documents, (ii) Borrower is permitted to
do so under the provisions of any other mortgage, deed of trust or deed to
secure debt affecting the Property, (iii) such proceeding shall suspend the
collection of the Taxes from Borrower and from the Property or Borrower shall
have paid all of the Taxes under protest, (iv) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default
thereunder, (v) neither the Property nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, canceled or lost, (vi)
Borrower shall have set aside adequate reserves for the payment of the Taxes,
together with all interest and penalties thereon, unless Borrower has paid all
of the Taxes under protest, and (vii) Borrower shall have furnished the security
as may be required in the proceeding, or as may be reasonably requested by
Lender to insure the payment of any contested Taxes, together with all interest
and penalties thereon, taking into consideration the amount in the Escrow Fund
available for payment of Taxes.
Section . Escrow Fund. At the option of Lender, Lender may
require Borrower to establish an Escrow Fund (defined below) sufficient to
discharge its obligations for the payment of Insurance Premiums and Taxes
pursuant to Sections 3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance
Premiums shall be made by Borrower to Lender in amounts determined by Lender in
its discretion on the date hereof to be held by Lender in escrow. Additionally,
Borrower shall pay to Lender on the tenth (10th) day of each calendar month (a)
one-twelfth of an amount which would be sufficient to pay the Taxes payable, or
estimated by Lender to be payable, upon the due dates established by the
appropriate taxing authority during the next ensuing twelve (12) months and (b)
one-twelfth of an amount which would be sufficient to pay the Insurance Premiums
due for the renewal of the coverage afforded by the Policies upon the expiration
thereof (the initial deposits together with the amounts in (a) and (b) above
shall be called the "Escrow Fund"). Borrower agrees to notify Lender immediately
of any changes to the amounts, schedules and instructions for payment of any
Taxes and Insurance Premiums of which it has obtained knowledge and authorizes
Lender or its agent to obtain the bills for Taxes and Other Charges directly
from the appropriate tax authority. Monthly payments to the Escrow Fund as
required hereunder and the monthly payments of interest or principal or both,
payable pursuant to the Note, shall be added together and shall be paid as an
aggregate sum by Borrower to Lender. Provided there are sufficient amounts in
the Escrow Fund and no Event of Default exists, Lender shall be obligated to pay
the Taxes and Insurance Premiums as they become due on their
<PAGE>
respective due dates on behalf of Borrower by applying the Escrow Fund to the
payments of such Taxes and Insurance Premiums required to be made by Borrower
pursuant to Sections 3.3 and 3.4 hereof. If the amount of the Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Sections 3.3
and 3.4 hereof, Lender shall, in its discretion, return any excess to Borrower
or credit such excess against future payments to be made to the Escrow Fund. In
allocating such excess, Lender may deal with the person shown on the records of
Lender to be the owner of the Property. If the Escrow Fund is not sufficient to
pay the items set forth in (a) and (b) above, Borrower shall promptly pay to
Lender, upon demand, an amount which Lender shall reasonably estimate as
sufficient to make up the deficiency. The Escrow Fund shall not constitute a
trust fund and may be commingled with other monies held by Lender.
Section . Condemnation. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding and shall deliver to Lender copies of any and all papers
served in connection with such proceedings. Lender may participate in any such
proceedings to the extent permitted by law. Upon an Event of Default, Borrower
shall deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Borrower shall not make any agreement in lieu of condemnation of the Property or
any portion thereof without the prior written consent of Lender in each
instance, which consent shall not be unreasonably withheld or delayed in the
case of a taking of an insubstantial portion of the Property. Notwithstanding
any taking by any public or quasi-public authority through eminent domain or
otherwise (including, but not limited to any transfer made in lieu of or in
anticipation of the exercise of such taking), Borrower shall continue to pay the
Debt at the time and in the manner provided for its payment in the Note and in
this Security Instrument and the Debt shall not be reduced until any award or
payment therefor shall have been actually received and applied by Lender, after
the deduction of expenses of collection, to the reduction or discharge of the
Debt. Lender shall not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the award interest
at the rate or rates provided herein or in the Note. If the Property or any
portion thereof is taken by the power of eminent domain, Borrower shall promptly
commence and diligently prosecute the Restoration of the Property and otherwise
comply with the provisions of in accordance with Section 4.4 of this Security
Instrument. If the Property is sold, through foreclosure or otherwise, prior to
the receipt by Lender of the award or payment, Lender shall have the right,
whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive the award or payment, or a portion thereof
sufficient to pay the Debt.
Section . Leases and Rents. () Except as otherwise consented
to by Lender, all Leases shall be written on a standard form of lease which
shall have been approved by Lender. Upon request, Borrower shall furnish Lender
with executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior
<PAGE>
written consent of Lender, which consent shall not be unreasonably withheld or
delayed. All proposed leases shall be subject to the prior approval of Lender
except that all proposed leases which (i) are on the same form of lease which
has been approved by Lender, (ii) are the result of an arms-length transaction,
(iii) which provide for rental rates comparable to existing market rates, (iv)
where space to be leased does not exceed more than ten percent (10%) of total
rentable space of the Property, (v) where the proposed tenant is an independent
third party not affiliated with the Borrower, and (vi) do not contain any terms
which would materially affect Lender's rights under this Security Instrument,
the Note or the Other Security Documents, shall not be subject to the prior
approval of Lender. Notwithstanding subsections (ii), (iii) and (v) above,
Borrower may lease units to employees of Borrower, but the aggregate number of
units leased to such employees shall not exceed 1.5% of the total number of
units at the Property. Borrower (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases if the failure to perform
or observe the same would materially and adversely affect the value of the
Property taken as a whole and shall not do or permit to be done anything to
impair the value of the Leases as security for the Debt; (ii) shall promptly
send copies to Lender of all notices of default which Borrower shall send or
receive thereunder; (iii) shall enforce in a commercially reasonable manner all
of the terms, covenants and conditions contained in the Leases upon the part of
the lessee thereunder to be observed or performed; provided, however, with
respect to multifamily residential property, a residential Lease may be
terminated in the event of a default by the tenant thereunder; (iv) shall not
collect any of the Rents more than one (1) month in advance (provided that a
security deposit shall not be deemed rent collected in advance); (v) shall not
execute any other assignment of the lessor's interest in the Leases or the
Rents; (vi) shall not (A) materially alter, modify or change the terms of the
Leases without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed if the alteration, modification or change does
not materially and adversely affect the value of the Property taken as a whole
and provided further that such Lease, as altered, modified or changed, is
otherwise in compliance with the requirements of this Security Instrument, or
(B) cancel or terminate any Lease (except for defaults thereunder) of more than
ten (10%) percent of the rentable space of the Property or accept a surrender
thereof or convey or transfer or suffer or permit a conveyance or transfer of
the Land or of any interest therein so as to effect a merger of the estates and
rights of, or a termination or diminution of the obligations of, lessees
thereunder; (vii) shall not alter, modify or change the terms of any guaranty,
letter of credit or other credit support with respect to the Leases (the "Lease
Guaranty") or cancel or terminate such Lease Guaranty without the prior written
consent of Lender; and (viii) shall not consent to any assignment of or
subletting under the Leases not in accordance with their terms, without the
prior written consent of Lender. Notwithstanding the foregoing, subdivisions
(ii), (vi), (vii) and (viii) shall not apply to residential Leases for space in
a multifamily residential property.
Section . Maintenance of Property. Borrower shall cause the
Property to be maintained in a good and safe condition and repair. The
Improvements and the Personal Property shall not be removed, demolished or
altered if the costs of same would exceed
<PAGE>
$500,000 (except for normal replacement of the Personal Property) without the
consent of Lender. Subject to Section 4.4(c) hereof, Borrower shall promptly
repair, replace or rebuild any part of the Property which may be destroyed by
any casualty, or become damaged, worn or dilapidated or which may be affected by
any proceeding of the character referred to in Section 3.6 hereof and shall
complete and pay for any structure at any time in the process of construction or
repair on the Land. Borrower shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Property or any part thereof. If under applicable zoning provisions the
use of all or any portion of the Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use or Improvement to
be discontinued or abandoned without the express written consent of Lender.
Section . Waste. Borrower shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section . Compliance With Laws. () Borrower shall promptly
comply with all existing and future federal, state and local laws, orders,
ordinances, governmental rules and regulations or court orders affecting the
Property, or the use thereof including, but not limited to, the Americans with
Disabilities Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request,
provide Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any
document regarding Lender's approval of alterations of the Property, Borrower
shall not alter the Property in any manner which would materially increase
Borrower's responsibilities for compliance with Applicable Laws without the
prior written approval of Lender. Lender's approval of the plans,
specifications, or working drawings for alterations of the Property shall create
no responsibility or liability on behalf of Lender for their completeness,
design, sufficiency or their compliance with Applicable Laws. The foregoing
shall apply to tenant improvements constructed by Borrower or by any of its
tenants. Lender may condition any such approval upon receipt of a certificate of
compliance with Applicable Laws from an independent architect, engineer, or
other person acceptable to Lender.
() Borrower shall give prompt notice to Lender of the receipt
by
<PAGE>
Borrower of any notice related to a violation of any Applicable Laws and of
the commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the Applicable Laws affecting
the Property, provided that (i) no Event of Default has occurred and is
continuing under the Note, this Security Instrument or any of the Other Security
Documents; (ii) Borrower is permitted to do so under the provisions of any other
mortgage, deed of trust or deed to secure debt affecting the Property; (iii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder; (iv) neither the Property nor any part thereof
or interest therein nor any of the tenants or occupants thereof shall be
affected in any material adverse way as a result of such proceeding; and (v)
Borrower shall have furnished to Lender all other items reasonably requested by
Lender.
Section . Books and Records. () Borrower and any Guarantors
and Indemnitors shall keep adequate books and records of account in accordance
with the methods utilized by them as of the date hereof, consistently applied
and furnish to Lender:
() quarterly certified rent rolls signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing the total
revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of Borrower,
any Guarantors and any Indemnitors, in the form required by Lender, prepared and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly basis
consistent with the quarterly certified rent rolls described above within ninety
(90) days after the close of each fiscal year;
<PAGE>
() an annual operating budget presented on a monthly basis consistent
with the annual operating statement described above for the Property and all
proposed capital replacements and improvements at least thirty (30) days prior
to the start of each calendar year; and
() such other financial statements, including monthly operating
statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its
affiliates shall furnish to Lender:
() a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and deposits received from tenants and any other information requested
by Lender, in reasonable detail and certified by Borrower under penalty of
perjury to be true and complete, but no more frequently than quarterly; and
() an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and
Indemnitor shall furnish Lender with such other additional financial or
management information as may, from time to time, be reasonably required by
Lender in form and substance satisfactory to Lender.
Section . Payment For Labor and Materials. Borrower will
promptly pay when due all bills and costs for labor, materials, and specifically
fabricated materials incurred in connection with the Property and never permit
to exist beyond the due date thereof in respect of the Property or any part
thereof any lien or security interest, even though inferior to the liens and the
security interests hereof, and in any event never permit to be created or exist
in respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section . Performance of Other Agreements. Borrower shall
observe and perform each and every term to be observed or performed by Borrower
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Property.
Section . Change of Name, Identity or Structure. Borrower
will not change Borrower's name, identity (including its trade name or names)
or, if not an individual, Borrower's corporate, partnership or other structure
without notifying the Lender of such
<PAGE>
change in writing at least thirty (30) days prior to the effective date of such
change and, in the case of a change in Borrower's structure, without first
obtaining the prior written consent of the Lender.
Section . Existence. Borrower will continuously maintain (a)
its existence and shall not dissolve or permit its dissolution, (b) its rights
to do business in the state where the Property is located and (c) its franchises
and trade names.
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section . Property Use. The Property shall be used only for
multifamily apartments, and for no other use without the prior written consent
of Lender, which consent may be withheld in Lender's discretion.
Section . ERISA. () It shall not engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Lender of any of its rights under the Note, this Security
Instrument and the Other Security Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender
such certifications or other evidence from time to time throughout the term of
this Security Instrument, as requested by Lender in its sole discretion, that
(i) Borrower is not an "employee benefit plan" as defined in Section 3(32) of
ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity
interests in Borrower are held by "benefit plan investors"
within the meaning of 29 C.F.R. ss. 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. ss.
2510.3-101(c) or (e) or an investment company registered under
The Investment Company Act of 1940.
<PAGE>
Section . Intentionally Deleted.
Section . Restoration After Casualty/Condemnation. In the
event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed
$500,000 ("Casualty Amount"); (ii) the costs of completing the Restoration as
reasonably estimated by Borrower shall be less than or equal to the Casualty
Amount; (iii) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security Documents; (iv)
the Property and the use thereof after the Restoration will be in compliance
with, and permitted under, all applicable zoning laws, ordinances, rules and
regulations (including, without limitation, all applicable Environmental Laws
(defined in Section 12.1); and (v) such fire or other casualty or taking, as
applicable, does not materially impair access to the Property or the
Improvements, then the Net Proceeds will be disbursed directly to Borrower and
Borrower shall commence and diligently prosecute to completion, subject to Force
Majeure (defined herein), the Restoration of the Property to as nearly as
possible the condition it was in immediately prior to such fire or other
casualty or to such taking. Except upon the occurrence and continuance of an
Event of Default, Borrower shall settle any insurance claims with respect to the
Net Proceeds which in the aggregate are less than or equal to the Casualty
Amount. Lender shall have the right to participate in and reasonably approve any
settlement for insurance claims with respect to the Net Proceeds which in the
aggregate are equal to or greater than the Casualty Amount. If an Event of
Default shall have occurred and be continuing, Borrower hereby irrevocably
empowers Lender, in the name of Borrower as its true and lawful
attorney-in-fact, to file and prosecute such claim and to collect and to make
receipt for any such payment. If the Net Proceeds are received by Borrower, such
Net Proceeds shall, until the completion of the related work, be held in trust
for Lender and shall be segregated from other funds of Borrower to be used to
pay for the cost of the Restoration in accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount,
such Net Proceeds shall, subject to the provisions of the Leases that are
superior to the lien of this Security Instrument or with respect to which
subordination, non-disturbance agreements binding upon Lender have entered into
concerning the deposits of Net Proceeds, be forthwith paid to Lender to be held
by Lender in a segregated account to be made available to Borrower for the
Restoration in accordance with the provisions of this Subsection 4.4(b). Subject
to Section 4.4(c) hereof, Borrower shall commence and diligently prosecute to
completion, subject to Force Majeure (defined below), the Restoration (in the
case of a taking, to the extent the Property is capable of being restored). The
term "Net Proceeds" for purposes of this Section 4.4 shall mean: (i) the net
amount of all insurance proceeds received by Lender under the Policies carried
pursuant to Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security
Instrument as a result of such damage or destruction, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any,
<PAGE>
in collecting the same, or (ii) the net amount of all awards and payments
received by Lender with respect to a taking referenced in Section 3.6 of this
Security Instrument, after deduction of its reasonable costs and expenses
(including, but not limited to reasonable counsel fees), if any, in collecting
the same, whichever the case may be. The term "Force Majeure" for the purpose of
this Section 4.4 shall have the following meaning: Borrower shall be excused for
the period of any delay in the performance of any obligations hereunder when
prevented from so doing by cause or causes beyond Borrower's control such as,
without limitation, all labor disputes, civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, and acts of God.
() If the Net Proceeds are greater than the Casualty Amount,
the Net Proceeds shall be made available to Borrower for payment of, or
reimbursement of Borrower's expenses in connection with, the Restoration,
subject to the following conditions:
(A) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security
Documents;
(B) Lender shall, within a reasonable period of time prior to
request for initial disbursement, be furnished with an estimate
of the cost of the Restoration accompanied by an independent
architect's certification as to such costs and appropriate plans
and specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by Borrower with Lender, are sufficient to cover the
cost of the Restoration as such costs are certified by the
independent architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds,
less than fifty percent (50%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered unusable
as a result of such fire or other casualty; or (2) in the event
that the Net Proceeds are condemnation awards, less than fifty
percent (50%) of the Land constituting the Property is taken,
such Land that is taken is located along the perimeter or
periphery of the Property and no portion of the Improvements is
located in such Lands;
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note
which will be incurred with respect to the Property as a result
of the occurrence of any such fire or other casualty or taking,
whichever the case may be, will be covered out of (1) the Net
Proceeds, or (2) other funds of Borrower;
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash
flow of the Property will be restored to a
<PAGE>
level sufficient to cover all carrying costs and operating
expenses of the Property, including, without limitation, debt
service on the Note at a coverage ratio (on a "normalized"
basis, i.e., after deducting replacement reserve requirements
and reserves for tenant improvements and leasing commissions
from net operating income, whether or not such sums are escrowed
with Lender) of at least 1.30 : 1.0 (assuming an interest rate
equal to 9.0% per annum), or, if lower, the coverage ratio which
existed as of the date immediately preceding such casualty or
taking as the case may be;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity
Date (as defined in the Note), (2) the earliest date required
for such completion under the terms of any Lease and (3) such
time as may be required under applicable zoning law, ordinance,
rule or regulation in order to repair and restore the Property
to as nearly as possible the condition it was in immediately
prior to such fire or other casualty or to such taking, as
applicable;
(H) the Property and the use thereof after the Restoration will be
in compliance with, and permitted under, all applicable zoning
laws, ordinances, rules and regulations (including, without
limitation, all applicable Environmental Laws (defined in
Section 12.1)); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net Proceeds
shall be held by Lender and, until disbursed in accordance with the provisions
of this Subsection 4.4(b), shall constitute additional security for the
Obligations. The Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
() If the Net Proceeds exceed the Casualty Amount, Lender shall have
the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. If the Net Proceeds
exceed the Casualty Amount, the identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as
<PAGE>
well as the contracts under which they have been engaged, shall be subject to
prior review and acceptance by Lender and an independent consulting engineer
selected by Lender (the "Casualty Consultant"), such acceptance not to be
unreasonably withheld or delayed. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration including,
without limitation, reasonable counsel fees and disbursements and the Casualty
Consultant's fees, shall be paid by Borrower.
In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There shall be
no Casualty Retainage with respect to costs actually incurred by Borrower for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
() If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the
<PAGE>
Restoration, Borrower shall deposit the deficiency (the "Net Proceeds
Deficiency") with Lender before any further disbursement of the Net Proceeds
shall be made. The Net Proceeds Deficiency deposited with Lender shall be held
by Lender and shall be disbursed for costs actually incurred in connection with
the Restoration on the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this Subsection 4.4(b) shall
constitute additional security for the Obligations.
() The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for
the Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward
the payment of the Debt whether or not then due and payable in such order,
priority and proportions as Lender in its discretion shall deem proper or, at
the discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section . Warranty of Title. Borrower has good and marketable
title to the Property and has the right to mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
Section . Authority. Borrower (and the undersigned
representative of Borrower, if any) has full power, authority and legal right to
execute this Security
<PAGE>
Instrument, and to mortgage, grant, bargain, sell, pledge, assign, warrant,
transfer and convey the Property pursuant to the terms hereof and to keep and
observe all of the terms of this Security Instrument on Borrower's part to be
performed.
Section . Legal Status and Authority. Borrower (a) is duly
organized, validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section . Validity of Documents. (a) The execution, delivery
and performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section . Litigation. There is no action, suit or proceeding,
judicial, administrative or otherwise (including any condemnation or similar
proceeding), pending or, to the best of Borrower's knowledge, threatened or
contemplated against Borrower, any person guaranteeing the payment of the Debt
or any portion thereof or performance by Borrower of any terms of this Security
Instrument (a "Guarantor"), if any, an Indemnitor (defined in Subsection
10.1(c)), if any, or against or affecting the Property that (a) has not been
disclosed to Lender, and has a material, adverse effect on the Property or
Borrower's, any Guarantor's or any Indemnitor's ability to perform its
obligations under the Note, this Security Instrument or the Other Security
Documents, or (b) is not adequately covered by
<PAGE>
insurance, each as determined by Lender in its sole and absolute discretion.
Section . Status of Property. () No portion of the
Improvements is located in an area identified by the Secretary of Housing and
Urban Development or any successor thereto as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, or the National Flood Insurance Reform Act of
1994, as each may be amended, or any successor law, or, if any portion of the
Improvements is now or at any time in the future located within any such area,
Borrower has obtained and will maintain the insurance prescribed in Section 3.3
hereof.
() Borrower has obtained all necessary certificates, licenses
and other approvals, governmental and otherwise, necessary for the operation of
the Property and the conduct of its business and all required zoning, building
code, land use, environmental and other similar permits or approvals, all of
which are in full force and effect as of the date hereof and, to the best of
Borrower's knowledge, not subject to revocation, suspension, forfeiture or
modification.
() To the best of Borrower's knowledge, and except as
expressly set forth in that certain Property Condition Survey of Cobblestone
Apartments, dated April 1, 1999, by Environmental Management Group, and that
certain Phase I Environmental Site Assessment of the Property dated April 1,
1999, prepared by Environmental Management Group, the Property and the present
and contemplated use and occupancy thereof are in full compliance with all
Applicable Laws, including, without limitation, zoning ordinances, building
codes, land use and Environmental Laws, laws relating to the disabled (including
but not limited to, the ADA) and other similar laws.
() The Property is served by all utilities required for the
current or contemplated use thereof. All utility service is provided by public
utilities and the Property has accepted or is equipped to accept such utility
service.
() To the best of Borrower's knowledge, all public roads and
streets necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other
casualty.
() All costs and expenses of any and all labor, materials,
supplies and equipment used in the construction of the Improvements have been
paid in full.
() Borrower has paid in full for, and is the owner of, all
furnishings,
<PAGE>
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby.
() To the best of Borrower's knowledge, all liquid and solid
waste disposal, septic and sewer systems located on the Property are in a good
and safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on
the certified rent roll delivered to Lender have been collected by Borrower
except as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the
Property.
Section . No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of
1986, as amended and the related Treasury Department regulations, including
temporary regulations.
Section . Separate Tax Lot. The Property is assessed for real
estate tax purposes as one or more wholly independent tax lot or lots, separate
from any adjoining land or improvements not constituting a part of such lot or
lots, and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section . ERISA Compliance. () As of the date hereof and
throughout the term of this Security Instrument, (i) Borrower is not and will
not be an "employee benefit plan" as defined in Section 3(32) of ERISA, which is
subject to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this
Security Instrument, (i) Borrower is not and will not be a "governmental plan"
within the meaning of Section 3(32) of ERISA, and (ii) transactions by or with
Borrower are not and will not be subject to state statutes applicable to
Borrower regulating investments of and fiduciary obligations with respect to
governmental plans.
Section . Leases. Except as disclosed in the certified rent
roll for the Property delivered to and approved by Lender, or as otherwise set
forth on Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's
interest in the Leases; (b) the Leases are valid and enforceable; (c) the terms
of all alterations, modifications and amendments to the Leases are reflected in
the certified rent roll delivered to and approved by Lender; (d) none
<PAGE>
of the Rents reserved in the Leases have been assigned or otherwise pledged or
hypothecated (except to Lender); (e) none of the Rents have been collected for
more than one (1) month in advance (provided that a security deposit shall not
be deemed rent collected in advance); (f) the premises demised under the Leases
have been completed and the tenants under the Leases have accepted the same and
have taken possession of the same on a rent-paying basis; (g) to the best of
Borrower's knowledge, there exist no offsets or defenses to the payment of any
portion of the Rents; (h) Borrower has received no notice from any tenant
challenging the validity or enforceability of any Lease; (i) all payments due
under the Leases are current and are consistent with the certified rent roll for
the Property delivered to and approved by Lender; (j) to the best of Borrower's
knowledge, no tenant under any Lease is in default thereunder, or is a debtor in
any bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the tenants under the Leases other than
expressly set forth in each Lease; (l) the Leases are valid and enforceable
against Borrower and, to the best of Borrower's knowledge, the tenants set forth
therein; (m) no Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (n) to the best of Borrower's
knowledge, no person or entity has any possessory interest in, or right to
occupy, the Property except under and pursuant to a Lease; (o) each Lease (other
than a residential Lease) is subordinate to this Security Instrument, either
pursuant to its terms or a recorded subordination agreement; and (p) to the best
of Borrower's knowledge, no brokerage commissions or finders fees are due and
payable regarding any Lease.
Section . Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section . Business Purposes. The loan evidenced by the Note
is solely for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section . Taxes. Borrower, any Guarantor and any Indemnitor
have filed all federal, state, county, municipal, and city income and other tax
returns required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section . Mailing Address. Borrower's mailing address, as set
forth in the opening paragraph hereof or as changed in accordance with Article
16, is true and correct.
Section . No Change in Facts or Circumstances. All
information in the
<PAGE>
application for the loan submitted to Lender (the "Loan Application") and in all
financing statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application or in satisfaction of the
terms thereof, are accurate, complete and correct in all material respects.
There has been no adverse change in any condition, fact, circumstance or event
that would make any such information materially inaccurate, incomplete or
otherwise misleading.
Section . Disclosure. To the best of Borrower's knowledge,
Borrower has disclosed to Lender all material facts and has not failed to
disclose any material fact that could cause any representation or warranty made
herein to be materially misleading.
Section . Third Party Representations. To the best of
Borrower's knowledge, each of the representations and the warranties made by
each Guarantor and Indemnitor herein or in any Other Security Document(s) is
true and correct in all material respects.
Section . Illegal Activity. To the best of Borrower's
knowledge, no portion of the Property has been or will be purchased, improved,
fixtured, equipped or furnished with proceeds of any criminal or other illegal
activity and to the best of Borrower's knowledge, there are no illegal
activities or activities relating to controlled substance at the Property.
Section . FUNB Line of Credit. No more than five (5) Business
Days after the expiration or earlier termination of, or concurrently with the
giving of notice by PREIT Associates, L.P. to the public that an event of
default has occurred under, that certain Revolving Credit Loan Agreement between
PREIT Associates, L.P. and Corestates Bank, N.A., as agent
(predecessor-in-interest to First Union National Bank, as agent), and First
Trust Savings Bank, Fleet Bank, N.A. and PNC Bank, as lenders, dated September
30, 1997, Borrower shall notify Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section . Relationship of Borrower and Lender. The
relationship between Borrower and Lender is solely that of debtor and creditor,
and Lender has no fiduciary or other special relationship with Borrower, and no
term or condition of any of the Note, this Security Instrument and the Other
Security Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.
Section . Servicing of the Loan. At the option of Lender, the
loan secured hereby may be serviced by a servicer/trustee (the "Servicer")
selected by Lender and Lender may delegate all or any portion of its
responsibilities under the Note, this Security Instrument, and the Other
Security Documents to the Servicer.
<PAGE>
Article - FURTHER ASSURANCES
Section . Recording of Security Instrument, Etc. Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, will cause this Security Instrument and any of
the Other Security Documents creating a lien or security interest or evidencing
the lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property. Borrower will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, this Security Instrument, the Other
Security Documents, any note or mortgage supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and any modification or amendment of the foregoing documents, and all federal,
state, county and municipal taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this Security
Instrument, any mortgage supplemental hereto, any security instrument with
respect to the Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except where prohibited by
law so to do.
Section . Further Acts, Etc. Borrower will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers and assurances as Lender shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender, the property and rights hereby
mortgaged, granted, bargained, sold, conveyed, confirmed, pledged, assigned,
warranted and transferred or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or
for carrying out the intention or facilitating the performance of the terms of
this Security Instrument or for filing, registering or recording this Security
Instrument, or for complying with all Applicable Laws. Borrower, on demand, will
execute and deliver and hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements, chattel mortgages or other instruments,
to evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section . Changes in Tax, Debt Credit and Documentary Stamp
Laws. () If any law is enacted or adopted or amended after the date of this
Security Instrument which deducts the Debt from the value of the Property for
the purpose of taxation or which imposes a tax, either directly or indirectly,
on the Debt or Lender's interest in the Property, Borrower will pay the tax,
with interest and penalties thereon, if any. If Lender is advised
<PAGE>
by counsel chosen by it that the payment of tax by Borrower would be unlawful or
taxable to Lender or unenforceable or provide the basis for a defense of usury,
then Lender shall have the option by written notice of not less than ninety (90)
days to declare the Debt immediately due and payable.
() Borrower will not claim or demand or be entitled to any
credit or credits on account of the Debt for any part of the Taxes or Other
Charges assessed against the Property, or any part thereof, and no deduction
shall otherwise be made or claimed from the assessed value of the Property, or
any part thereof, for real estate tax purposes by reason of this Security
Instrument or the Debt. If such claim, credit or deduction shall be required by
law, Lender shall have the option, by written notice of not less than ninety
(90) days, to declare the Debt immediately due and payable.
() If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or other
stamps to be affixed to the Note, this Security Instrument, or any of the Other
Security Documents or impose any other tax or charge on the same, Borrower will
pay for the same, with interest and penalties thereon, if any.
Section . Estoppel Certificates. () After request by Lender,
Borrower, within twenty (20) days, shall furnish Lender or any proposed assignee
with a statement, duly acknowledged and certified, setting forth (i) the amount
of the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the rate of interest of the Note, (iv) the terms of payment
and maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by
Section 18.1 hereof, at Lender's request, Borrower, any Guarantors and any
Indemnitors shall provide an
<PAGE>
estoppel certificate to the Investor (defined in Section 18.1) or any
prospective Investor confirming the accuracy of information provided by such
person to Lender under or in respect of this Security Instrument.
() After written request by Borrower not more than twice
annually, Lender shall furnish Borrower a statement setting forth (i) the amount
of the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the rate of interest of the Note, (iv) the balance of the
sums in the Escrow Fund, if any, and (v) to the best of Lender's knowledge,
whether Borrower is currently in default.
Section . Flood Insurance. After Lender's request, Borrower
shall deliver evidence satisfactory to Lender that no portion of the
Improvements is situated in a federally designated "special flood hazard area"
or, if it is, that Borrower has obtained insurance meeting the requirements of
Section 3.3(a)(vi).
Section . Splitting of Security Instrument. This Security
Instrument and the Note shall, at any time until the same shall be fully paid
and satisfied, at the sole election of Lender, be split or divided into two or
more notes and two or more security instruments, each of which shall cover all
or a portion of the Property to be more particularly described therein. To that
end, Borrower, upon written request of Lender, shall execute, acknowledge and
deliver to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount secured by this Security Instrument, and containing terms,
provisions and clauses no less favorable to Borrower than those contained herein
and in the Note, and such other documents and instruments as may be required by
Lender to effect the splitting of the Note and this Security Instrument.
Section . Replacement Documents. Upon receipt of an affidavit
of an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any Other Security Document which is not of public record, and, in the
case of any such mutilation, upon surrender and cancellation of such Note or
Other Security Document, Borrower will issue, in lieu thereof, a replacement
Note or Other Security Document, dated the date of such lost, stolen, destroyed
or mutilated Note or Other Security Document in the same principal amount
thereof and otherwise of like tenor. Borrower shall not be responsible to Lender
for Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section . Amended Financing Statements. Borrower will execute
and deliver to the Lender, prior to or contemporaneously with the effective date
of any such change, any financing statement or financing statement change
required by the Lender to establish or maintain the validity, perfection and
priority of the security interest granted herein. At the request of the Lender,
Borrower shall execute a certificate in form satisfactory to the Lender listing
the trade names under which Borrower intends to operate the Property, and
<PAGE>
representing and warranting that Borrower does business under no other trade
name with respect to the Property.
Article - DUE ON SALE/ENCUMBRANCE
Section . No Sale/Encumbrance. Borrower agrees that Borrower
shall not, without the prior written consent of Lender, sell, convey, mortgage,
grant, bargain, encumber, pledge, assign, or otherwise transfer the Property or
any part thereof or permit the Property or any part thereof to be sold,
conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred. Notwithstanding the foregoing, the Property may be
transferred with the prior written consent of Lender which consent shall not be
unreasonably withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, provided that (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one quarter of one percent (.25%) of
the outstanding principal balance of the Note shall be paid by Borrower to
Lender upon notice being given to Borrower of approval of the proposed transfer
(unless the proposed transferee is an affiliate of Borrower, in which event no
transfer fee shall be due and payable), and (iv) no transfer shall be permitted
hereunder if an Event of Default, or an event which with the giving of notice or
lapse of time or both could become an Event of Default, has occurred and is
continuing. Borrower agrees that Borrower shall not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than the Debt and trade payables incurred in the ordinary course of business in
connection with the operation of the Property, provided same are paid when due.
Section . Sale/Encumbrance Defined. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 8 shall be deemed to include, but not be limited to
(a) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower or any general partner or
managing member (or if no managing member, any member) of Borrower is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation's stock; (d) if Borrower or any general
partner or
<PAGE>
managing member (or if no managing member, any member) of Borrower is a limited
or general partnership or joint venture, the change, removal or resignation of a
general partner or the transfer or pledge of the partnership interest of any
general partner or any profits or proceeds relating to such partnership interest
or the transfer or pledge of any partnership interest of any limited partner or
any profits or proceeds relating to any such partnership interest, which,
whether singly or in the aggregate, result in more than 49% of the beneficial
interests in Borrower, or the profits or proceeds relating thereto, having been
transferred or pledged; and (e) if Borrower or any general partner or member of
Borrower is a limited liability company, the change, removal or resignation of a
managing member or the transfer of the membership interest of a managing member
or any profits or proceeds relating to such membership interest or the transfer
or pledge of any membership interest of any other member or any profits or
proceeds relating to any such membership interest, which, whether singly or in
the aggregate, result in more than 49% of the beneficial interests in Borrower,
or the profits or proceeds relating thereto, having been transferred or pledged.
Notwithstanding the foregoing, the following transfers shall not be deemed to be
a sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer within the meaning of this Article 8: (a) transfer by devise or descent
or by operation of law upon the death of a member, general partner or
stockholder of Borrower, any Guarantor or Indemnitor or any member or general
partner thereof, (b) a sale, transfer or hypothecation of a membership,
partnership or shareholder interest in Borrower, whichever the case may be, by a
current member, general partner or shareholder, as applicable, to an immediate
family member (i.e., parents, spouses, siblings, children or grandchildren) of
such member, general partner or shareholder, or to a trust for the benefit of an
immediate family member of such member, general partner or shareholder, and (c)
a change in the form of organizational structure or name of Borrower, provided
that there is no transfer or change in the ownership interests in Borrower.
Section . Lender's Rights. Lender reserves the right to
condition the consent required hereunder upon a modification of the terms hereof
and on assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section . Right To Substitute Property. The terms and
conditions of this Article 8 shall be subject to Borrower's rights pursuant to
that certain letter dated the date
<PAGE>
hereof from Lender to Borrower regarding Borrower's rights to substitute
security for the Debt. Inquiries regarding the aforementioned letter shall be
made to Borrower at the address set forth in Article 16 below.
Article - PREPAYMENT
Section . Prepayment Only in Accordance with Note. The Debt
may be prepaid only in strict accordance with the express terms and conditions
of the Note including, without limitation, payment of the Prepayment
Consideration if applicable.
Article - DEFAULT
Section . Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for
purposes of this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the
provisions of Sections 3.7 or 8.1;
() if any representation or warranty of Borrower, Indemnitor
(as defined in that certain Environmental Indemnity Agreement dated as of the
date hereof (the "Environmental Indemnity") or any Guarantor, or any member,
general partner, principal or beneficial owner of any of the foregoing, made
herein or in the Environmental Indemnity or in any guaranty, or in any
certificate, report, financial statement or other instrument or document
furnished to Lender shall have been false or misleading in any material respect
when made;
() if any default occurs under any guaranty or indemnity
executed in connection herewith and such default continues after the expiration
of applicable grace periods, if any;
() except for the specific defaults set forth in this Section
10.1, any other default hereunder or any of the Other Security Documents by
Borrower, which default is not cured (i) in the case of any default which can be
cured by the payment of a sum of money, within five (5) days after written
notice from Lender to Borrower, or (ii) in the case of any other default, within
thirty (30) days after written notice from Lender to Borrower; provided that if
such default cannot reasonably be cured within such thirty (30) day period and
Borrower shall have commenced to cure such default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same,
such thirty (30) day period
<PAGE>
shall be extended for so long as it shall require Borrower in the exercise of
due diligence to cure such default, it being agreed that no such extension shall
be for a period in excess of one hundred twenty (120) days, unless, only in the
case of cures that require construction or remedial work, such cure cannot with
diligence be completed within such one hundred twenty (120) day period, in which
case such period shall be extended for an additional one hundred twenty (120)
days;
() if Borrower or any Guarantor or Indemnitor shall make an
assignment for the benefit of creditors or if Borrower shall generally not be
paying its debts as they become due; or
() if the Policies are not kept in full force and effect, or
Borrower has not delivered evidence of the renewal of the Policies ten (10) days
prior to their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any Guarantor or Indemnitor
shall make a general assignment for the benefit of its creditors'; or (ii) there
shall be commenced against Borrower or any Guarantor or Indemnitor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
ninety (90) days; or (iii) there shall be commenced against the Borrower or any
Guarantor or Indemnitor any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within ninety (90) days from the entry thereof; or (iv)
the Borrower or any Guarantor or Indemnitor shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
Article - RIGHTS AND REMEDIES
Section . Remedies. () Upon the occurrence of any Event of
Default, Borrower agrees that Lender, may take such action, without notice or
demand, as it deems advisable to protect and enforce the rights of Lender
against Borrower and in and to the
<PAGE>
Property, including, but not limited to the following actions, each of which may
be pursued concurrently or otherwise, at such time and in such order as Lender
may determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Lender:
() declare the entire unpaid Debt to be immediately due and
payable;
() institute proceedings, judicial or otherwise, for the
complete foreclosure of this Security Instrument under any applicable provision
of law in which case the Property or any interest therein may be sold for cash
or upon credit in one or more parcels or in several interests or portions and in
any order or manner;
() with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute proceedings for
the partial foreclosure of this Security Instrument for the portion of the Debt
then due and payable, subject to the continuing lien and security interest of
this Security Instrument for the balance of the Debt not then due, unimpaired
and without loss of priority;
() sell for cash or upon credit the Property or any part
thereof and all estate, claim, demand, right, title and interest of Borrower
therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, as an entity or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law;
() subject to the provisions of Article 15, institute an
action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein, in the Note or in the Other
Security Documents;
() subject to the provisions of Article 15, recover judgment
on the Note either before, during or after any proceedings for the enforcement
of this Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee,
liquidator or conservator of the Property, without notice and without regard for
the adequacy of the security for the Debt and without regard for the solvency of
Borrower, any Guarantor, Indemnitor or of any person, firm or other entity
liable for the payment of the Debt;
() subject to any applicable law, the license granted to
Borrower under Section 1.2 shall automatically be revoked and Lender may enter
into or upon the Property, either personally or by its agents, nominees or
attorneys and dispossess Borrower and its agents and servants therefrom, without
liability for trespass, damages or otherwise and exclude Borrower and its agents
or servants wholly therefrom, and take possession of all books, records and
accounts relating thereto and Borrower agrees to surrender possession of
<PAGE>
the Property and of such books, records and accounts to Lender upon demand, and
thereupon Lender may (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the Property and
conduct the business thereat; (B) complete any construction on the Property in
such manner and form as Lender deems advisable; (C) make alterations, additions,
renewals, replacements and improvements to or on the Property; (D) exercise all
rights and powers of Borrower with respect to the Property, whether in the name
of Borrower or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all Rents of the Property and every part thereof; (E)
require Borrower to pay monthly in advance to Lender, or any receiver appointed
to collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Property as may be occupied by Borrower; (F)
require Borrower to vacate and surrender possession of the Property to Lender or
to such receiver and, in default thereof, Borrower may be evicted by summary
proceedings or otherwise; and (G) apply the receipts from the Property to the
payment of the Debt, in such order, priority and proportions as Lender shall
deem appropriate in its sole discretion after deducting therefrom all expenses
(including reasonable attorneys' fees) incurred in connection with the aforesaid
operations and all amounts necessary to pay the Taxes, Other Charges, insurance
and other expenses in connection with the Property, as well as just and
reasonable compensation for the services of Lender, its counsel, agents and
employees;
() exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing: (A) the right to take possession of
the Collateral or any part thereof, and to take such other measures as Lender
may deem necessary for the care, protection and preservation of the Collateral,
and (B) request Borrower at its expense to assemble the Collateral and make it
available to Lender at a convenient place acceptable to Lender. Any notice of
sale, disposition or other intended action by Lender with respect to the
Collateral sent to Borrower in accordance with the provisions hereof at least
five (5) days prior to such action, shall constitute commercially reasonable
notice to Borrower;
() apply any sums then deposited in the Escrow Fund and any
other sums held in escrow or otherwise by Lender in accordance with the terms of
this Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the
Note; and all other sums payable pursuant to the Note,
this Security
<PAGE>
Instrument and the Other Security Documents,
including, without limitation, advances made by
Lender pursuant to the terms of this Security
Instrument;
() surrender the Policies maintained pursuant to Article 3
hereof, collect the unearned Insurance Premiums and apply such sums as a credit
on the Debt in such priority and proportion as Lender in its discretion shall
deem proper, and in connection therewith, Borrower hereby appoints Lender as
agent and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any
Net Proceeds Deficiency deposit, together with interest thereon, to the payment
of the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or
through Borrower from making use of or withdrawing any sums from any lockbox or
similar account, if any;
() pursue such other remedies as Lender may have under
applicable law.
() In the event of a sale, by foreclosure, power of sale, or
otherwise, of less than all of the Property, this Security Instrument shall
continue as a lien and security interest on the remaining portion of the
Property unimpaired and without loss of priority. Notwithstanding the provisions
of this Section 11.1 to the contrary, if any Event of Default as described in
Subsection 10.1 (h)(i) or (ii) shall occur, the entire unpaid Debt shall be
automatically due and payable, without any further notice, demand or other
action by Lender.
() Lender may adjourn from time to time any sale by it to be
made under or by virtue of this Security Instrument by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
() Upon any sale made under or by virtue of this Section
11.1, whether made under a power of sale or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Lender may bid
for and acquire the Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the Debt
the net sales price after deducting therefrom the expenses of the sale and costs
of the action and any other sums which Lender is authorized to deduct under this
Security Instrument.
<PAGE>
Section . Application of Proceeds. The purchase money,
proceeds and avails of any disposition of the Property, or any part thereof, or
any other sums collected by Lender pursuant to the Note, this Security
Instrument or the Other Security Documents, may be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion
shall deem proper.
Section . Right to Cure Defaults. Upon the occurrence of any
Event of Default, Lender may, but without any obligation to do so and without
notice to or demand on Borrower and without releasing Borrower from any
obligation hereunder, cure the same in such manner and to such extent as Lender
may deem necessary to protect the security hereof. Lender is authorized to enter
upon the Property for such purposes, or appear in, defend, or bring any action
or proceeding to protect its interest in the Property or to foreclose this
Security Instrument or collect the Debt, and the cost and expense thereof
(including reasonable attorneys' fees to the extent permitted by law), with
interest as provided in this Section 11.3, shall constitute a portion of the
Debt and shall be due and payable to Lender upon demand. All such costs and
expenses incurred by Lender in remedying such Event of Default or in appearing
in, defending, or bringing any such action or proceeding shall bear interest at
the Default Rate (as defined in the Note), for the period after notice from
Lender that such cost or expense was incurred to the date of payment to Lender.
All such costs and expenses incurred by Lender together with interest thereon
calculated at the Default Rate shall be deemed to constitute a portion of the
Debt and be secured by this Security Instrument and the Other Security Documents
and shall be immediately due and payable upon demand by Lender therefor.
Section . Actions and Proceedings. After the occurrence and
during the continuance of an Event of Default, Lender has the right to appear in
and defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.
Section . Recovery of Sums Required To Be Paid. Lender shall
have the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
Section . Examination of Books and Records. Lender, its
agents, accountants and attorneys shall have the right upon prior written notice
to examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon
<PAGE>
notice to make copies and extracts from the foregoing records and other papers.
In addition, Lender, its agents, accountants and attorneys shall have the right
to examine and audit the books and records of Borrower and its affiliates or of
any Guarantor or Indemnitor pertaining to the income, expenses and operation of
the Property during reasonable business hours at any office of Borrower, its
affiliates or any Guarantor or Indemnitor where the books and records are
located.
Section . Other Rights, Etc. () The failure of Lender to
insist upon strict performance of any term hereof shall not be deemed to be a
waiver of any term of this Security Instrument. Borrower shall not be relieved
of Borrower's obligations hereunder by reason of (i) the failure of Lender to
comply with any request of Borrower, any Guarantor or any Indemnitor to take any
action to foreclose this Security Instrument or otherwise enforce any of the
provisions hereof or of the Note or the Other Security Documents, (ii) the
release, regardless of consideration, of the whole or any part of the Property,
or of any person liable for the Debt or any portion thereof, or (iii) any
agreement or stipulation by Lender extending the time of payment or otherwise
modifying or supplementing the terms of the Note, this Security Instrument or
the Other Security Documents.
() It is agreed that the risk of loss or damage to the
Property is on Borrower, and Lender shall have no liability whatsoever for
decline in value of the Property, for failure to maintain the Policies, or for
failure to determine whether insurance in force is adequate as to the amount of
risks insured. Possession by Lender shall not be deemed an election of judicial
relief, if any such possession is requested or obtained, with respect to any
Property or collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect. Lender may take action to recover the Debt, or any portion thereof,
or to enforce any covenant hereof without prejudice to the right of Lender
thereafter to foreclose this Security Instrument. The rights of Lender under
this Security Instrument shall be separate, distinct and cumulative and none
shall be given effect to the exclusion of the others. No act of Lender shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Lender shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.
Section . Right to Release Any Portion of the Property.
Lender, may release any portion of the Property for such consideration as Lender
may require without, as to the remainder of the Property, in any way impairing
or affecting the lien or priority of this Security Instrument, or improving the
position of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by the actual
monetary consideration, if any, received by Lender for such release, and may
accept by assignment, pledge or otherwise any other property in place thereof as
Lender may
<PAGE>
require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section . Violation of Laws. If the Property is not in
compliance with Applicable Laws, Lender may impose additional requirements upon
Borrower in connection herewith including, without limitation, monetary reserves
or financial equivalents.
Section . Right of Entry. Lender and its agents shall have
the right upon prior written notice to enter and inspect the Property at all
reasonable times upon not less than five (5) Business Days' notice (except in
the case of emergencies when no notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section . Environmental Representations and Warranties.
Borrower represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances,
<PAGE>
relating to liability for or costs of Remediation or prevention of Releases of
Hazardous Substances or relating to liability for or costs of other actual or
threatened danger to human health or the environment. "Environmental Law"
includes, but is not limited to, the following statutes, as amended, any
successor thereto, and any regulations promulgated pursuant thereto, and any
state or local statutes, ordinances, rules, regulations and the like addressing
similar issues: the Comprehensive Environmental Response, Compensation and
Liability Act; the Emergency Planning and Community Right-to-Know Act; the
Hazardous Substances Transportation Act; the Resource Conservation and Recovery
Act (including, but not limited to Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act.
"Environmental Law" also includes, but is not limited to, any present, and for
the purposes of Sections 12.2, 12.3 and 13.4 only, future, federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law: conditioning transfer of property upon a negative declaration or
other approval of a governmental authority of the environmental condition of the
property; requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of the Property to any governmental
authority or other person or entity, whether or not in connection with transfer
of title to or interest in property. "Hazardous Substances" include but are not
limited to any and all substances (whether solid, liquid or gas) (i) defined,
listed, or otherwise classified as pollutants, hazardous wastes, hazardous
substances, hazardous materials, extremely hazardous wastes, or words of similar
meaning or regulatory effect under any present, or for the purposes of Sections
12.2. 12.3 and 13.4 only, future, Environmental Laws or (ii) that may have a
negative impact on human health or the environment, including, but not limited
to petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives. "Release" of any Hazardous Substance includes, but is not limited to
any release, deposit, discharge, emission, leaking, spilling, seeping,
migrating, injecting, pumping, pouring, emptying, escaping, dumping or disposing
of Hazardous Substances. "Remediation" includes, but is not limited to any
response, remedial removal, or corrective action, any activity to cleanup,
detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance,
any actions to prevent, cure or mitigate any Release of any Hazardous Substance,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances.
Section . Environmental Covenants. Borrower covenants and
agrees that so long as the Borrower owns, manages, is in possession of, or
otherwise controls the operation of the Property: (a) all uses and operations on
or of the Property, whether by Borrower or any other person or entity, shall be
in compliance with all Environmental Laws and permits issued pursuant thereto;
(b) there shall be no Releases of Hazardous Substances in, on, under
<PAGE>
or from the Property; (c) there shall be no Hazardous Substances in, on, or
under the Property, except those that are in compliance with all Environmental
Laws and with permits issued pursuant thereto, if and to the extent required;
(d) Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender after Lender has reason to
believe this Section 12.2 has been violated (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas), and share with Lender
the reports and other results thereof, and Lender and other Indemnified Parties
(defined in Section 13.1) shall be entitled to rely on such reports and other
results thereof; (g) Borrower shall, at its sole cost and expense, comply with
all reasonable written requests of Lender to (i) reasonably effectuate
Remediation of any condition (including, but not limited to a Release of a
Hazardous Substance) in, on, under or from the Property, (ii) comply with any
Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) Borrower shall not do or
allow any tenant or other user of the Property to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Property), impairs
or may impair the value of the Property, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) Borrower shall immediately notify Lender in writing promptly
after it has become aware of (A) any presence or Releases or threatened Releases
of Hazardous Substances in, on, under, from or migrating towards the Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting the Property, (C)
any required Remediation of environmental conditions relating to the Property,
and (D) any written or oral notice or other communication of which Borrower
becomes aware from any source whatsoever (including, but not limited to a
governmental entity) relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or threatened administrative or judicial proceedings in
connection with anything referred to in this Article 12.
Section . Lender's Rights. Lender, its environmental
consultant, and any other person or entity designated by Lender, including, but
not limited to any receiver and any representative of a governmental entity,
shall have the right, but not the obligation, at intervals of not less than one
year, or more frequently if the Lender reasonably believes that
<PAGE>
a Hazardous Substance or other environmental condition violates or threatens to
violate any Environmental Law, after notice to Borrower, to enter upon the
Property at all reasonable times to assess any and all aspects of the
environmental condition of the Property and its use, including, but not limited
to conducting any environmental assessment or audit of the Property or portions
thereof to confirm Borrower's compliance with the provisions of this Article 12,
and Borrower shall cooperate in all reasonable ways with Lender in connection
with any such audit. Such audit shall be performed in a manner so as to minimize
interference with the conduct of business at the Property. If such audit
discloses that a violation of or a liability under any Environmental Law exists
or if such audit was required or prescribed by law, regulation or governmental
or quasi-governmental authority, Borrower shall pay all costs and expenses
incurred in connection with such audit; otherwise, the costs and expenses of
such audit shall, notwithstanding anything to the contrary set forth in this
Section, be paid by Lender.
Article - INDEMNIFICATION
Section . General Indemnification. Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, or punitive damages, of whatever kind or nature (including, but not
limited to attorneys' fees and other costs of defense) (the "Losses") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an
<PAGE>
accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate,
Broker and Barter Exchange Transactions, which may be required in connection
with the Security Instrument, or to supply a copy thereof in a timely fashion to
the recipient of the proceeds of the transaction in connection with which this
Security Instrument is made; (i) any failure of the Property to be in compliance
with any Applicable Laws; (j) the enforcement by any Indemnified Party of the
provisions of this Article 13; (k) any and all claims and demands whatsoever
which may be asserted against Lender 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 Lease; (l) the payment of any commission, charge or
brokerage fee to anyone which may be payable in connection with the funding of
the loan evidenced by the Note and secured by this Security Instrument; or (m)
any misrepresentation made by Borrower in this Security Instrument, the Other
Security Documents, or any documents or information provided pursuant to Section
18.1 hereof. Any amounts payable to Lender by reason of the application of this
Section 13.1 shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Lender until paid.
For purposes of this Article 13, the term "Indemnified Parties" means Lender and
any person or entity who is or will have been involved in the origination of
this loan, any person or entity who is or will have been involved in the
servicing of this loan, any person or entity in whose name the encumbrance
created by this Security Instrument is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest in
this loan (including, but not limited to Investors or prospective Investors in
the Securities, as well as custodians, trustees and other fiduciaries who hold
or have held a full or partial interest in this loan for the benefit of third
parties) as well as the respective directors, officers, shareholders, members,
partners, employees, agents, servants, representatives, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including, but not limited to any other person or entity who holds or
acquires or will have held a participation or other full or partial interest in
this loan or the Property, whether during the term of this loan or as a part of
or following a foreclosure of this loan and including, but not limited to any
successors by merger, consolidation or acquisition of all or a substantial
portion of Lender's assets and business).
Section . Mortgage and/or Intangible TAX. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any TAX on the making and/or
recording of this Security Instrument, the Note or any of the Other Security
Documents or in connection with a transfer of all or a portion of the Property
pursuant to a foreclosure, deed in lieu of foreclosure or otherwise.
Section . ERISA Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of Losses incurred in correcting any
<PAGE>
prohibited transaction or in the sale of a prohibited loan, and in obtaining any
individual prohibited transaction exemption under ERISA that may be required, in
Lender's sole discretion) that Lender may incur, directly or indirectly, as a
result of a default under Sections 4.2 or 5.9.
Section . Environmental Indemnification. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses and costs of
Remediation (whether or not performed voluntarily), reasonable engineers' fees,
reasonable environmental consultants' fees, and costs of investigation
(including, but not limited to sampling, testing and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas) imposed upon or incurred by or asserted against any Indemnified Parties,
and arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Borrower, any
person or entity affiliated with Borrower or tenant or other users of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any time located in, under, on or above the Property;
(d) any activity by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including, but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened violations of
any Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including, but not limited
to any failure by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property to comply with any order of any
governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a
<PAGE>
threatened Release of any Hazardous Substance which causes the incurrence of
costs for Remediation; (k) any personal injury, wrongful death, or property
damage caused by Hazardous Substances arising under any statutory or common law
or tort law theory, including, but not limited to damages assessed for the
maintenance of a private or public nuisance or for the conducting of an
abnormally dangerous activity on or near the Property; and (l) any intentional
misrepresentation in any representation or warranty or material breach or
failure to perform any covenants or other obligations pursuant to Article 12.
Section . Duty to Defend; Attorneys' Fees and Other Fees and
Expenses. Upon written request by any Indemnified Party, Borrower shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
Article - WAIVERS
Section . Waiver of Counterclaim. Borrower hereby waives the
right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Lender arising
out of or in any way connected with this Security Instrument, the Note, any of
the Other Security Documents, or the Obligations.
Section . Marshalling and Other Matters. Borrower hereby
waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, Borrower hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Security Instrument on behalf of Borrower, and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by Applicable Law.
Section . Waiver of Notice. To the extent permitted by
Applicable Law, Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Security
Instrument specifically and expressly provides for the giving of notice by
Lender to Borrower and except with respect to matters for which Lender is
required by Applicable Law to give notice, and Borrower hereby expressly waives
<PAGE>
the right to receive any notice from Lender with respect to any matter for which
this Security Instrument does not specifically and expressly provide for the
giving of notice by Lender to Borrower.
Section . Waiver of Statute of Limitations. Borrower hereby
expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.
Section . Sole Discretion of Lender. Wherever pursuant to
this Security Instrument (a) Lender exercises any right given to it to approve
or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or
(c) any other decision or determination is to be made by Lender, the decision of
Lender to approve or disapprove all decisions that arrangements or terms are
satisfactory or not satisfactory, and all other decisions and determinations
made by Lender, shall be in the sole and absolute discretion of Lender and shall
be final and conclusive, except as may be otherwise expressly and specifically
provided herein.
Section . Survival. Except as hereinafter specifically set
forth below, the representations and warranties, covenants, and other
obligations arising under Article 12 shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or Lender's
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender's rights and
remedies pursuant hereto including, but not limited to foreclosure or acceptance
of a deed in lieu of foreclosure, any exercise of any rights and remedies
pursuant to the Note or any of the Other Security Documents, any transfer of all
or any portion of the Property (whether by Borrower or by Lender, following
foreclosure or acceptance of a deed in lieu of foreclosure or at any other
time), any amendment to this Security Instrument, the Note or the Other Security
Documents, and any act or omission that might otherwise be construed as a
release or discharge of Borrower from the obligations pursuant hereto. All
obligations and liabilities of Borrower under Article 12 shall cease and
terminate on the first (1st) anniversary of the date of payment to Lender in
cash of the entire Debt, provided that contemporaneously with or subsequent to
such payment, Borrower, at its sole cost and expense, delivers to Lender an
environmental audit of the Property in form and substance, and prepared by a
qualified environmental consultant, reasonably satisfactory in all respects to
Lender and indicating the Property is in full compliance with all applicable
Environmental Laws.
Section . Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY
<PAGE>
DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS
OR AGENTS IN CONNECTION THEREWITH.
Article - EXCULPATION
Section . Exculpation. Notwithstanding anything to the
contrary contained in this Security Instrument or in any Other Security Document
(but subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note or this Security Instrument by any
action or proceeding to collect damages or wherein a money judgment or any
deficiency judgment or order or any judgment establishing any personal
obligation or liability shall be sought against Borrower or any principal
director, officer, employee, beneficiary, shareholder, partner, member, trustee,
agent or affiliate of Borrower or any person owning, directly or indirectly, any
legal or beneficial interest in Borrower, or any successors or assigns of any of
the foregoing (collectively, the "Exculpated Parties"). Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon this Security
Instrument, the Other Security Documents, and the interest in the Property, the
Rents and any other collateral given to Lender created by this Security
Instrument and the Other Security Documents; provided, however, subject to the
provisions of Sections 15.2, 15.3, 15.4 and 15.5, that any judgment in any
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower's interest in the Property, in the Rents and in any other collateral
given to Lender in connection with the Note. Lender, by accepting the Note and
this Security Instrument, agrees that it shall not, except as otherwise provided
below, sue for or demand any deficiency judgment against Borrower or any of the
Exculpated Parties in any action or proceeding, under or by reason of or under
or in connection with the Note, the Other Security Documents or this Security
Instrument.
Section . Reservation of Certain Rights. The provisions of
Section 15.1 shall not (a) constitute a waiver, release or impairment of the
Obligations; (b) impair the right of Lender to name Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under this
Security Instrument; (c) affect the validity or enforceability of any indemnity,
guaranty, master lease or similar instrument made in connection with the Note,
this Security Instrument, or the Other Security Documents; (d) impair the
ability of Lender to obtain the appointment of a receiver; or (e) impair the
enforcement of the Assignment of Leases and Rents executed in connection
herewith.
Section . Exceptions to Exculpation. Notwithstanding the
provisions of Article 15.1 to the contrary, Borrower and Indemnitor shall be
personally liable to Lender on a joint and several basis for the Losses Lender
incurs due to: (a) fraud or intentional misrepresentation by Borrower or any
other person or entity in connection with the execution and the delivery of the
Note, this Security Instrument or the Other Security Documents; (b)
<PAGE>
Borrower's misapplication or misappropriation of Rents received by Borrower
after the occurrence and during the continuance of an Event of Default; (c)
Borrower's misapplication or misappropriation of tenant security deposits or
Rents collected in advance; (d) the misapplication or misappropriation of
insurance proceeds or condemnation awards after the occurrence and during the
continuance of an Event of Default; (e) any fees or commissions paid by Borrower
after the occurrence and during the continuance of an Event of Default to any
principal, affiliate or general partner of Borrower, Indemnitor or Guarantor in
violation of the terms of the Note, this Security Instrument or the Other
Security Documents; (f) gross negligence or criminal acts perpetrated by it
resulting in forfeiture, seizure or loss of any portion of the security; (g) any
failure by Borrower or Indemnitor to comply with the terms and provisions of
Section 13.4 hereof or of the Environmental Indemnity; (h) any failure by
Borrower or any general partner or the SPE Member of Borrower to comply with the
terms and provisions of Section 4.3 hereof; or (i) any sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment or transfer of the
Property or any part thereof, within the meaning of Article 8 hereof, without
the prior written consent of Lender.
Section . Recourse. Notwithstanding the foregoing, the
agreement of Lender not to pursue recourse liability as set forth in Section
15.1 above SHALL BECOME
<PAGE>
NULL AND VOID and shall be of no further force and effect in the event (i)
Borrower fails to comply with the terms and conditions of Section 8.1, 8.2 or
8.3, (ii) the Property or any part thereof shall become an asset in (A) a
voluntary bankruptcy or insolvency proceeding, or (B) an involuntary bankruptcy
or insolvency proceeding commenced by any Person (other than Lender) and
Borrower fails to use its best efforts to obtain a dismissal of such
proceedings, or (iii) Borrower or any Guarantor or Indemnitor fails to comply
with the terms and provisions of Section 3.11 hereof within thirty (30) days
after written notice from Lender to Borrower (which notice shall be a second
notice given after the expiration of any notice given pursuant to Section
10.1(e)); provided, however, so long as PREIT Associates, L.P., a Delaware
limited partnership, maintains that certain line of credit with First Union
National Bank, as agent, pursuant to that certain Revolving Credit Loan
Agreement with Corestates Bank, N.A. (predecessor-in-interest to First Union
National Bank), as agent, and First Trust Savings Bank, Fleet Bank, N.A. and PNC
Bank, as lenders, dated September 30, 1997 (or another credit arrangement
containing market standard financial covenants for net worth, leverage and
liquidity), the occurrence of any of the events referred to in subsections
(i)-(iii) above shall not create recourse liability against Borrower or any
Guarantor or Indemnitor.
Section . Bankruptcy Claims. Nothing herein shall be deemed
to be a waiver of any right which Lender may have under Sections 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for
the full amount of the Debt secured by this Security Instrument or to require
that all collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
Article - NOTICES
Section . Notices. All notices or other written
communications hereunder shall be deemed to have been properly given (a) upon
delivery, if delivered in person or by facsimile transmission with receipt
acknowledged by the recipient thereof, (b) one (1) Business Day (defined below)
after having been deposited for overnight delivery with any reputable overnight
courier service, or (c) three (3) Business Days after having been deposited in
any post office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Borrower: Pennsylvania Real Estate Investment Trust
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
<PAGE>
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a
day on which commercial banks are not authorized or required by law to close in
the State of New York.
Article - APPLICABLE LAW
Section . Choice of Law. THIS SECURITY INSTRUMENT SHALL BE
GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE WHERE THE LAND IS LOCATED AND THE
<PAGE>
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section . Usury Laws. This Security Instrument and the Note
are subject to the express condition that at no time shall Borrower be obligated
or required to pay interest on the Debt at a rate which could subject the holder
of the Note to either civil or criminal
<PAGE>
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Security Instrument or the Note, Borrower is at any time required
or obligated to pay interest on the Debt at a rate in excess of such maximum
rate, the rate of interest under the Security Instrument and the Note shall be
deemed to be immediately reduced to such maximum rate and the interest payable
shall be computed at such maximum rate and all prior interest payments in excess
of such maximum rate shall be applied and shall be deemed to have been payments
in reduction of the principal balance of the Note. All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate of interest from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding.
Section . Provisions Subject to Applicable Law. All rights,
powers and remedies provided in this Security Instrument may be exercised only
to the extent that the exercise thereof does not violate any applicable
provisions of law and are intended to be limited to the extent necessary so that
they will not render this Security Instrument invalid, unenforceable or not
entitled to be recorded, registered or filed under the provisions of any
Applicable Law.
Section . Inapplicable Provision. If any term of this
Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.
Article - SECONDARY MARKET
Section . Dissemination of Information. If Lender determines
at any time to sell, transfer or assign the Note, this Security Instrument and
the Other Security Documents, and any or all servicing rights with respect
thereto, or to grant participations therein (the "Participations") or issue
mortgage pass-through certificates or other securities (such sale and/or
issuance, the "Securitization") evidencing a beneficial interest in a rated or
unrated public offering or private placement (the "Securities"), Lender may
forward to each purchaser, transferee, assignee, servicer, participant,
investor, or their respective successors in such Participations and/or
Securities (collectively, the "Investor") or any Rating Agency rating such
Securities and each prospective Investor, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower,
any Guarantor, any Indemnitors and the Property (including, without limitation,
all financial statements), which shall have been furnished by Borrower, any
Guarantor or any Indemnitors, as Lender determines necessary or desirable.
Borrower, any Guarantor and any Indemnitor agree to cooperate with Lender in
connection with any transfer made or any Securities created pursuant to this
Section, including, without limitation, the delivery of an
<PAGE>
estoppel certificate required in accordance with Subsection 7.4(c) hereof and
such other documents as may be reasonably requested by Lender and, upon Lender's
reasonable request, meeting with any Rating Agency for due diligence purposes.
Borrower shall also furnish and Borrower, any Guarantor and any Indemnitor
consent to Lender furnishing to such Investors or such prospective Investors or
any Rating Agency any and all information concerning the Property, the Leases,
the financial condition of Borrower, any Guarantor and any Indemnitor as may be
requested by Lender, any Investor or any prospective Investor or Rating Agency
in connection with any sale, transfer or Participation, provided, however, PREIT
Associates, L.P. and Pennsylvania Real Estate Investment Trust shall only be
required under this Section 18.1 to disclose information that is deemed to be
"public" information. Borrower shall not be responsible for Lender's fees and
expenses incurred in connection with the transactions contemplated by this
Section 18.1. Lender shall reimburse Borrower for the reasonable actual
out-of-pocket third party costs incurred by Borrower in excess of $1,500.00 in
connection with the transactions contemplated by this Section 18.1.
Article - COSTS
Section . Performance at Borrower's Expense. Borrower
acknowledges and confirms that Lender shall impose certain administrative
processing and/or commitment fees in connection with (a) the extension, renewal,
modification, amendment and termination of its loans, (b) the release or
substitution of collateral therefor, provided, however, no commitment fee shall
be imposed in connection with the substitution of collateral, (c) obtaining
certain consents, waivers and approvals with respect to the Property, or (d) the
review of any Lease or proposed Lease or the preparation or review of any
subordination, non-disturbance agreement (the occurrence of any of the above
shall be called an "Event"). Borrower further acknowledges and confirms that it
shall be responsible for the payment of all costs of reappraisal of the Property
or any part thereof, whether required by law, regulation, Lender or any
governmental or quasi-governmental authority. Borrower hereby acknowledges and
agrees to pay, immediately, with or without demand, all such fees (as the same
may be increased or decreased from time to time), and any additional fees of a
similar type or nature which may be imposed by Lender from time to time, upon
the occurrence of any Event or otherwise. Wherever it is provided for herein
that Borrower pay any costs and expenses, such costs and expenses shall include,
but not be limited to, all legal fees and disbursements of Lender (whether of
retained firms, the reimbursement for the expenses of in-house staff or
otherwise) and all costs and expenses of Lender, if any.
Section . Attorney's Fees for Enforcement. (a) Borrower shall
pay all legal fees incurred by Lender in connection with (i) the preparation of
the Note, this Security Instrument and the Other Security Documents; and (ii)
the items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender
on demand any and all expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender in protecting its interest in the Property or the
Collateral or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property or the Collateral, whether or not
any legal
<PAGE>
proceeding is commenced hereunder or thereunder and whether or not any default
or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by Lender
until such expenses are paid by Borrower.
Article - DEFINITIONS
Section . General Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Security Instrument may be used interchangeably in singular
or plural form and the word "Borrower" shall mean "each Borrower and any
subsequent owner or owners of the Property or any part thereof or any interest
therein," the word "Lender" shall mean "Lender and any subsequent holder of the
Note," the word "Note" shall mean "the Note and any other evidence of
indebtedness secured by this Security Instrument," the word "person" shall
include an individual, corporation, limited liability company, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, the word "Property" shall include any portion of the Property and
any interest therein, and the phrases "attorneys' fees" and "counsel fees" shall
include any and all attorneys', paralegal and law clerk fees and disbursements,
including, but not limited to fees and disbursements at the pre-trial, trial and
appellate levels incurred or paid by Lender in protecting its interest in the
Property, the Leases and the Rents and enforcing its rights under this Security
Instrument.
Section . Headings, Etc. The headings and captions of various
Sections of this Security Instrument are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section . No Oral Change. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower, or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
Section . Liability. If Borrower consists of more than one
person, the obligations and liabilities of each such person hereunder shall be
joint and several. This Security Instrument shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns
forever.
Section . Duplicate Originals; Counterparts. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security Instrument
may be executed in several counterparts, each of
<PAGE>
which counterparts shall be deemed an original instrument and all of which
together shall constitute a single Security Instrument.
Section . Number and Gender. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
Section . Subrogation. If any or all of the proceeds of the
Note have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Property, then, to the extent of the funds so used, Lender
shall be subrogated to all of the rights, claims, liens, titles, and interests
existing against the Property heretofore held by, or in favor of, the holder of
such indebtedness and such former rights, claims, liens, titles, and interests,
if any, are not waived but rather are continued in full force and effect in
favor of Lender and are merged with the lien and security interest created
herein as cumulative security for the repayment of the Debt, the performance and
discharge of Borrower's obligations hereunder, under the Note and the Other
Security Documents and the performance and discharge of the Other Obligations.
Section . Entire Agreement. The Note, this Security
Instrument and the Other Security Documents constitute the entire understanding
and agreement between Borrower and Lender with respect to the transactions
arising in connection with the Debt and supersede all prior written or oral
understandings and agreements between Borrower and Lender with respect thereto.
Borrower hereby acknowledges that, except as incorporated in writing in the
Note, this Security Instrument and the Other Security Documents, there are not,
and were not, and no persons are or were authorized by Lender to make, any
representations, understandings, stipulations, agreements or promises, oral or
written, with respect to the transaction which is the subject of the Note, this
Security Instrument and the Other Security Documents.
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been
executed by Borrower as of the date first above written.
BORROWER:
PENNSYLVANIA REAL ESTATE
INVESTMENT TRUST
a Pennsylvania business trust
By: /s/ Jeffrey A. Linn
-----------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the
buildings and improvements thereon, situate, lying and being
<PAGE>
Exhibit 10.3
PROMISSORY NOTE
$12,300,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PR MARYLANDER NOTE LLC, a Delaware limited liability company ("Borrower"),
promises to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation ("Lender"), at Lender's office located at 650 Dresher
Road, P.O. Box 809, Horsham, Pennsylvania 19044-0809, Attn: Servicing -
Accounting Manager, or at such other place as Lender may designate to Borrower
in writing from time to time, the principal sum of TWELVE MILLION THREE HUNDRED
THOUSAND AND 00/100 DOLLARS ($12,300,000.00), or so much thereof as is
outstanding and unpaid, together with interest thereon at the rate of 6.773% per
annum ("Interest Rate"), in lawful money of the United States of America, which,
at the time of payment, shall be legal tender in payment of all debts and dues,
public and private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay
principal and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments
of principal and interest in the amount of $80,793.45 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the
entire outstanding principal balance hereof, together with all accrued but
unpaid interest thereon and any other amounts due under the Note or the other
Loan Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a
date other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days
<PAGE>
from and including the date of this Note to and including the ninth day of such
month (or if the date of this Note is after the ninth day of the month, then the
next following month) (b) by a daily rate based on the Interest Rate calculated
for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not
be deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall
be applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05,
or as required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying a date ("Defeasance Date") which
shall be a Payment Date, on which the amount required to defease the Loan
("Defeasance Deposit") is to be made and on which the Defeasance is to occur, as
well as the anticipated outstanding principal amount of this Note as of the
Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and
unpaid interest on the outstanding principal balance of this Note to but not
including the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums,
not including scheduled interest or principal payments, then due under this
Note, the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the
Defeasance Date.
(v) Borrower shall pay to Lender the required
Defeasance Deposit for the Defeasance, or at Borrower's option, Borrower shall
deliver to Lender U.S. Government Securities which provide payments on or prior
to, but as close as possible to, all successive Payment Dates after the
Defeasance Date (including the outstanding principal balance of this Note due on
the Maturity Date), and in amounts equal to the full amounts due on each Payment
Date under this Note.
(vi) Borrower shall execute and deliver one or more
security agreements in form and substance satisfactory to Lender (collectively,
"Security Agreement"), creating a first priority lien on, and security interest
in, the Defeasance Deposit and the U.S. Government Securities purchased with
Defeasance Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies,
Borrower also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification
from Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and
expenses of Lender incurred in connection with the Defeasance, including any
costs and expenses associated with the Release Instruments (as defined in
Section 2.05(f) hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a
confirmation, in form and substance satisfactory to Lender, by a "Big Five"
independent certified public accounting firm, that Defeasance Deposit is
sufficient to pay all Scheduled Defeasance Payments and other amounts required
to be paid by Borrower hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation,
in form and substance satisfactory to Lender, that all conditions to Defeasance
have been met from any applicable Rating Agency that has required as a condition
to Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with
the Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee. The Successor Borrower shall assume in
<PAGE>
writing the obligations under this Note, the Security Agreement and the other
Loan Documents, by agreements in form and substance satisfactory to Lender,
whereupon Borrower shall, pursuant to the express terms of such agreement, be
relieved of its obligations thereunder. Borrower shall pay $10 to any such
Successor Borrower as consideration for assuming Borrower's obligations under
the Note and the Security Agreement. Notwithstanding anything in this Note or
the Guaranty (hereinafter defined) or the Security Instrument to the contrary,
no other assumption fee shall be payable upon a transfer of this Note in
accordance with this Section 2.05(d), but Borrower shall pay all out-of-pocket
costs and expenses incurred by Lender, including Lender's reasonable attorneys
fees and expenses, incurred in connection therewith.
(e) Repayment Upon Default. If all or any part of the
principal amount of this Note is prepaid upon acceleration of this Note
following the occurrence of an Event of Default prior to the Optional Defeasance
Date, then, in addition to such principal payment, Borrower shall be required to
make such payments ("Yield Maintenance Payments") in an amount equal to the
greater of (i) one percent (1%), or (ii) the excess, if any, of (A) the
aggregate respective present values of all scheduled interest and principal
payments payable on each Payment Date in respect of this Note for the period
from the date of such prepayment upon acceleration to the Maturity Date,
discounted monthly at a rate equal to the Treasury Constant Maturity Yield Index
(defined below) and based on a 360-day year of twelve 30-day months over (B) the
then current outstanding principal amount of this Note. For purposes hereof,
"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) ("FRB Release") published during the second full week
preceding the Prepayment Date for instruments having a maturity coterminous with
the remaining term of this Note. In the event the FRB Release is no longer
published, Lender shall select a comparable publication to determine the
Treasury Constant Maturity Yield Index. If there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with the
remaining term of this Note, then 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 shall be used, 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). The Yield
Maintenance Payments to be paid in connection with any prepayment under this
Section 2.05(e) shall be determined by Lender and shall be conclusive and
binding on Borrower (absent manifest error). For purposes of this Section
2.05(e), the unpaid principal amount due on this Note on the date of prepayment
shall be determined after giving effect to any payment of scheduled amortization
made on such date.
(f) Release of the Guaranty. No repayment, prepayment or
Defeasance of all or any portion of this Note shall cause, give rise to a right
to require, or otherwise result in, the release of the Guaranty of this Note
(the "Guaranty"), dated the date hereof, by PR Marylander, LLC, a Delaware
limited liability company, or the real or personal property subject to the lien
or mortgage created by the Security Instrument (referred to in this Section
2.05(f) as "Mortgaged Property") that secures the Guaranty, except as follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Guaranty and the
Mortgaged Property shall be released from the lien and mortgage created by the
Security Instrument, whereupon the U.S. Government Securities pledged pursuant
to the Security Agreement shall be the sole source of Borrower's collateral
securing this Note.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
on behalf of PR Marylander, LLC, not less than thirty (30) days prior to the
Defeasance Date, a release of the Mortgaged Property (and related Loan Documents
approved by Lender) for execution by Lender which shall be in a form appropriate
in the applicable state and otherwise satisfactory to Lender in its reasonable
discretion, along with all other documentation Lender reasonably requires to be
delivered by Borrower in connection with such release (collectively, "Release
Instruments"), together with a certification from Borrower, in form and
substance satisfactory to Lender, certifying that such documentation (A) is in
compliance with all Legal Requirements, and (B) will effect such releases in
accordance with the terms of this Section 2.05.
3. INTENTIONALLY DELETED.
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following
shall constitute an event of default ("Event of Default") under this Note: (a)
if any payment of principal and interest or any other payment required under
this Note is not received by Lender on or before the date such payment is due;
or (b) if any default should occur under any of the other Loan Documents which
is not fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
4.02 Late Charges. If any payment is not received by Lender on
or before the date on which such payment originally was due, then, in addition
to any default interest payments due hereunder, Borrower also shall pay to
Lender a late charge in an amount equal to five percent (5.0%) of the amount of
such overdue payment to defray the expenses incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of the
use of the delinquent payment. Such late charge shall be immediately due and
payable, without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full
on or before the Maturity Date or the date on which the due date of the
indebtedness has been accelerated pursuant to the provisions hereof, the unpaid
principal and accrued interest and other amounts then due shall bear interest at
<PAGE>
a rate per annum ("Default Interest Rate") equal to the lesser of (a) five
percent (5.0%) in excess of the Interest Rate or (b) the maximum rate of
interest, if any, which may be charged or collected from Borrower under
applicable law. In addition, Lender shall have the right, without acceleration
of the indebtedness, to collect interest at the Default Interest Rate on any
payment due hereunder (including without limitation late charges and fees for
legal counsel) which is not received by Lender on or before the date on which
such payment originally was due. Interest at the Default Interest Rate shall be
immediately due and payable from the due date specified herein and shall accrue
until all Events of Default have been fully cured or full payment is received,
as applicable.
4.04 Interest on Judgments. Interest shall accrue on any
judgment obtained by Lender in connection with the enforcement or collection of
this Note from the date any such judgment becomes due until such judgment amount
is paid in full at a rate equal to the greater of (a) the Default Interest Rate
or (b) the legal rate applicable to judgments within such jurisdiction;
provided, however, that interest shall not accrue at a rate in excess of the
maximum rate of interest, if any, which may be charged or collected from
Borrower under applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of
Lender in this Note and in the other Loan Documents, or at law or in equity,
shall be cumulative and concurrent, and may be pursued singly, successively or
together in Lender's sole discretion and as often as occasion therefor shall
arise. If Borrower's obligations under this Note or any of the other Loan
Documents are enforced by Lender through an attorney-at-law, or any payment due
under this Note or the other Loan Documents is collected by or through an
attorney-at-law or collection agency, Borrower agrees to pay all costs incurred
by Lender in connection therewith, including, but not limited to, reasonable
fees and disbursements of legal counsel (whether with respect to a retained firm
or Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
5. PROCEEDS OF LOAN. Borrower represents, warrants, covenants and
agrees that (i) the proceeds of the Loan will be used by Borrower for commercial
purposes and (ii) the Loan evidenced by this Note is the result of a commercial
loan transaction within the meaning of Sections 12-101(c) and 12-103(e) of the
Commercial Law Article of the Annotated Code of Maryland.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
<PAGE>
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others
who may become liable for payment of all or any part of the indebtedness
evidenced by this Note, hereby waives presentment for payment, demand, protest,
and notice of dishonor, protest, nonpayment, demand, intent to accelerate, and
acceleration. Borrower, for itself and all others who may become liable for
payment of all or any part of the indebtedness evidenced by this Note, 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 party and property (real and
personal), against the enforcement and collection of the obligations evidenced
by this Note or the other Loan Documents.
<PAGE>
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full
power, authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note
shall be deemed a negotiable instrument, even though this Note, absent this
paragraph, may not otherwise qualify as a negotiable instrument under applicable
law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this
Note or under the other Loan Documents are to be in writing, addressed to the
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
<PAGE>
Borrower: PR Marylander Note LLC
c/o PREIT-RUBIN Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together
with the other Loan Documents and Lender's commitment letter to Borrower,
contain the entire agreements between Borrower and Lender relating to the
subject matter hereof and thereof, and supersede all prior discussions and
agreements (oral or written) relative hereto and thereto which are not contained
herein or therein. Borrower represents and warrants that it is not relying on
any promises, covenants, representations or agreements in connection with this
Note or the other Loan Documents, other than as expressly set forth herein or
therein. In the event of any conflict between the terms of the Loan Documents,
the following order of priority shall be used to resolve such conflict: The Note
shall control over the Security Instrument and the Security Instrument shall
control over all other Loan Documents. Time is of the essence with respect to
all provisions of this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party against whom enforcement thereof is
sought and then only to the extent expressly set forth in such writing. No
person other than a duly authorized officer or agent of Lender shall be deemed
an agent of Lender nor have any authority to waive, modify, supplement or
terminate in any manner whatsoever any of the terms of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms
and provisions of this Note and the other Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
<PAGE>
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or
the other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this
Note nor any uncertainty or ambiguity herein shall be construed or resolved
against Lender by virtue of the fact that such document has originated with
Lender as drafter. Borrower acknowledges that it has reviewed this Note and has
had the opportunity to consult with counsel on same. This Note, therefore, shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of the parties hereto.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other
words of similar import refer to this Note as a whole and not to any particular
section, paragraph or other subdivision; "Section" refers to the entire section
and not to any particular subsection, paragraph of other subdivision. Reference
to days for performance shall mean calendar days unless Business Days are
expressly indicated.
8.07 Governing Law. This Note and the other Loan Documents
shall be interpreted, construed and enforced according to the laws of the state
in which the real property encumbered by the Security Instrument is located
(without giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its
acceptance of this Note, agree and consent to the exclusive jurisdiction and
venue of any state or federal court sitting in the county and state where the
real property encumbered by the Security Instrument is located with respect to
any legal action, proceeding, or controversy between them and hereby expressly
waive any and all rights under applicable law or in equity to object to the
jurisdiction and venue of said courts. Borrower further irrevocably consents to
service of process by certified mail, return receipt requested, to Borrower at
the address for Borrower last provided to Lender in accordance with the notice
provision of this Note and agrees that such service shall be effective ten (10)
days after mailing. Nothing herein shall, however, preclude or prevent Lender
from bringing any one or more actions against Borrower in any other jurisdiction
as may be necessary to enforce or realize upon the Security or other collateral
provided for this Note.
<PAGE>
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN
ANY LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PR MARYLANDER NOTE LLC,
a Delaware limited liability company
By: PR Marylander, LLC,
its manager
By: PR Marylander Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
----------------------------
Name: Jeffrey A. Linn
----------------------------
Title: Authorized Signatory
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
Date:______________________________
<PAGE>
Exhibit 10.4
================================================================================
PR MARYLANDER LLC, as mortgagor
(Grantor)
to
JOSEPH M. ZABLOTSKI,
(Trustee)
for the benefit of
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Beneficiary)
-----------------------------------
INDEMNITY DEED OF TRUST AND
SECURITY AGREEMENT
Principal Sum Secured: $12,300,000.00
-----------------------------------
Dated: April 13, 1999
Location: The Marylander Apartments
3501 St. Paul Street
Baltimore, MD 21218
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged 1
Section 1.2 Assignment of Leases and Rents. 4
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 5
Section 2.1 Debt. 5
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Article 3 - GRANTOR COVENANTS 5
Section 3.1 Payment Under Guaranty. 5
Section 3.2 Incorporation by Reference. 5
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 9
Section 3.5 Escrow Fund. 10
Section 3.7 Leases and Rents. 11
Section 3.8 Maintenance of Property. 12
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 15
Section 3.14 Change of Name, Identity or Structure. 15
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Single Purpose Entity. 16
Section 4.4 Restoration After Casualty/Condemnation. 19
<PAGE>
Article 5 - REPRESENTATIONS AND WARRANTIES 24
Section 5.1 Warranty of Title. 24
Section 5.2 Authority. 24
Section 5.3 Legal Status and Authority. 24
Section 5.4 Validity of Documents. 24
Section 5.5 Litigation. 25
Section 5.6 Status of Property. 25
Section 5.7 No Foreign Person. 26
Section 5.8 Separate Tax Lot. 26
Section 5.9 ERISA Compliance. 26
Section 5.10 Leases. 27
Section 5.11 Financial Condition. 27
Section 5.12 Business Purposes. 28
Section 5.13 Taxes. 28
Section 5.14 Mailing Address. 28
Section 5.15 No Change in Facts or Circumstances. 28
Section 5.16 Disclosure. 28
Section 5.17 Third Party Representations. 28
Section 5.18 Illegal Activity. 28
Section 5.19 FUNB Line of Credit. 28
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 29
Section 6.1 Relationship of Grantor and Beneficiary. 29
Section 6.2 Servicing of the Loan. 29
Article 7 - FURTHER ASSURANCES 29
Section 7.1 Recording of Security Instrument, Etc. 29
Section 7.2 Further Acts, Etc. 29
Section 7.3 Intentionally Deleted. 30
Section 7.4 Estoppel Certificates. 30
Section 7.5 Flood Insurance. 31
Section 7.6 Splitting of Security Instrument. 31
Section 7.7 Replacement Documents. 31
Section 7.8 Amended Financing Statements. 31
Article 8 - DUE ON SALE/ENCUMBRANCE 31
Section 8.1 Beneficiary Reliance 31
Section 8.2 No Sale/Encumbrance. 32
Section 8.3 Sale/Encumbrance Defined. 32
Section 8.4 Beneficiary's Rights. 33
Section 8.5 Right To Substitute Property. 34
Article 9 - INTENTIONALLY DELETED 34
Article 10 - DEFAULT 34
Section 10.1 Events of Default. 34
Article 11 - RIGHTS AND REMEDIES 35
Section 11.1 Remedies. 35
Section 11.2 Application of Proceeds. 39
Section 11.3 Right to Cure Defaults. 39
Section 11.4 Actions and Proceedings. 39
Section 11.5 Recovery of Sums Required To Be Paid. 40
Section 11.6 Examination of Books and Records. 40
Section 11.7 Other Rights, Etc. 40
Section 11.8 Right to Release Any Portion of the Property. 41
Section 11.9 Violation of Laws. 41
Section 11.10 Recourse and Choice of Remedies 41
Section 11.11 Right of Entry. 41
Article 12 - ENVIRONMENTAL HAZARDS 42
Section 12.1 Environmental Representations and Warranties. 42
Section 12.2 Environmental Covenants. 43
Section 12.3 Beneficiary's Rights. 44
Article 13 - INDEMNIFICATION 45
Section 13.1 General Indemnification. 45
Section 13.2 Mortgage and/or Intangible Tax. 46
Section 13.3 ERISA Indemnification. 46
Section 13.4 Environmental Indemnification. 46
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. 47
<PAGE>
Article 14 - WAIVERS 48
Section 14.1 Waiver of Counterclaim. 48
Section 14.2 Marshalling and Other Matters. 48
Section 14.3 Waiver of Notice. 48
Section 14.4 Waiver of Statute of Limitations. 48
Section 14.5 Sole Discretion of Beneficiary. 48
Section 14.6 Survival. 48
Section 14.7 Waiver of Trial By Jury. 49
Article 15 - EXCULPATION 49
Section 15.1 Exculpation. 49
Section 15.2 Reservation of Certain Rights. 50
Section 15.3 Exceptions to Exculpation. 50
Section 15.4 Recourse. 50
Section 15.5 Bankruptcy Claims. 51
Article 16 - NOTICES 51
Section 16.1 Notices. 51
Article 17 - APPLICABLE LAW 52
Section 17.1 Choice of Law. 52
Section 17.2 Usury Laws. 52
Section 17.3 Provisions Subject to Applicable Law. 53
Section 17.4 Inapplicable Provision. 53
Article 18 - SECONDARY MARKET 53
Section 18.1 Dissemination of Information. 53
Article 19 - COSTS 54
Section 19.1 Performance at Grantor's Expense. 54
Section 19.2 Attorney's Fees for Enforcement. 54
Article 20 - DEFINITIONS 55
Section 20.1 General Definitions. 55
Section 20.2 Headings, Etc. 55
Article 21 - MISCELLANEOUS PROVISIONS 55
Section 21.1 No Oral Change. 55
Section 21.2 Liability. 55
Section 21.3 Duplicate Originals; Counterparts. 55
Section 21.4 Number and Gender. 56
Section 21.5 Subrogation. 56
Section 21.6 Entire Agreement. 56
Article 22 - TRUSTEE PROVISIONS 56
Section 22.1 The Trustee. 56
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
a. ADA: Subsection 3.10(a);
b. Applicable Law: Subsection 3.10(a);
c. Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
d. Bankruptcy Code: Subsection 1.1(f);
e. Grantor: Preamble;
f. Business Day: Section 16.1;
g. Casualty Consultant: Subsection 4.4(b)(iii);
h. Casualty Retainage: Subsection 4.4(b)(iii);
i. Collateral: Section 1.3;
j. Debt: Section 2.1;
k. Default Rate: Section 10.3;
l. Environmental Indemnity: Subsection 10.1(c);
m. Environmental Law: Section 12.1;
n. Environmental Liens: Section 12.2;
o. Environmental Report: Section 12.1;
p. ERISA: Subsection 4.2(a);
q. Escrow Fund: Section 3.5;
r. Event: Section 19.1;
s. Event of Default: Section 10.1;
t. Exculpated Parties: Section 15.1;
u. Force Majeure: Subsection 4.4(b);
v. Guarantor: Section 5.5;
w. Hazardous Substances: Section 12.1;
x. Improvements: Subsection 1.1(c);
y. Indemnified Parties: Section 13.1;
z. Indemnitor: Subsection 10.1(c);
aa. Independent Director: Subsection 4.3(c);
ab. Insurance Premiums: Subsection 3.3(b);
ac. Investor: Section 18.1;
ad. Land: Subsection 1.1(a);
ae. Lease Guaranty: Subsection 3.7(a);
af. Leases: Subsection 1.1(f);
ag. Beneficiary: Preamble;
ah. Loan Application: Section 5.15;
<PAGE>
ai. Losses: Section 13.1;
aj. Net Proceeds: Subsection 4.4(b);
ak. Net Proceeds Deficiency: Subsection 4.4(b)(v);
al. Note: Recitals;
am. Obligations: Section 2.3;
an. Other Charges: Subsection 3.4(a);
ao. Other Obligations: Section 2.2;
ap. Other Security Documents: Section 3.2;
aq. Participations: 18.1;
ar. Permitted Exceptions: Section 5.1;
as. Person: Section 20.1;
at. Personal Property: Subsection 1.1(e);
au. Policies/Policy: Subsection 3.3(b), 3.3(b);
av. Property: Section 1.1;
aw. Qualified Insurer: Subsection 3.3(b);
ax. Rating Agency: Subsection 3.3(b);
ay. Registrar: Section 18.2;
az. Release: Section 12.1;
ba. Remediation: Section 12.1;
bb. Rents: Subsection 1.1(f);
bc. Restoration: Subsection 3.3(d);
bd. Securities: Section 18.1;
be. Securitization: Section 18.1;
bf. Security Instrument: Preamble;
bg. Servicer: Section 6.2;
bh. SPE Member: Subsection 4.3(b);
bi. Taxes: Subsection 3.4(a); and
bj. Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
Principal Sum Secured: $12,300,000.00
THIS INDEMNITY DEED OF TRUST AND SECURITY AGREEMENT (the
"Security Instrument") is made as of the 13th day of April, 1999, by PR
MARYLANDER LLC, a Delaware limited liability company, having its principal place
of business at The Bellevue, Suite 300, 200 South Broad Street, Philadelphia,
Pennsylvania 19102, as mortgagor ("Grantor"), to JOSEPH M. ZABLOTSKI, a Maryland
resident, having an address c/o Commonwealth Land Title Insurance Company, 31
Light Street, Suite 500, Baltimore, Maryland 21202 ("Trustee"), for the benefit
of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, having an
address at 650 Dresher Road, Horsham, Pennsylvania 19044-8015, as beneficiary
("Beneficiary").
RECITALS:
Simultaneously herewith, Beneficiary has made a $12,300,000
loan (the "Loan") to PR Marylander Note, LLC, a Delaware limited liability
company ("Borrower"). The Loan is evidenced by the Borrower's Promissory Note of
even date herewith payable to the order of Beneficiary in the principal amount
of the Loan (which Promissory Note, together with any replacements or
substitutions therefor, and as such Promissory Note or any replacement or
substitution therefor may from time to time be extended, renewed, amended,
restated, supplemented or otherwise modified, is herein called the "Note"). The
payment of the Loan and the Note with interest and the performance of the Other
Security Documents are guaranteed by Grantor pursuant to the provisions of a
Guaranty dated the date hereof from Grantor to Beneficiary (which Guaranty, as
the same may from time to time be amended, restated, supplemented or otherwise
modified, is herein called the "Guaranty").
The obligations of Grantor under the Guaranty are contingent
and arise only after a default or an event of default has occurred under the
Note and demand for payment has been made under the Guaranty.
As a condition precedent to the making of the Loan to the
Borrower, Beneficiary has required that Grantor, by the execution and delivery
of this Security Instrument, secure the full and punctual payment of the Debt
and the Obligations, and the performance of the Guaranty, this Security
Instrument and the Other Security Instruments.
GRANTOR IS NOT PRIMARILY LIABLE UNDER THE NOTE
Article - GRANTS OF SECURITY
Section . Property Mortgaged. Grantor does hereby irrevocably
(i) mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey
to Beneficiary and to its successors and assigns with power of sale in
accordance with the terms and conditions hereof, for the use and benefit of
Beneficiary, and (ii) grant a security interest to Beneficiary and to its
successors and assigns with power of sale, in accordance with the terms and
conditions hereof, for the use and benefit of Beneficiary, in, the following
property, rights, interests and estates now owned, or hereafter acquired by
Grantor (collectively, the "Property"):
<PAGE>
() Land. The real property described in Exhibit A attached hereto and
made a part hereof (the "Land");
() Additional Land. All additional lands, estates and development
rights hereafter acquired by Grantor for use in connection with the Land and the
development of the Land that may, from time to time, by supplemental mortgage or
otherwise be expressly made subject to the lien of this Security Instrument;
() Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (the "Improvements");
() Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Grantor of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment, fixtures
(including, but not limited to all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Grantor, or in which Grantor has or shall have an
interest, now or hereafter located upon the Land or the Improvements, or
appurtenant thereto, and used in connection with the present or future operation
and occupancy of the Land and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Grantor, or in which
Grantor has or shall have an interest, now or hereafter located upon the Land
and the Improvements, or appurtenant thereto, or used in connection with the
present or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Grantor in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or states where any of the Property is located (the
"Uniform Commercial Code"), superior in lien to the lien of this Security
Instrument and all proceeds and products of the above;
<PAGE>
() Leases and Rents. All leases and other agreements affecting the use,
enjoyment or occupancy of all or any part of the Land or the Improvements
heretofore or hereafter entered into whether before or after the filing by or
against Grantor of any petition for relief under 11 U.S.C. ss. 101 et seq. (the
"Bankruptcy Code"), as the same may be amended from time to time (the "Leases")
and all right, title and interest of Grantor, its successors and assigns therein
and thereunder, including, without limitation, all guarantees, letters of credit
and any other credit support given by any guarantor in connection therewith,
cash or securities deposited under the Leases to secure the performance by the
lessees of their obligations thereunder and all rents, additional rents,
revenues, issues and profits (including all oil and gas or other mineral
royalties and bonuses) from the Land and the Improvements whether paid or
accruing before or after the filing by or against Grantor of any petition for
relief under the Bankruptcy Code (the "Rents") and all proceeds from the sale or
other disposition of the Leases and the right to receive and apply the Rents to
the payment of the Debt;
() Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain (including,
but not limited to any transfer made in lieu of or in anticipation of the
exercise of the right), or for a change of grade, or for any other injury to or
decrease in the value of the Property;
() Insurance Proceeds. All proceeds of and any unearned premiums on
any insurance policies covering the Property, including, without limitation, the
right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
() Tax Certiorari. All refunds, rebates or credits in connection with
a reduction in real estate taxes and assessments charged against the Property as
a result of Tax certiorari or any applications or proceedings for reduction;
() Rights. The right, in the name and on behalf of Grantor, to
commence any action or proceeding to protect the interest of Beneficiary in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with respect
to the Property;
() Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right, title and
interest of Grantor therein and thereunder, including, without limitation, the
right, while an Event of Default remains uncured, to receive and collect any
sums payable to Grantor thereunder;
<PAGE>
() Intangibles. All accounts, escrows, chattel paper, claims,
deposits, trade names, trademarks, servicemarks, logos, copyrights, goodwill,
books and records and all other general intangibles specific to or used in
connection with the operation of the Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, proceeds of
insurance and condemnation awards, into cash or liquidation claims;
() Other Rights. Any and all other rights of Grantor in and to the
items set forth in Subsections (a) through (m) above.
Section . Assignment of Leases and Rents. Grantor hereby
absolutely and unconditionally assigns to Beneficiary Grantor's right, title and
interest in and to all current and future Leases and Rents; it being intended by
Grantor that this assignment constitutes a present, absolute assignment and not
an assignment for additional security only. Nevertheless, subject to the terms
of this Section 1.2 and Section 3.7, Beneficiary grants to Grantor a revocable
license to collect and receive the Rents. Grantor shall hold the Rents, or a
portion thereof, sufficient to discharge all current sums due on the Debt, for
use in the payment of such sums.
Section . Security Agreement. This Security Instrument is
both a real property mortgage and a "security agreement" within the meaning of
the Uniform Commercial Code. The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Grantor in the Property. By executing and delivering this Security
Instrument, Grantor hereby grants to Beneficiary, as security for the
Obligations (defined in Section 2.3), a security interest in the Property to the
full extent that the Property may be subject to the Uniform Commercial Code
(said portion of the Property so subject to the Uniform Commercial Code, the
"Collateral").
Section . Pledge of Monies Held. Grantor hereby pledges to
Beneficiary, and grants to Beneficiary a security interest in, any and all
monies now or hereafter held by Beneficiary, including, without limitation, any
sums deposited in the Escrow Fund (defined in Section 3.5) and the Net Proceeds
(defined in Section 4.4), as additional security for the Obligations until
expended or applied as provided in this Security Instrument.
<PAGE>
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
unto the Trustee and its successors and assigns, in trust with power of sale in
accordance with the terms and conditions hereof, for the use and benefit of
Beneficiary, and the successors and assigns of Beneficiary, forever;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Grantor shall perform its obligations under the Guaranty at
the time and in the manner provided in the Guaranty and this Security
Instrument, shall well and truly perform the Other Obligations as set forth in
this Security Instrument and shall well and truly abide by and comply with each
and every covenant and condition set forth herein and in the Guaranty, these
presents and the estate hereby granted shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section . Debt. This Security Instrument and the grants,
assignments and transfers made in Article 1 are given for the purpose of
securing the payment of all amounts that become due under the Guaranty and the
performance of all covenants and obligations under the Guaranty (collectively,
the "Debt").
Section . Other Obligations. This Security Instrument and
the grants, assignments and transfers made in Article 1 are also given for the
purpose of securing the following (the "Other Obligations"):
() the performance of all Other Obligations of Grantor contained
herein;
() the performance of each obligation of Grantor contained in any
other agreement given by Grantor to Beneficiary which is for the purpose of
further securing the obligations secured hereby, and among amendments,
modifications and changes thereto; and
() the performance of each obligation of Grantor and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part of the
Note, this Security Instrument or the Other Security Documents.
Section . Debt and Other Obligations. Grantor's obligations
for the Guaranty and the performance of the Other Obligations shall be referred
to collectively below as the "Obligations."
<PAGE>
Article - GRANTOR COVENANTS
Grantor covenants and agrees with Trustee and Beneficiary
that:
Section . Payment Under Guaranty. Grantor will pay all
amounts due under the Guaranty at the time and in the manner provided in the
Guaranty and in this Security Instrument.
Section . Incorporation by Reference. All the covenants,
conditions and agreements contained in (a) the Guaranty and (b) all and any of
the documents other than the Guaranty or this Security Instrument now or
hereafter executed by Grantor and/or others and by or in favor of Beneficiary,
which wholly or partially secure or guaranty payment of the Guaranty or the
other Obligations (the "Other Security Documents"), are hereby made a part of
this Security Instrument to the same extent and with the same force as if fully
set forth herein.
Section . Insurance.
() Grantor shall obtain and maintain, or cause to be maintained,
insurance for Grantor and the Property providing at least the following
coverages:
() Property Insurance. Insurance with
respect to the Improvements and building equipment insuring against any peril
included within the classification "All Risks of Physical Loss" in amounts at
all times sufficient to prevent Beneficiary from becoming a co-insurer within
the terms of the applicable policies and under applicable law, but in any event
such insurance shall be maintained in an amount equal to the full insurable
value of the Improvements and building equipment, the term "full insurable
value" to mean the actual replacement cost of the Improvements and building
equipment (without taking into account any depreciation, and exclusive of
excavations, footings and foundations, landscaping and paving) determined
annually by an insurer, a recognized independent insurance broker or an
independent appraiser selected and paid by Grantor and in no event less than the
coverage required pursuant to the terms of any Lease. Absent such annual
adjustment, each policy shall contain inflation guard coverage insuring that the
policy limit will be increased over time to reflect the effect of inflation.
Grantor shall also maintain insurance against loss or damage to such furniture,
furnishings, fixtures, equipment and other items (whether personalty or
fixtures) included in the Property and owned by Grantor from time to time, to
the extent applicable, in the amount of the cost of replacing the same, in each
case, with inflation guard coverage to reflect the effect of inflation, or
annual valuation. Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the operation of
any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Beneficiary's approval. The maximum deductible shall be $10,000.00;
() Liability Insurance. Comprehensive
general liability insurance, including personal injury, bodily injury, death and
property damage liability, insurance against any and all claims, including all
legal liability to the extent insurable and imposed upon Beneficiary and all
court costs and attorneys' fees and expenses, arising out of or connected with
the possession, use, leasing, operation, maintenance or condition of the
Property in such amounts as are generally available at commercially reasonable
premiums and are generally required by institutional beneficiaries for
properties comparable to the Property but in no event for a combined single
limit of less than $5,000,000. During any construction of the Property,
Grantor's general contractor for such construction shall also provide the
insurance required in this Subsection b. Beneficiary hereby retains the right to
periodically review the amount of said liability insurance being maintained by
Grantor and to require an increase in the amount of said liability insurance
should Beneficiary deem an increase to be reasonably prudent under then existing
circumstances;
() Workers' Compensation Insurance. Statutory
workers' compensation insurance with respect to any work on or about the
Property covering all persons subject to the workers' compensation laws of the
state in which the Property is located;
() Business Interruption. Business interruption
and/or loss of "rental income" insurance in an amount sufficient to avoid any
co-insurance penalty and to provide proceeds which will cover a period of not
less than one (1) year from the date of casualty or loss with a six month
extended period of indemnity, the term "rental income" to mean the sum of (A)
the total then ascertainable Rents payable under the Leases and (B) the total
ascertainable amount of all other amounts to be received by Grantor from third
parties which are the legal obligation of the tenants, reduced to the extent
such amounts would not be received because of operating expenses not incurred
during a period of non-occupancy of that portion of the Property then not being
occupied. The amount of coverage shall be adjusted annually to reflect the rents
payable during the succeeding twelve (12) month period.
<PAGE>
() Boiler and Machinery Insurance. Broad form boiler
and machinery insurance (without exclusion for explosion) covering all boilers
or other pressure vessels, machinery, and equipment located in, on or about the
Property and insurance against loss of occupancy or use arising from any
breakdown in such amount per accident equal to the replacement value of the
improvements housing the machinery or $2,000,000 or such other amount reasonably
determined by Beneficiary. If one or more large HVAC units is in operation at
the Property, "System Breakdowns" coverage shall be required, as determined by
Beneficiary. Minimum liability coverage per accident must equal the value of
such unit(s);
() Flood Insurance. If required by
Subsection 5.6(a) hereof, flood insurance in an amount at least equal to the
lesser of (A) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the indebtedness secured hereby if replacement cost coverage is not available
for the type of building insured); or (B) the maximum insurance available under
the appropriate National Flood Insurance Administration program. The deductible
may not exceed $25,000.
() During the period of any construction, renovation
or alteration of the Improvements, the cost of which exceeds the lesser of 10%
of the principal amount of the Guaranty or $500,000, at Beneficiary's request, a
completed value, "All Risk" Builder's Risk form, or "Course of Construction"
insurance policy in non-reporting form for any Improvements under construction,
renovation or alteration in an amount approved by Beneficiary may be required.
During the period of any construction of any addition to the existing
Improvements, a completed value, "All Risk" Builder's Risk form or "Course of
Construction" insurance policy in non-reporting form, in an amount approved by
Beneficiary, shall be required.
() Other Insurance. Such other insurance with
respect to the Property or on any replacements or substitutions thereof or
additions thereto as may from time to time be required by Beneficiary against
other insurable hazards or casualties which at the time are commonly insured
against in the case of property similarly situated, including, without
limitation, sinkhole, mine subsidence, earthquake and environmental insurance,
due regard being given to the height and type of buildings, their construction,
location, use and occupancy.
<PAGE>
() All insurance provided for in Subsection 3.3(a) hereof
shall be obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25 million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Beneficiary (a "Rating Agency"), (each such insurer shall be referred to below
as a "Qualified Insurer"). All insurers providing insurance required by this
Security Instrument shall be authorized to issue insurance in the state in which
the Property is located. The Policy referred to in Subsection 3.3(a)(ii) above
shall name Beneficiary as an additional named insured and the Policy referred to
in Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all
proceeds be payable to Beneficiary as set forth in Section 4.4 hereof. The
Policies referred to in Subsections 3.3(a)(i), (v) and (vi) shall also contain:
(i) a standard "non-contributory mortgagee" endorsement or its equivalent
relating, inter alia, to recovery by Beneficiary notwithstanding the negligent
or willful acts or omission of Beneficiary. All Policies described in Subsection
3.3(a) above shall contain (i) a provision that such Policies shall not be
canceled or terminated, nor shall they expire, without at least thirty (30)
days' prior written notice to Beneficiary in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any mortgage, loss payees, additional insureds and named insureds
(other than Grantor). In the event that the Property or the Improvements
constitutes a legal non-conforming use under applicable building, zoning or land
use laws or ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with
a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. Certificates of insurance with respect to all renewal
and replacement Policies shall be delivered to Beneficiary not less than thirty
(30) days prior to the expiration date of any of the Policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums (the "Insurance Premiums"). Originals or certificates of
such replacement Policies shall be delivered to Beneficiary promptly after
Grantor's receipt thereof but in any case within thirty (30) days after the
effective date thereof. If Grantor fails to maintain and deliver to Beneficiary
copies of the Policies or certificates of insurance required by this Security
Instrument, upon ten (10) days' prior notice to Grantor, Beneficiary may procure
such insurance at Grantor's sole cost and expense.
() Grantor shall comply with all insurance requirements and
shall not bring or keep or permit to be brought or kept any article upon any of
the Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Grantor on or with respect to
any part of the Property pursuant to this Section 3.3.
<PAGE>
() If the Property shall be damaged or destroyed, in whole or
in part, by fire or other casualty, Grantor shall give prompt notice of such
damage to Beneficiary and provided that Grantor shall have received the Net
Proceeds, Grantor shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such fire or other
casualty, with such alterations as may be approved by Beneficiary (the
"Restoration") and otherwise in accordance with Section 4.4 of this Security
Instrument.
() The insurance coverage required under Section 3.3(a) may
be effected under a blanket policy or policies covering the Property and other
properties and assets not constituting a part of the security hereunder;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of such policy
that is allocated to the Property, and any sublimit in such blanket policy
applicable to the Property, and shall in any case comply in all other respects
with the requirements of this Section 3.3.
() The insurance coverage required under Subsection
3.3(a)(ii) may be satisfied by a layering of Commercial General Liability,
Umbrella and Excess Liability Policies, but in no event will the Commercial
General Liability policy be written for an amount less than $1,000,000 per
occurrences and $2,000,000 aggregate for bodily injury and property damage
liability.
() The delivery to Beneficiary of the insurance policies or
the certificates of insurance as provided above shall constitute an assignment
of all proceeds payable under such insurance as relating to the Property by
Grantor to Beneficiary as further security for the indebtedness secured hereby.
In the event of foreclosure of this Security Instrument, or other transfer of
title to the Property in extinguishment in whole or in part of the secured
indebtedness, all right, title and interest of Grantor in and to all proceeds
payable under such policies then in force concerning the Property shall
thereupon vest in the purchaser at such foreclosure, or in Beneficiary or other
transferee in the event of such other transfer of title. Approval of any
insurance by Beneficiary shall not be a representation of the solvency of any
insurer or the sufficiency of any amount of insurance.
() Beneficiary 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 Beneficiary has caused the insurance to be placed with the
insurer after failure of Grantor to furnish such insurance. Grantor shall not
obtain insurance for the Property in addition to that required by Beneficiary
without the prior written consent of Beneficiary, which consent will not be
unreasonably withheld provided that (i) Beneficiary is named insured on such
insurance, (ii) Beneficiary receives complete copies of all policies evidencing
such insurance, and (iii) such insurance complies with all of the applicable
requirements set forth herein.
<PAGE>
Section . Payment of Taxes, Etc. () Subject to the terms and
conditions of Section 3.5 hereof, Grantor shall pay by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Grantor will deliver to Beneficiary,
promptly upon Beneficiary's request, evidence satisfactory to Beneficiary that
the Taxes, Other Charges and utility service charges have been so paid or are
not then delinquent. Grantor shall not suffer and shall promptly cause to be
paid and discharged any lien or charge whatsoever which may be or become a lien
or charge against the Property. Except to the extent sums sufficient to pay all
Taxes and Other Charges have been deposited with Beneficiary in accordance with
the terms of this Security Instrument, Grantor shall furnish to Beneficiary paid
receipts for the payment of the Taxes and Other Charges prior to the date the
same shall become delinquent.
() After prior written notice to Beneficiary, Grantor, at its
own expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Taxes, provided that (i) no Event
of Default has occurred and is continuing under the Guaranty, this Security
Instrument or any of the Other Security Documents, (ii) Grantor is permitted to
do so under the provisions of any other mortgage, deed of trust or deed to
secure debt affecting the Property, (iii) such proceeding shall suspend the
collection of the Taxes from Grantor and from the Property or Grantor shall have
paid all of the Taxes under protest, (iv) such proceeding shall be permitted
under and be conducted in accordance with the provisions of any other instrument
to which Grantor is subject and shall not constitute a default thereunder, (v)
neither the Property nor any part thereof or interest therein will be in danger
of being sold, forfeited, terminated, canceled or lost, (vi) Grantor shall have
set aside adequate reserves for the payment of the Taxes, together with all
interest and penalties thereon, unless Grantor has paid all of the Taxes under
protest, and (vii) Grantor shall have furnished the security as may be required
in the proceeding, or as may be reasonably requested by Beneficiary to insure
the payment of any contested Taxes, together with all interest and penalties
thereon, taking into consideration the amount in the Escrow Fund available for
payment of Taxes.
<PAGE>
Section . Escrow Fund. At the option of Beneficiary,
Beneficiary may require Grantor to establish an Escrow Fund (defined below)
sufficient to discharge its obligations for the payment of Insurance Premiums
and Taxes pursuant to Sections 3.3 and 3.4 hereof. Initial deposits of Taxes and
Insurance Premiums shall be made by Grantor to Beneficiary in amounts determined
by Beneficiary in its discretion on the date hereof to be held by Beneficiary in
escrow. Additionally, Grantor shall pay to Beneficiary on the tenth (10th) day
of each calendar month (a) one-twelfth of an amount which would be sufficient to
pay the Taxes payable, or estimated by Beneficiary to be payable, upon the due
dates established by the appropriate taxing authority during the next ensuing
twelve (12) months and (b) one-twelfth of an amount which would be sufficient to
pay the Insurance Premiums due for the renewal of the coverage afforded by the
Policies upon the expiration thereof (the initial deposits together with the
amounts in (a) and (b) above shall be called the "Escrow Fund"). Grantor agrees
to notify Beneficiary immediately of any changes to the amounts, schedules and
instructions for payment of any Taxes and Insurance Premiums of which it has
obtained knowledge and authorizes Beneficiary or its agent to obtain the bills
for Taxes and Other Charges directly from the appropriate Tax authority. Monthly
payments to the Escrow Fund as required hereunder and the monthly payments of
interest or principal or both, payable pursuant to the Guaranty, shall be added
together and shall be paid as an aggregate sum by Grantor to Beneficiary.
Provided there are sufficient amounts in the Escrow Fund and no Event of Default
exists, Beneficiary shall be obligated to pay the Taxes and Insurance Premiums
as they become due on their respective due dates on behalf of Grantor by
applying the Escrow Fund to the payments of such Taxes and Insurance Premiums
required to be made by Grantor pursuant to Sections 3.3 and 3.4 hereof. If the
amount of the Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Sections 3.3 and 3.4 hereof, Beneficiary shall, in its
discretion, return any excess to Grantor or credit such excess against future
payments to be made to the Escrow Fund. In allocating such excess, Beneficiary
may deal with the person shown on the records of Beneficiary to be the owner of
the Property. If the Escrow Fund is not sufficient to pay the items set forth in
(a) and (b) above, Grantor shall promptly pay to Beneficiary, upon demand, an
amount which Beneficiary shall reasonably estimate as sufficient to make up the
deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by Beneficiary.
Section . Condemnation. Grantor shall promptly give
Beneficiary notice of the actual or threatened commencement of any condemnation
or eminent domain proceeding and shall deliver to Beneficiary copies of any and
all papers served in connection with such proceedings. Beneficiary may
participate in any such proceedings to the extent permitted by law. Upon an
Event of Default, Grantor shall deliver to Beneficiary all instruments requested
by it to permit such participation. Grantor shall, at its expense, diligently
prosecute any such proceedings, and shall consult with Beneficiary, its
attorneys and experts, and cooperate with them in the carrying on or defense of
any such proceedings. Grantor shall not make any agreement in lieu of
condemnation of the Property or any portion thereof without the prior written
consent of Beneficiary in each instance, which consent shall not be unreasonably
withheld or delayed in the case of a taking of an insubstantial portion of the
Property. Notwithstanding any taking by any public or quasi-public authority
through eminent domain or otherwise (including, but not limited to any transfer
made in lieu of or in anticipation of the exercise of such taking), Grantor
shall continue to pay the Debt at the time and in the manner provided for its
payment in the Guaranty and in this Security Instrument and the Debt shall not
be reduced until any award or payment therefor shall have been actually received
and applied by Beneficiary, after the deduction of expenses of collection, to
the reduction or discharge of the Debt. Beneficiary shall not be limited to the
interest paid on the award by the condemning authority but shall be entitled to
receive out of the award interest at the rate or rates provided herein or in the
Guaranty. If the Property or any portion thereof is taken by the power of
eminent domain, Grantor shall promptly commence and diligently prosecute the
Restoration of the Property and otherwise comply with the provisions of in
accordance with Section 4.4 of this Security Instrument. If the Property is
sold, through foreclosure or otherwise, prior to the receipt by Beneficiary of
the award or payment, Beneficiary shall have the right, whether or not a
deficiency judgment on the Guaranty shall have been sought, recovered or denied,
to receive the award or payment, or a portion thereof sufficient to pay the
Debt.
<PAGE>
Section . Leases and Rents. () Except as otherwise consented
to by Beneficiary, all Leases shall be written on a standard form of lease which
shall have been approved by Beneficiary. Upon request, Grantor shall furnish
Beneficiary with executed copies of all Leases. No material changes may be made
to the Beneficiary-approved standard lease without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld or delayed. All
proposed leases shall be subject to the prior approval of Beneficiary except
that all proposed leases which (i) are on the same form of lease which has been
approved by Beneficiary, (ii) are the result of an arms-length transaction,
(iii) which provide for rental rates comparable to existing market rates, (iv)
where space to be leased does not exceed more than ten percent (10%) of total
rentable space of the Property, (v) where the proposed tenant is an independent
third party not affiliated with the Grantor, and (vi) do not contain any terms
which would materially affect Beneficiary's rights under this Security
Instrument, the Guaranty or the Other Security Documents, shall not be subject
to the prior approval of Beneficiary. Notwithstanding subsections (ii), (iii)
and (v) above, Grantor may lease units to employees of Grantor, but the
aggregate number of units leased to such employees shall not exceed 1.5% of the
total number of units at the Property. Grantor (i) shall observe and perform all
the obligations imposed upon the lessor under the Leases if the failure to
perform or observe the same would materially and adversely affect the value of
the Property taken as a whole and shall not do or permit to be done anything to
impair the value of the Leases as security for the Debt; (ii) shall promptly
send copies to Beneficiary of all notices of default which Grantor shall send or
receive thereunder; (iii) shall enforce in a commercially reasonable manner all
of the terms, covenants and conditions contained in the Leases upon the part of
the lessee thereunder to be observed or performed; provided, however, with
respect to multifamily residential property, a residential Lease may be
terminated in the event of a default by the tenant thereunder; (iv) shall not
collect any of the Rents more than one (1) month in advance (provided that a
security deposit shall not be deemed rent collected in advance); (v) shall not
execute any other assignment of the lessor's interest in the Leases or the
Rents; (vi) shall not (A) materially alter, modify or change the terms of the
Leases without the prior written consent of Beneficiary, which consent shall not
be unreasonably withheld or delayed if the alteration, modification or change
does not materially and adversely affect the value of the Property taken as a
whole and provided further that such Lease, as altered, modified or changed, is
otherwise in compliance with the requirements of this Security Instrument, or
(B) cancel or terminate any Lease (except for defaults thereunder) of more than
ten (10%) percent of the rentable space of the Property or accept a surrender
thereof or convey or transfer or suffer or permit a conveyance or transfer of
the Land or of any interest therein so as to effect a merger of the estates and
rights of, or a termination or diminution of the obligations of, lessees
thereunder; (vii) shall not alter, modify or change the terms of any guaranty,
letter of credit or other credit support with respect to the Leases (the "Lease
Guaranty") or cancel or terminate such Lease Guaranty without the prior written
consent of Beneficiary; and (viii) shall not consent to any assignment of or
subletting under the Leases not in accordance with their terms, without the
prior written consent of Beneficiary. Notwithstanding the foregoing,
subdivisions (ii), (vi), (vii) and (viii) shall not apply to residential Leases
for space in a multifamily residential property.
<PAGE>
Section . Maintenance of Property. Grantor shall cause the
Property to be maintained in a good and safe condition and repair. The
Improvements and the Personal Property shall not be removed, demolished or
altered if the costs of same would exceed $500,000 (except for normal
replacement of the Personal Property) without the consent of Beneficiary.
Subject to Section 4.4(c) hereof, Grantor shall promptly repair, replace or
rebuild any part of the Property which may be destroyed by any casualty, or
become damaged, worn or dilapidated or which may be affected by any proceeding
of the character referred to in Section 3.6 hereof and shall complete and pay
for any structure at any time in the process of construction or repair on the
Land. Grantor shall not initiate, join in, acquiesce in, or consent to any
change in any private restrictive covenant, zoning law or other public or
private restriction, limiting or defining the uses which may be made of the
Property or any part thereof. If under applicable zoning provisions the use of
all or any portion of the Property is or shall become a nonconforming use,
Grantor will not cause or permit the nonconforming use or Improvement to be
discontinued or abandoned without the express written consent of Beneficiary.
Section . Waste. Grantor shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Grantor will not, without the prior
written consent of Beneficiary, permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of the Land, regardless of the depth thereof or the method of mining
or extraction thereof.
Section . Compliance With Laws. () Grantor shall promptly
comply with all existing and future federal, state and local laws, orders,
ordinances, governmental rules and regulations or court orders affecting the
Property, or the use thereof including, but not limited to, the Americans with
Disabilities Act ("ADA") (collectively, "Applicable Law").
() Grantor shall from time to time, upon Beneficiary's
request, provide Beneficiary with evidence reasonably satisfactory to
Beneficiary that the Property complies with all Applicable Laws or is exempt
from compliance with Applicable Laws.
() Notwithstanding any provisions set forth herein or in any
document regarding Beneficiary's approval of alterations of the Property,
Grantor shall not alter the Property in any manner which would materially
increase Grantor's responsibilities for compliance with Applicable Laws without
the prior written approval of Beneficiary. Beneficiary's approval of the plans,
specifications, or working drawings for alterations of the Property shall create
no responsibility or liability on behalf of Beneficiary for their completeness,
design, sufficiency or their compliance with Applicable Laws. The foregoing
shall apply to tenant improvements constructed by Grantor or by any of its
tenants. Beneficiary may condition any such approval upon receipt of a
certificate of compliance with Applicable Laws from an independent architect,
engineer, or other person acceptable to Beneficiary.
() Grantor shall give prompt notice to Beneficiary of the
receipt by Grantor of any notice related to a violation of any Applicable Laws
and of the commencement of any proceedings or investigations which relate to
compliance with Applicable Laws.
() After prior written notice to Beneficiary, Grantor, at
its own expense, may contest by appropriate legal proceeding, promptly initiated
and conducted in good faith and with due diligence, the Applicable Laws
affecting the Property, provided that (i) no Event of Default has occurred and
is continuing under the Guaranty, this Security Instrument or any of the Other
Security Documents; (ii) Grantor is permitted to do so under the provisions of
any other mortgage, deed of trust or deed to secure debt affecting the Property;
(iii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Grantor is subject and
shall not constitute a default thereunder; (iv) neither the Property nor any
part thereof or interest therein nor any of the tenants or occupants thereof
shall be affected in any material adverse way as a result of such proceeding;
and (v) Grantor shall have furnished to Beneficiary all other items reasonably
requested by Beneficiary.
<PAGE>
Section . Books and Records. () Grantor and any Guarantors
and Indemnitors shall keep adequate books and records of account in accordance
with the methods utilized by them as of the date hereof, consistently applied
and furnish to Beneficiary:
() quarterly certified rent rolls signed and dated by
Grantor, detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Beneficiary, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing
the total revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Grantor in the form
required by Beneficiary, and if available (i.e., Grantor shall have no
obligation to deliver unless same is available to Grantor), any quarterly
operating statement and/or balance sheet prepared by an independent certified
public accountant within thirty (30) days after the close of each fiscal
quarter.
() an annual balance sheet and profit and loss statement of
Grantor, any Guarantors and any Indemnitors, in the form required by
Beneficiary, prepared and certified by the respective Grantor, Guarantor and/or
Indemnitor, as applicable, within ninety (90) days after the close of each
fiscal year;
() an annual certified rent roll presented on a quarterly
basis consistent with the quarterly certified rent rolls described above within
ninety (90) days after the close of each fiscal year;
() an annual operating budget presented on a monthly basis
consistent with the annual operating statement described above for the Property
and all proposed capital replacements and improvements at least thirty (30) days
prior to the start of each calendar year; and
() such other financial statements, including monthly
operating statements and rent rolls, as Beneficiary may reasonably request.
() Upon reasonable request from Beneficiary, Grantor and its
affiliates shall furnish to Beneficiary:
<PAGE>
() a property management report for the Property, showing
the number of inquiries made and/or rental applications received from tenants or
prospective tenants and deposits received from tenants and any other information
requested by Beneficiary, in reasonable detail and certified by Grantor under
penalty of perjury to be true and complete, but no more frequently than
quarterly; and
() an accounting of all security deposits held in connection
with any Lease of any part of the Property, including the name and
identification number of the accounts in which such security deposits are held,
the name and address of the financial institutions in which such security
deposits are held and the name of the person to contact at such financial
institution, along with any authority or release necessary for Beneficiary to
obtain information regarding such accounts directly from such financial
institutions.
() Grantor and its affiliates and any Guarantor and
Indemnitor shall furnish Beneficiary with such other additional financial or
management information as may, from time to time, be reasonably required by
Beneficiary in form and substance satisfactory to Beneficiary.
Section . Payment For Labor and Materials. Grantor will
promptly pay when due all bills and costs for labor, materials, and specifically
fabricated materials incurred in connection with the Property and never permit
to exist beyond the due date thereof in respect of the Property or any part
thereof any lien or security interest, even though inferior to the liens and the
security interests hereof, and in any event never permit to be created or exist
in respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section . Performance of Other Agreements. Grantor shall
observe and perform each and every term to be observed or performed by Grantor
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Property.
Section . Change of Name, Identity or Structure. Grantor
will not change Grantor's name, identity (including its trade name or names) or,
if not an individual, Grantor's corporate, partnership or other structure
without notifying the Beneficiary of such change in writing at least thirty (30)
days prior to the effective date of such change and, in the case of a change in
Grantor's structure, without first obtaining the prior written consent of the
Beneficiary.
<PAGE>
Section . Existence. Grantor will continuously maintain (a)
its existence and shall not dissolve or permit its dissolution, (b) its rights
to do business in the state where the Property is located and (c) its franchises
and trade names.
Article - SPECIAL COVENANTS
Grantor covenants and agrees with Beneficiary that:
Section . Property Use. The Property shall be used only for
multifamily apartments, except for limited retail and other commercial use,
provided same does not exceed, in the aggregate, more than six percent (6%) of
the gross leaseable area of the Property, and for no other use without the prior
written consent of Beneficiary, which consent may be withheld in Beneficiary's
discretion.
Section . ERISA. () It shall not engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Beneficiary of any of its rights under the Guaranty, this
Security Instrument and the Other Security Documents) to be a non-exempt (under
a statutory or administrative class exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
() Grantor further covenants and agrees to deliver to
Beneficiary such certifications or other evidence from time to time throughout
the term of this Security Instrument, as requested by Beneficiary in its sole
discretion, that (i) Grantor is not an "employee benefit plan" as defined in
Section 3(32) of ERISA, which is subject to Title I of ERISA, or a "governmental
plan" within the meaning of Section 3(32) of ERISA; (ii) Grantor is not subject
to state statutes regulating investments and fiduciary obligations with respect
to governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Grantor are publicly offered securities,
within the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests
in Grantor are held by "benefit plan investors" within the meaning
of 29 C.F.R. ss. 2510.3-101(f)(2); or
(C) Grantor qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. ss.
2510.3-101(c) or (e) or an investment company registered under The
Investment Company Act of 1940.
Section . Single Purpose Entity. () It has not and shall
not:
() engage in any business or activity other than the
ownership, operation and maintenance of the Property, and activities incidental
thereto;
() acquire or own any material assets other than (A)
the Property, and (B) such incidental Personal Property as may be necessary for
the operation of the Property;
() merge into or consolidate with any person or
entity or dissolve, terminate or liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change its legal
structure, without in each case Beneficiary's consent;
() fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the laws
of the jurisdiction of its organization or formation, or without the prior
written consent of Beneficiary, amend, modify, terminate or fail to comply with
the provisions of Grantor's Partnership Agreement, Articles or Certificate of
Incorporation, Operating Agreement or similar organizational documents, as the
case may be, as same may be further amended or supplemented, if such amendment,
modification, termination or failure to comply would adversely affect the
ability of Grantor to perform its obligations hereunder, under the Guaranty or
under the Other Security Documents;
() own any subsidiary or make any investment in, any
person or entity without the consent of Beneficiary;
() commingle its assets with the assets of any of
its general partners, members, shareholders, affiliates, principals or of any
other person or entity;
<PAGE>
() incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than the Debt and
trade payables incurred in the ordinary course of business, provided same are
paid when due, and that certain Promissory Note made by Grantor in favor of
Borrower, dated as of the date of hereof, in the original principal amount of
$12,300,000;
() fail to maintain its records, books of account
and bank accounts separate and apart from those of the general partners,
members, shareholders, principals and affiliates of Grantor, the affiliates of a
general partner or member, or shareholder of Grantor, and any other person or
entity;
() enter into any contract or agreement with any
general partner, member, shareholder, principal or affiliate of Grantor,
Guarantor or Indemnitor, or any general partner, member, principal or affiliate
thereof, except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than any general partner, member, shareholder,
principal or affiliate of Grantor, Guarantor or Indemnitor, or any general
partner, member, principal or affiliate thereof;
() seek the dissolution or winding up in whole, or
in part, of Grantor;
() maintain its assets in such a manner that it will
be costly or difficult to segregate, ascertain or identify its individual assets
from those of any general partner, member, shareholder, principal or affiliate
of Grantor, or any general partner, member, shareholder, principal or affiliate
thereof or any other person;
() hold itself out to be responsible for the debts
of another person;
() make any loans or advances to any third party,
including any general partner, member, shareholder, principal or affiliate of
Grantor, or any general partner, principal or affiliate thereof;
() fail to file its own tax returns;
() agree to, enter into or consummate any
transaction which would render Grantor unable to furnish the certification or
other evidence referred to in Section 4.2(b) hereof;
<PAGE>
() fail either to hold itself out to the public as a
legal entity separate and distinct from any other entity or person or to conduct
its business solely in its own name in order not (A) to mislead others as to the
identity with which such other party is transacting business, or (B) to suggest
that Grantor is responsible for the debts of any third party (including any
general partner, principal or affiliate of Grantor, or any general partner,
principal or affiliate thereof);
() fail to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations; or
() file or consent to the filing of any petition,
either voluntary or involuntary, to take advantage of any applicable insolvency,
bankruptcy, liquidation or reorganization statute, or make an assignment for the
benefit of creditors.
() If Grantor is a limited liability company or a limited
liability company, each general partner or at least one member (the "SPE
Member") of Grantor, as applicable, is a corporation or limited liability
company whose sole asset is its interest in Grantor and each general partner or
the SPE Member of Grantor, as applicable, will at all times comply, and will
cause Grantor to comply, with each of the covenants, terms and provisions
contained in Section 4.3(a) as if such representation, warranty or covenant was
made directly by such general partner or SPE Member. Only the SPE Member may be
designated as a manager under the law where the Grantor is organized.
() Grantor shall at all times cause there to be at least one
duly appointed member of the board of directors (an "Independent Director") of
each general partner of Grantor (or of the SPE Member of Grantor) reasonably
satisfactory to Beneficiary who shall not have been at the time of such
individual's initial appointment, and may not have been at any time during the
preceding five years, and shall not be at any time while serving as a director
of the general partner (or SPE Member) either (i) a shareholder of, or an
officer, director (other than an Independent Director), partner or employee of,
Grantor or any of its shareholders, partners, members, subsidiaries or
affiliates, (ii) a customer of, or supplier to, Grantor or any of its
shareholders, partners, members, subsidiaries or affiliates, (iii) a person or
other entity controlling or under common control with any such shareholder,
officer, director, partner, member, employee, supplier or customer, or (iv) a
member of the immediate family of any such shareholder, officer, director,
partner, member, employee, supplier or customer. As used herein, the term
"control": means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policy of a person or entity,
whether through ownership of voting securities, by contract or otherwise.
() Grantor shall not cause or permit the board of directors
of the general partner of Grantor (or of the SPE Member of Grantor) to take any
action which, under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a vote of the
board of directors of the general partner of Grantor (or the SPE Member of
Grantor) unless at the time of such action there shall be at least one member of
the board of directors who is an Independent Director.
<PAGE>
Section . Restoration After Casualty/Condemnation. In the
event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed
$500,000 ("Casualty Amount"); (ii) the costs of completing the Restoration as
reasonably estimated by Grantor shall be less than or equal to the Casualty
Amount; (iii) no Event of Default shall have occurred and be continuing under
the Guaranty, this Security Instrument or any of the Other Security Documents;
(iv) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws, ordinances,
rules and regulations (including, without limitation, all applicable
Environmental Laws (defined in Section 12.1); and (v) such fire or other
casualty or taking, as applicable, does not materially impair access to the
Property or the Improvements, then the Net Proceeds will be disbursed directly
to Grantor and Grantor shall commence and diligently prosecute to completion,
subject to Force Majeure (defined herein), the Restoration of the Property to as
nearly as possible the condition it was in immediately prior to such fire or
other casualty or to such taking. Except upon the occurrence and continuance of
an Event of Default, Grantor shall settle any insurance claims with respect to
the Net Proceeds which in the aggregate are less than or equal to the Casualty
Amount. Beneficiary shall have the right to participate in and reasonably
approve any settlement for insurance claims with respect to the Net Proceeds
which in the aggregate are equal to or greater than the Casualty Amount. If an
Event of Default shall have occurred and be continuing, Grantor hereby
irrevocably empowers Beneficiary, in the name of Grantor as its true and lawful
attorney-in-fact, to file and prosecute such claim and to collect and to make
receipt for any such payment. If the Net Proceeds are received by Grantor, such
Net Proceeds shall, until the completion of the related work, be held in trust
for Beneficiary and shall be segregated from other funds of Grantor to be used
to pay for the cost of the Restoration in accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount,
such Net Proceeds shall, subject to the provisions of the Leases that are
superior to the lien of this Security Instrument or with respect to which
subordination, non-disturbance agreements binding upon Beneficiary have entered
into concerning the deposits of Net Proceeds, be forthwith paid to Beneficiary
to be held by Beneficiary in a segregated account to be made available to
Grantor for the Restoration in accordance with the provisions of this Subsection
4.4(b). Subject to Section 4.4(c) hereof, Grantor shall commence and diligently
prosecute to completion, subject to Force Majeure (defined below), the
Restoration (in the case of a taking, to the extent the Property is capable of
being restored). The term "Net Proceeds" for purposes of this Section 4.4 shall
mean: (i) the net amount of all insurance proceeds received by Beneficiary under
the Policies carried pursuant to Subsections 3.3(a)(i), (iv), (v), (vi) and
(vii) of this Security Instrument as a result of such damage or destruction,
after deduction of its reasonable costs and expenses (including, but not limited
to reasonable counsel fees), if any, in collecting the same, or (ii) the net
amount of all awards and payments received by Beneficiary with respect to a
taking referenced in Section 3.6 of this Security Instrument, after deduction of
its reasonable costs and expenses (including, but not limited to reasonable
counsel fees), if any, in collecting the same, whichever the case may be. The
term "Force Majeure" for the purpose of this Section 4.4 shall have the
following meaning: Grantor shall be excused for the period of any delay in the
performance of any obligations hereunder when prevented from so doing by cause
or causes beyond Grantor's control such as, without limitation, all labor
disputes, civil commotion, war, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, fire or other casualty, inability to obtain any materials or services,
and acts of God.
<PAGE>
() If the Net Proceeds are greater than the Casualty Amount,
the Net Proceeds shall be made available to Grantor for payment of, or
reimbursement of Grantor's expenses in connection with, the Restoration, subject
to the following conditions:
(A) no Event of Default shall have occurred
and be continuing under the Guaranty, this Security Instrument
or any of the Other Security Documents;
(B) Beneficiary shall, within a reasonable
period of time prior to request for initial disbursement, be
furnished with an estimate of the cost of the Restoration
accompanied by an independent architect's certification as to
such costs and appropriate plans and specifications for the
Restoration;
(C) the Net Proceeds, together with any cash
or cash equivalent deposited by Grantor with Beneficiary, are
sufficient to cover the cost of the Restoration as such costs
are certified by the independent architect;
(D) (1) in the event that the Net Proceeds
are insurance proceeds, less than fifty percent (50%) of the
total floor area of the Improvements has been damaged or
destroyed, or rendered unusable as a result of such fire or
other casualty; or (2) in the event that the Net Proceeds are
condemnation awards, less than fifty percent (50%) of the Land
constituting the Property is taken, such Land that is taken is
located along the perimeter or periphery of the Property and
no portion of the Improvements is located in such Lands;
(E) Beneficiary shall be satisfied that any
operating deficits, including all scheduled payments of
principal and interest under the Guaranty which will be
incurred with respect to the Property as a result of the
occurrence of any such fire or other casualty or taking,
whichever the case may be, will be covered out of (1) the Net
Proceeds, or (2) other funds of Grantor;
(F) Beneficiary shall be satisfied that, upon
the completion of the Restoration and related lease-up, if
applicable, the net cash flow of the Property will be restored
to a level sufficient to cover all carrying costs and
operating expenses of the Property, including, without
limitation, debt service on the Guaranty at a coverage ratio
(on a "normalized" basis, i.e., after deducting replacement
reserve requirements and reserves for tenant improvements and
leasing commissions from net operating income, whether or not
such sums are escrowed with Beneficiary) of at least 1.30 :
1.0 (assuming an interest rate equal to 9.0% per annum), or,
if lower, the coverage ratio which existed as of the date
immediately preceding such casualty or taking as the case may
be;
(G) the Restoration can reasonably be
completed on or before the earliest to occur of (1) six (6)
months prior to the Maturity Date (as defined in the
Guaranty), (2) the earliest date required for such completion
under the terms of any Lease and (3) such time as may be
required under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the Property to as
nearly as possible the condition it was in immediately prior
to such fire or other casualty or to such taking, as
applicable;
(H) the Property and the use thereof after
the Restoration will be in compliance with, and permitted
under, all applicable zoning laws, ordinances, rules and
regulations (including, without limitation, all applicable
Environmental Laws (defined in Section 12.1)); and
(I) such fire or other casualty or taking, as
applicable, does not materially impair access to the Property
or the Improvements.
<PAGE>
() If the Net Proceeds exceed the Casualty Amount, the Net
Proceeds shall be held by Beneficiary and, until disbursed in accordance with
the provisions of this Subsection 4.4(b), shall constitute additional security
for the Obligations. The Net Proceeds other than the Net Proceeds paid under the
Policy described in Subsection 3.3(a)(iv) shall be disbursed by Beneficiary to,
or as directed by, Grantor from time to time during the course of the
Restoration, upon receipt of evidence satisfactory to Beneficiary that (A) all
materials installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there exist no notices of
pendency, stop orders, mechanic's or materialman's liens or notices of intention
to file same, or any other liens or encumbrances of any nature whatsoever on the
Property arising out of the Restoration which have not either been fully bonded
and discharged of record or in the alternative fully insured to the satisfaction
of Beneficiary by the title company insuring the lien of this Security
Instrument.
() If the Net Proceeds exceed the Casualty Amount,
Beneficiary shall have the use of the plans and specifications and all permits,
licenses and approvals required or obtained in connection with the Restoration.
If the Net Proceeds exceed the Casualty Amount, the identity of the contractors,
subcontractors and materialmen engaged in the Restoration, as well as the
contracts under which they have been engaged, shall be subject to prior review
and acceptance by Beneficiary and an independent consulting engineer selected by
Beneficiary (the "Casualty Consultant"), such acceptance not to be unreasonably
withheld or delayed. All costs and expenses incurred by Beneficiary in
connection with making the Net Proceeds available for the Restoration including,
without limitation, reasonable counsel fees and disbursements and the Casualty
Consultant's fees, shall be paid by Grantor.
In no event shall Beneficiary be obligated to make disbursements of the
Net Proceeds in excess of an amount equal to the costs actually incurred from
time to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Beneficiary that 50% of the required Restoration has been completed. There shall
be no Casualty Retainage with respect to costs actually incurred by Grantor for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Grantor from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Beneficiary that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Beneficiary receives evidence satisfactory to Beneficiary that the costs of
the Restoration have been paid in full or will be paid in full out of the
Casualty Retainage, provided, however, that Beneficiary will release the portion
of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which the Casualty Consultant certifies to Beneficiary that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the contractor's,
subcontractor's or materialman's contract, and the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or materialman as may be reasonably
requested by Beneficiary or by the title company insuring the lien of this
Security Instrument. If required by Beneficiary, the release of any such portion
of the Casualty Retainage shall be approved by the surety company, if any, which
has issued a payment or performance bond with respect to the contractor,
subcontractor or materialman.
() Beneficiary shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every calendar
month.
() If at any time the Net Proceeds or the
undisbursed balance thereof shall not, in the opinion of Beneficiary, be
sufficient to pay in full the balance of the costs which are estimated by the
Casualty Consultant to be incurred in connection with the completion of the
Restoration, Grantor shall deposit the deficiency (the "Net Proceeds
Deficiency") with Beneficiary before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Beneficiary
shall be held by Beneficiary and shall be disbursed for costs actually incurred
in connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Subsection 4.4(b) shall constitute additional security for the Obligations.
<PAGE>
() The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited with
Beneficiary after the Casualty Consultant certifies to Beneficiary that the
Restoration has been completed in accordance with the provisions of this
Subsection 4.4(b), and the receipt by Beneficiary of evidence satisfactory to
Beneficiary that all costs incurred in connection with the Restoration have been
paid in full, shall be remitted by Beneficiary to Grantor, provided no Event of
Default shall have occurred and shall be continuing under the Guaranty, this
Security Instrument or any of the Other Security Documents.
() All Net Proceeds not required (i) to be made available
for the Restoration or (ii) to be returned to Grantor as excess Net Proceeds
pursuant to Subsection 4.4(b)(vi) shall be retained and applied by Beneficiary
toward the payment of the Debt whether or not then due and payable in such
order, priority and proportions as Beneficiary in its discretion shall deem
proper or, at the discretion of Beneficiary, the same shall be paid, either in
whole or in part, to Grantor. If Beneficiary shall receive and retain Net
Proceeds, the lien of this Security Instrument shall be reduced only by the
amount received and retained by Beneficiary, and notwithstanding anything to the
contrary contained herein, Grantor shall have no further obligation thereafter
to commence or complete the Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Grantor represents and warrants to Beneficiary that:
Section . Warranty of Title. Grantor has good and marketable
title to the Property and has the right to mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey the same and Grantor possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Grantor shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Beneficiary against the claims of all
persons whomsoever.
Section . Authority. Grantor (and the undersigned
representative of Grantor, if any) has full power, authority and legal right to
execute this Security Instrument, and to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the Property pursuant to the terms hereof
and to keep and observe all of the terms of this Security Instrument on
Grantor's part to be performed.
Section . Legal Status and Authority. Grantor (a) is duly
organized, validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Grantor now
has and shall continue to have the full right, power and authority to operate
and lease the Property, to encumber the Property as provided herein and to
perform all of the other obligations to be performed by Grantor under the
Guaranty, this Security Instrument and the Other Security Documents.
Section . Validity of Documents. (a) The execution, delivery
and performance of the Guaranty, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Guaranty (i) are within the power
and authority of Grantor; (ii) have been authorized by all requisite
organizational action; (iii) have received all necessary approvals and consents,
corporate, governmental or otherwise; (iv) to the best of Grantor's knowledge,
will not violate, conflict with, result in a breach of or constitute (with
notice or lapse of time, or both) a default under any provision of law
(including, without limitation, any usury laws), any order or judgment of any
court or governmental authority, the articles of incorporation, by-laws,
partnership or operating agreement, or other governing instrument of Grantor, or
any indenture, agreement or other instrument to which Grantor is a party or by
which it or any of its assets or the Property is or may be bound or affected;
(v) will not result in the creation or imposition of any lien, charge or
encumbrance whatsoever upon any of its assets, except the lien and security
interest created hereby; and (vi) to the best of Grantor's knowledge, will not
require any authorization or license from, or any filing with, any governmental
or other body (except for the recordation of this instrument in appropriate land
records in the State where the Property is located and except for Uniform
Commercial Code filings relating to the security interest created hereby), and
(b) the Guaranty, this Security Instrument and the Other Security Documents
constitute the legal, valid and binding obligations of Grantor.
<PAGE>
Section . Litigation. There is no action, suit or proceeding,
judicial, administrative or otherwise (including any condemnation or similar
proceeding), pending or, to the best of Grantor's knowledge, threatened or
contemplated against Grantor, any person guaranteeing the payment of the Debt or
any portion thereof or performance by Grantor of any terms of this Security
Instrument (a "Guarantor"), if any, an Indemnitor (defined in Subsection
10.1(c)), if any, or against or affecting the Property that (a) has not been
disclosed to Beneficiary, and has a material, adverse effect on the Property or
Grantor's, any Guarantor's or any Indemnitor's ability to perform its
obligations under the Guaranty, this Security Instrument or the Other Security
Documents, or (b) is not adequately covered by insurance, each as determined by
Beneficiary in its sole and absolute discretion.
Section . Status of Property. () No portion of the
Improvements is located in an area identified by the Secretary of Housing and
Urban Development or any successor thereto as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, or the National Flood Insurance Reform Act of
1994, as each may be amended, or any successor law, or, if any portion of the
Improvements is now or at any time in the future located within any such area,
Grantor has obtained and will maintain the insurance prescribed in Section 3.3
hereof.
() Grantor has obtained all necessary certificates, licenses
and other approvals, governmental and otherwise, necessary for the operation of
the Property and the conduct of its business and all required zoning, building
code, land use, environmental and other similar permits or approvals, all of
which are in full force and effect as of the date hereof and, to the best of
Grantor's knowledge, not subject to revocation, suspension, forfeiture or
modification.
() To the best of Grantor's knowledge, and except as
expressly set forth in that certain Property Condition Survey of the Property,
dated April 1, 1999, prepared by Environmental Management Group, and that
certain Phase I Environmental Site Assessment of the Property, dated March 31,
1999, prepared by Environmental Management Group, the Property and the present
and contemplated use and occupancy thereof are in full compliance with all
Applicable Laws, including, without limitation, zoning ordinances, building
codes, land use and Environmental Laws, laws relating to the disabled (including
but not limited to, the ADA) and other similar laws.
() The Property is served by all utilities required for the
current or contemplated use thereof. All utility service is provided by public
utilities and the Property has accepted or is equipped to accept such utility
service.
() To the best of Grantor's knowledge, all public roads and
streets necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other
casualty.
() All costs and expenses of any and all labor, materials,
supplies and equipment used in the construction of the Improvements have been
paid in full.
<PAGE>
() Grantor has paid in full for, and is the owner of, all
furnishings, fixtures and equipment (other than tenants' property) used in
connection with the operation of the Property, free and clear of any and all
security interests, liens or encumbrances, except the lien and security interest
created hereby.
() To the best of Grantor's knowledge, all liquid and solid
waste disposal, septic and sewer systems located on the Property are in a good
and safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on
the certified rent roll delivered to Beneficiary have been collected by Grantor
except as Guarantyd on the certified rent roll.
() Grantor has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the
Property.
Section . No Foreign Person. Grantor is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of
1986, as amended and the related Treasury Department regulations, including
temporary regulations.
Section . Separate Tax Lot. The Property is assessed for
real estate tax purposes as one or more wholly independent tax lot or lots,
separate from any adjoining land or improvements not constituting a part of such
lot or lots, and no other land or improvements is assessed and taxed together
with the Property or any portion thereof.
Section . ERISA Compliance. () As of the date hereof and
throughout the term of this Security Instrument, (i) Grantor is not and will not
be an "employee benefit plan" as defined in Section 3(32) of ERISA, which is
subject to Title I of ERISA, and (ii) the assets of Grantor do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this
Security Instrument, (i) Grantor is not and will not be a "governmental plan"
within the meaning of Section 3(32) of ERISA, and (ii) transactions by or with
Grantor are not and will not be subject to state statutes applicable to Grantor
regulating investments of and fiduciary obligations with respect to governmental
plans.
Section . Leases. Except as disclosed in the certified rent
roll for the Property delivered to and approved by Beneficiary, or as otherwise
set forth on Exhibit B hereof, (a) Grantor is the sole owner of the entire
lessor's interest in the Leases; (b) the Leases are valid and enforceable; (c)
the terms of all alterations, modifications and amendments to the Leases are
reflected in the certified rent roll delivered to and approved by Beneficiary;
(d) none of the Rents reserved in the Leases have been assigned or otherwise
pledged or hypothecated (except to Beneficiary); (e) none of the Rents have been
collected for more than one (1) month in advance (provided that a security
deposit shall not be deemed rent collected in advance); (f) the premises demised
under the Leases have been completed and the tenants under the Leases have
accepted the same and have taken possession of the same on a rent-paying basis;
(g) to the best of Grantor's knowledge, there exist no offsets or defenses to
the payment of any portion of the Rents; (h) Grantor has received no notice from
any tenant challenging the validity or enforceability of any Lease; (i) all
payments due under the Leases are current and are consistent with the certified
rent roll for the Property delivered to and approved by Beneficiary; (j) to the
best of Grantor's knowledge, no tenant under any Lease is in default thereunder,
or is a debtor in any bankruptcy, reorganization, insolvency or similar
proceeding, or has demonstrated a history of payment problems which suggest
financial difficulty; (k) there are no agreements with the tenants under the
Leases other than expressly set forth in each Lease; (l) the Leases are valid
and enforceable against Grantor and, to the best of Grantor's knowledge, the
tenants set forth therein; (m) no Lease contains an option to purchase, right of
first refusal to purchase, or any other similar provision; (n) to the best of
Grantor's knowledge, no person or entity has any possessory interest in, or
right to occupy, the Property except under and pursuant to a Lease; (o) each
Lease (other than a residential Lease) is subordinate to this Security
Instrument, either pursuant to its terms or a recorded subordination agreement;
and (p) to the best of Grantor's knowledge, no brokerage commissions or finders
fees are due and payable regarding any Lease.
<PAGE>
Section . Financial Condition. () Grantor is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Grantor has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section . Business Purposes. The Guaranty is delivered
solely for the business purpose of Grantor, and is not for personal, family,
household, or agricultural purposes, and the proceeds of the Loan guaranteed by
the Guaranty will be used for commercial purposes pursuant to Section 12-103 of
the Commercial Law Article of the Annotated Code of Maryland.
Section . Taxes. Grantor, any Guarantor and any Indemnitor
have filed all federal, state, county, municipal, and city income and other tax
returns required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Grantor, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section . Mailing Address. Grantor's mailing address, as set
forth in the opening paragraph hereof or as changed in accordance with Article
16, is true and correct.
Section . No Change in Facts or Circumstances. All
information in the application for the loan submitted to Beneficiary (the "Loan
Application") and in all financing statements, rent rolls, reports, certificates
and other documents submitted in connection with the Loan Application or in
satisfaction of the terms thereof, are accurate, complete and correct in all
material respects. There has been no adverse change in any condition, fact,
circumstance or event that would make any such information materially
inaccurate, incomplete or otherwise misleading.
Section . Disclosure. To the best of Grantor's knowledge,
Grantor has disclosed to Beneficiary all material facts and has not failed to
disclose any material fact that could cause any representation or warranty made
herein to be materially misleading.
Section . Third Party Representations. To the best of
Grantor's knowledge, each of the representations and the warranties made by each
Guarantor and Indemnitor herein or in any Other Security Document(s) is true and
correct in all material respects.
Section . Illegal Activity. To the best of Grantor's
knowledge, no portion of the Property has been or will be purchased, improved,
fixtured, equipped or furnished with proceeds of any criminal or other illegal
activity and to the best of Grantor's knowledge, there are no illegal activities
or activities relating to controlled substance at the Property.
<PAGE>
Section . FUNB Line of Credit. No more than five (5)
Business Days after the expiration or earlier termination of, or concurrently
with the giving of notice by PREIT Associates, L.P. to the public that an event
of default has occurred under, that certain Revolving Credit Loan Agreement
between PREIT Associates, L.P. and Corestates Bank, N.A., as agent
(predecessor-in-interest to First Union National Bank, as agent), and First
Trust Savings Bank, Fleet Bank, N.A. and PNC Bank, as lenders, dated September
30, 1997, Grantor shall notify Beneficiary in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section . Relationship of Grantor and Beneficiary. The
relationship between Grantor and Beneficiary is solely that of guarantor and
creditor, and Beneficiary has no fiduciary or other special relationship with
Grantor, and no term or condition of any of the Guaranty, this Security
Instrument and the Other Security Documents shall be construed so as to deem the
relationship between Grantor and Beneficiary to be other than that of guarantor
and creditor.
Section . Servicing of the Loan. At the option of
Beneficiary, the loan secured hereby may be serviced by a servicer/trustee (the
"Servicer") selected by Beneficiary and Beneficiary may delegate all or any
portion of its responsibilities under the Guaranty, this Security Instrument,
and the Other Security Documents to the Servicer.
Article - FURTHER ASSURANCES
Section . Recording of Security Instrument, Etc. Grantor
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, will cause this Security Instrument and any of
the Other Security Documents creating a lien or security interest or evidencing
the lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Trustee and of Beneficiary in, the Property. Grantor will pay all taxes,
filing, registration or recording fees, and all expenses incident to the
preparation, execution, acknowledgment and/or recording of the Guaranty, this
Security Instrument, the Other Security Documents, any Guaranty or mortgage
supplemental hereto, any security instrument with respect to the Property and
any instrument of further assurance, and any modification or amendment of the
foregoing documents, and all federal, state, county and municipal taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Security Instrument, any mortgage supplemental
hereto, any security instrument with respect to the Property or any instrument
of further assurance, and any modification or amendment of the foregoing
documents, except where prohibited by law so to do.
<PAGE>
Section . Further Acts, Etc. Grantor will, at the cost of
Grantor, and without expense to Beneficiary, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as Beneficiary
shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Trustee (where
appropriate) and to Beneficiary, the property and rights hereby mortgaged,
granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Grantor may be or
may hereafter become bound to convey or assign to Trustee or to Beneficiary, or
for carrying out the intention or facilitating the performance of the terms of
this Security Instrument or for filing, registering or recording this Security
Instrument, or for complying with all Applicable Laws. Grantor, on demand, will
execute and deliver and hereby authorizes Beneficiary or Trustee to execute in
the name of Grantor or without the signature of Grantor to the extent
Beneficiary and Trustee may lawfully do so, one or more financing statements,
chattel mortgages or other instruments, to evidence or perfect more effectively
the security interest of Trustee or Beneficiary in the Property. Grantor grants
to Beneficiary an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available
to Trustee or Beneficiary pursuant to this Section 7.2.
Section . Intentionally Deleted.
Section . Estoppel Certificates. () After request by
Beneficiary, Grantor, within twenty (20) days, shall furnish Beneficiary or any
proposed assignee with a statement, duly acknowledged and certified, setting
forth (i) the amount of the original principal amount of the Guaranty, (ii) the
unpaid principal amount of the Guaranty, (iii) the rate of interest of the
Guaranty, (iv) the terms of payment and maturity date of the Guaranty, (v) the
date installments of interest and/or principal were last paid, (vi) that, except
as provided in such statement, there are no defaults or events which with the
passage of time or the giving of notice or both, would constitute an event of
default under the Guaranty or the Security Instrument, (vii) that the Guaranty
and this Security Instrument are valid, legal and binding obligations and have
not been modified or if modified, giving particulars of such modification,
(viii) whether any offsets or defenses exist against the obligations secured
hereby and, if any are alleged to exist, a detailed description thereof, (ix)
that all Leases are in full force and effect and (provided the Property is not a
residential multifamily property) have not been modified (or if modified,
setting forth all modifications), (x) the date to which the Rents thereunder
have been paid pursuant to the Leases, (xi) whether or not, to the best
knowledge of Grantor, any of the lessees under the Leases are in default under
the Leases, and, if any of the lessees are in default, setting forth the
specific nature of all such defaults, (xii) the amount of security deposits held
by Grantor under each Lease and that such amounts are consistent with the
amounts required under each Lease, and (xiii) as to any other matters reasonably
requested by Beneficiary and reasonably related to the Leases, the obligations
secured hereby, the Property or this Security Instrument.
<PAGE>
() Upon any transfer or proposed transfer contemplated by
Section 18.1 hereof, at Beneficiary's request, Grantor, any Guarantors and any
Indemnitors shall provide an estoppel certificate to the Investor (defined in
Section 18.1) or any prospective Investor confirming the accuracy of information
provided by such person to Beneficiary under or in respect of this Security
Instrument.
() After written request by Grantor not more than twice
annually, Beneficiary shall furnish Grantor a statement setting forth (i) the
amount of the original principal amount of the Guaranty, (ii) the unpaid
principal amount of the Guaranty, (iii) the rate of interest of the Guaranty,
(iv) the balance of the sums in the Escrow Fund, if any, and (v) to the best of
Beneficiary's knowledge, whether Grantor is currently in default.
Section . Flood Insurance. After Beneficiary's request,
Grantor shall deliver evidence satisfactory to Beneficiary that no portion of
the Improvements is situated in a federally designated "special flood hazard
area" or, if it is, that Grantor has obtained insurance meeting the requirements
of Section 3.3(a)(vi).
Section . Splitting of Security Instrument. This Security
Instrument and the Guaranty shall, at any time until the same shall be fully
paid and satisfied, at the sole election of Beneficiary, be split or divided
into two or more guarantees and two or more security instruments, each of which
shall cover all or a portion of the Property to be more particularly described
therein. To that end, Grantor, upon written request of Beneficiary, shall
execute, acknowledge and deliver to Beneficiary and/or its designee or designees
substitute guarantees and security instruments in such principal amounts,
aggregating not more than the then unpaid principal amount secured by this
Security Instrument, and containing terms, provisions and clauses no less
favorable to Grantor than those contained herein and in the Guaranty, and such
other documents and instruments as may be required by Beneficiary to effect the
splitting of the Guaranty and this Security Instrument.
Section . Replacement Documents. Upon receipt of an affidavit
of an officer of Beneficiary as to the loss, theft, destruction or mutilation of
the Guaranty or any Other Security Document which is not of public record, and,
in the case of any such mutilation, upon surrender and cancellation of such
Guaranty or Other Security Document, Grantor will issue, in lieu thereof, a
replacement Guaranty or Other Security Document, dated the date of such lost,
stolen, destroyed or mutilated Guaranty or Other Security Document in the same
principal amount thereof and otherwise of like tenor. Grantor shall not be
responsible to Beneficiary for Beneficiary's fees and expenses incurred in
connection with the transactions contemplated in this Section 7.7.
<PAGE>
Section . Amended Financing Statements. Grantor will execute
and deliver to the Beneficiary, prior to or contemporaneously with the effective
date of any such change, any financing statement or financing statement change
required by the Beneficiary to establish or maintain the validity, perfection
and priority of the security interest granted herein. At the request of the
Beneficiary, Grantor shall execute a certificate in form satisfactory to the
Beneficiary listing the trade names under which Grantor intends to operate the
Property, and representing and warranting that Grantor does business under no
other trade name with respect to the Property.
Article - DUE ON SALE/ENCUMBRANCE
Section . Beneficiary Reliance. Grantor acknowledges that
Beneficiary has examined and relied on the experience of Grantor and its general
partners, principals and (if Grantor is a trust) beneficial owners in owning and
operating properties such as the Property in agreeing to make the loan secured
hereby, and will continue to rely on Grantor's ownership of the Property as a
means of maintaining the value of the Property as security for Grantor's
performance under the Guaranty and the performance of the Other Obligations.
Grantor acknowledges that Beneficiary has a valid interest in maintaining the
value of the Property so as to ensure that, should Grantor default under the
Guaranty or the performance of the Other Obligations, Beneficiary can enforce
the Guaranty by a sale of the Property.
Section . No Sale/Encumbrance. Grantor agrees that Grantor
shall not, without the prior written consent of Beneficiary, sell, convey,
mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the
Property or any part thereof or permit the Property or any part thereof to be
sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred. Notwithstanding the foregoing, the Property may be
transferred with the prior written consent of Beneficiary which consent shall
not be unreasonably withheld in the case of a proposed transferee whose entity
status, creditworthiness and management ability meet standards consistently
applied by Beneficiary for approval of Grantors for similar properties under
mortgage loans secured by similar properties, provided that (i) only one such
transfer shall be permitted during the term of the Guaranty, (ii) prior to the
effective date of the transfer, the transferee shall execute and deliver to
Beneficiary a written assumption agreement in form and substance acceptable to
Beneficiary in its sole discretion, (iii) a transfer fee equal to one quarter of
one percent (.25%) of the outstanding principal balance of the Debt shall be
paid by Grantor to Beneficiary upon notice being given to Grantor of approval of
the proposed transfer (unless the proposed transferee is an affiliate of
Grantor, in which event no transfer fee shall be due and payable), (iv) no
transfer shall be permitted hereunder if an Event of Default, or an event which
with the giving of notice or lapse of time or both could become an Event of
Default, has occurred and is continuing, and (v) such transferee shall be a
single purpose bankruptcy remote entity and Grantor shall cause to be delivered
to Beneficiary a non-consolidation opinion or an update of the same, in form and
substance reasonably acceptable to Beneficiary, upon Beneficiary's request to do
so. Grantor agrees that Grantor shall not incur any debt, secured or unsecured,
direct or contingent (including guaranteeing any obligation), other than the
Debt and trade payables incurred in the ordinary course of business in
connection with the operation of the Property, provided same are paid when due.
<PAGE>
Section . Sale/Encumbrance Defined. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 8 shall be deemed to include, but not be limited to
(a) an installment sales agreement wherein Grantor agrees to sell the Property
or any part thereof for a price to be paid in installments; (b) an agreement by
Grantor leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Grantor's right, title and interest
in and to any Leases or any Rents; (c) if Grantor or any general partner or
managing member (or if no managing member, any member) of Grantor is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation's stock; (d) if Grantor or any general
partner or managing member (or if no managing member, any member) of Grantor is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest or the transfer or pledge of any partnership interest of
any limited partner or any profits or proceeds relating to any such partnership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Grantor, or the profits or proceeds relating
thereto, having been transferred or pledged; and (e) if Grantor or any general
partner or member of Grantor is a limited liability company, the change, removal
or resignation of a managing member or the transfer of the membership interest
of a managing member or any profits or proceeds relating to such membership
interest or the transfer or pledge of any membership interest of any other
member or any profits or proceeds relating to any such membership interest,
which, whether singly or in the aggregate, result in more than 49% of the
beneficial interests in Grantor, or the profits or proceeds relating thereto,
having been transferred or pledged. Notwithstanding the foregoing, the following
transfers shall not be deemed to be a sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer within the meaning of this
Article 8: (a) transfer by devise or descent or by operation of law upon the
death of a member, general partner or stockholder of Grantor, any Guarantor or
Indemnitor or any member or general partner thereof, (b) a sale, transfer or
hypothecation of a membership, partnership or shareholder interest in Grantor,
whichever the case may be, by a current member, general partner or shareholder,
as applicable, to an immediate family member (i.e., parents, spouses, siblings,
children or grandchildren) of such member, general partner or shareholder, or to
a trust for the benefit of an immediate family member of such member, general
partner or shareholder, and (c) a change in the form of organizational structure
or name of Grantor, provided that there is no transfer or change in the
ownership interests in Grantor, and provided further that Grantor shall remain
in full compliance with Section 4.3 of this Security Instrument, provided that,
as to each of clauses (a), (b) and (c) of this sentence, with respect to any
such sale, transfer or hypothecation, Grantor shall deliver a non-consolidation
opinion or an update of the same, in form and substance reasonably satisfactory
to Beneficiary, upon Beneficiary's request to do so.
Section . Beneficiary's Rights. Beneficiary reserves the
right to condition the consent required hereunder upon a modification of the
terms hereof and on assumption of the Guaranty, this Security Instrument and the
Other Security Documents as so modified by the proposed transferee, payment of a
transfer fee and all of Beneficiary's expenses incurred in connection with such
transfer, or such other conditions as Beneficiary shall determine in its sole
discretion to be in the interest of Beneficiary. Beneficiary shall not be
required to demonstrate any actual impairment of its security or any increased
risk of default hereunder in order to declare the Debt immediately due and
payable upon Grantor's sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer of the Property without Beneficiary's consent.
This provision shall apply to every sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of the Property regardless of
whether voluntary or not, or whether or not Beneficiary has consented to any
previous sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property.
Section . Right To Substitute Property. The terms and
conditions of this Article 8 shall be subject to Grantor's rights pursuant to
that certain letter dated the date hereof from Beneficiary to Grantor regarding
Grantor's rights to substitute security for the Debt. Inquiries regarding the
aforementioned letter shall be made to Grantor at the address set forth in
Article 16 below.
<PAGE>
Article - INTENTIONALLY DELETED
Article - DEFAULT
Section . Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of Default":
() if any amount due under the Guaranty is not paid on the
date same is due and/or if the Grantor fails to perform, observe or comply with
any of the provisions of the Guaranty to be performed, observed or complied
with;
() if Grantor violates or does not comply with any of the
provisions of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE
Member of Grantor violates or does not comply with any of the provisions of
Section 4.3;
() if any representation or warranty of Grantor, Indemnitor
(as defined in that certain Environmental Indemnity Agreement dated as of the
date hereof (the "Environmental Indemnity") or any Guarantor, or any member,
general partner, principal or beneficial owner of any of the foregoing, made
herein or in the Environmental Indemnity or in any guaranty, or in any
certificate, report, financial statement or other instrument or document
furnished to Beneficiary shall have been false or misleading in any material
respect when made;
() if any default occurs under any guaranty or indemnity
executed in connection herewith and such default continues after the expiration
of applicable grace periods, if any;
<PAGE>
() except for the specific defaults set forth in this Section
10.1, any other default hereunder or any of the Other Security Documents by
Grantor, which default is not cured (i) in the case of any default which can be
cured by the payment of a sum of money, within five (5) days after written
notice from Beneficiary to Grantor, or (ii) in the case of any other default,
within thirty (30) days after written notice from Beneficiary to Grantor;
provided that if such default cannot reasonably be cured within such thirty (30)
day period and Grantor shall have commenced to cure such default within such
thirty (30) day period and thereafter diligently and expeditiously proceeds to
cure the same, such thirty (30) day period shall be extended for so long as it
shall require Grantor in the exercise of due diligence to cure such default, it
being agreed that no such extension shall be for a period in excess of one
hundred twenty (120) days, unless, only in the case of cures that require
construction or remedial work, such cure cannot with diligence be completed
within such one hundred twenty (120) day period, in which case such period shall
be extended for an additional one hundred twenty (120) days;
() if Grantor or any Guarantor or Indemnitor shall make an
assignment for the benefit of creditors or if Grantor shall generally not be
paying its debts as they become due; or
() if the Policies are not kept in full force and effect, or
Grantor has not delivered evidence of the renewal of the Policies ten (10) days
prior to their expiration as provided in Section 3.3(b); or
() if (i) Grantor or any Guarantor or Indemnitor shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Grantor or any Guarantor or Indemnitor
shall make a general assignment for the benefit of its creditors'; or (ii) there
shall be commenced against Grantor or any Guarantor or Indemnitor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
ninety (90) days; or (iii) there shall be commenced against the Grantor or any
Guarantor or Indemnitor any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within ninety (90) days from the entry thereof; or (iv)
the Grantor or any Guarantor or Indemnitor shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Grantor or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
<PAGE>
Article - RIGHTS AND REMEDIES
Section . Remedies. () Upon the occurrence of any Event of
Default, Grantor agrees that Beneficiary, and when requested to do so by
Beneficiary, Trustee, may take such action, without notice or demand, as it
deems advisable to protect and enforce the rights of Beneficiary and Trustee
against Grantor and in and to the Property, including, but not limited to the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Beneficiary may determine, in its sole
discretion, without impairing or otherwise affecting the other rights and
remedies of Beneficiary:
() declare all amounts due under the Guaranty to be
immediately due and payable;
() institute proceedings, judicial or otherwise, for
the complete foreclosure of this Security Instrument under any applicable
provision of law in which case the Property or any interest therein may be sold
for cash or upon credit in one or more parcels or in several interests or
portions and in any order or manner;
() in connection with any such sale or sales of all
or any part of the Property as mentioned in subpart (ii) above, Grantor hereby
(A) assents to the passage of a decree or decrees for the sale or sales of all
or any part of the Property, and/or (B) authorizes and empowers the Trustee to
sell all or any part of the Property. Any sale of all or any part of the
Property, whether by way of assent to decree or power of sale, shall be carried
out in accordance with the applicable laws of the State of Maryland and rules of
court relating to foreclosures of deeds of trust which do not materially change
or impair the remedy. The assent to decree and power of sale herein granted
shall not be deemed to be exhausted in the event that a foreclosure proceeding
is dismissed, canceled or delayed before the Debt is paid in full. In the event
of default by any purchaser at any such sale, the Trustee shall have the power
to resell all or any part of the Property. In connection with any such sale, the
Trustee may procure such title and other reports, surveys, audits, inspections,
environmental studies, Tax histories and appraisals as necessary or desirable,
and may make such repairs and improvements to the Property as the Trustee deems
advisable, the cost of all of which shall constitute and be a part of the Debt.
In case of any such sale under this Security Instrument, the Property may be
sold as an entirety or in parcels, by one sale or by several sales, as may be
deemed by the Trustee to be appropriate and without regard to any right of
Grantor or any other person to the marshalling of assets. Immediately upon the
first insertion of the advertisement of the sale of all or any part of the
Property, there shall become due and owing by Grantor all costs and expenses
incident to such sale and a commission on the total amount of the Debt then due
equal to one-half of the percentage allowed as commission to trustees making
sales under orders or decrees of the equity court having jurisdiction, and no
person shall be required to receive only the aggregate amount of the Debt to the
date of payment unless the same is accompanied by a tender of such Debt and
commission. Any sale hereunder may be made at public auction, at such time or
times, at such place or places, and upon such terms and conditions and after
such previous public notice as the Trustee shall deem appropriate and
advantageous and as required by applicable laws. Upon the terms of such sale
being complied with, the Trustee shall convey to, and at the cost of, the
purchaser or purchasers the interest of Grantor in the Property so sold, free
and discharged of and from all estate, title or interest of Grantor, at law or
in equity, such purchaser or purchasers being hereby discharged from all
liability to see to the application of the purchase money;
<PAGE>
() sell for cash or upon credit the Property or any
part thereof and all estate, claim, demand, right, title and interest of Grantor
therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, as an entity or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law;
() subject to the provisions of Article 15,
institute an action, suit or proceeding in equity for the specific performance
of any covenant, condition or agreement contained herein, in the Guaranty or in
the Other Security Documents;
() subject to the provisions of Article 15, recover
judgment on the Guaranty either before, during or after any proceedings for the
enforcement of this Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee,
liquidator or conservator of the Property, without notice and without regard for
the adequacy of the security for the Debt and without regard for the solvency of
Grantor, any Guarantor, Indemnitor or of any person, firm or other entity liable
for the payment of the Debt;
() subject to any applicable law, the license
granted to Grantor under Section 1.2 shall automatically be revoked and
Beneficiary may enter into or upon the Property, either personally or by its
agents, nominees or attorneys and dispossess Grantor and its agents and servants
therefrom, without liability for trespass, damages or otherwise and exclude
Grantor and its agents or servants wholly therefrom, and take possession of all
books, records and accounts relating thereto and Grantor agrees to surrender
possession of the Property and of such books, records and accounts to
Beneficiary upon demand, and thereupon Beneficiary may (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all and every
part of the Property and conduct the business thereat; (B) complete any
construction on the Property in such manner and form as Beneficiary deems
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Property; (D) exercise all rights and powers of
Grantor with respect to the Property, whether in the name of Grantor or
otherwise, including, without limitation, the right to make, cancel, enforce or
modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents of the Property and every part thereof; (E) require Grantor to
pay monthly in advance to Beneficiary, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Grantor; (F) require Grantor to
vacate and surrender possession of the Property to Beneficiary or to such
receiver and, in default thereof, Grantor may be evicted by summary proceedings
or otherwise; and (G) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Beneficiary shall deem
appropriate in its sole discretion after deducting therefrom all expenses
(including reasonable attorneys' fees) incurred in connection with the aforesaid
operations and all amounts necessary to pay the Taxes, Other Charges, insurance
and other expenses in connection with the Property, as well as just and
reasonable compensation for the services of Beneficiary, its counsel, agents and
employees;
() exercise any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code, including,
without limiting the generality of the foregoing: (A) the right to take
possession of the Collateral or any part thereof, and to take such other
measures as Trustee or Beneficiary may deem necessary for the care, protection
and preservation of the Collateral, and (B) request Grantor at its expense to
assemble the Collateral and make it available to Trustee or Beneficiary at a
convenient place acceptable to Beneficiary. Any notice of sale, disposition or
other intended action by Beneficiary with respect to the Collateral sent to
Grantor in accordance with the provisions hereof at least five (5) days prior to
such action, shall constitute commercially reasonable notice to Grantor;
<PAGE>
() apply any sums then deposited in the Escrow Fund
and any other sums held in escrow or otherwise by Beneficiary in accordance with
the terms of this Security Instrument or any Other Security Document to the
payment of the following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the Debt;
(D) amortization of the unpaid balance of the Debt;
and all other sums payable pursuant to the Guaranty, this Security Instrument
and the Other Security Documents, including, without limitation, advances made
by Beneficiary pursuant to the terms of this Security Instrument;
() surrender the Policies maintained pursuant to
Article 3 hereof, collect the unearned Insurance Premiums and apply such sums as
a credit on the Debt in such priority and proportion as Beneficiary in its
discretion shall deem proper, and in connection therewith, Grantor hereby
appoints Beneficiary as agent and attorney-in-fact (which is coupled with an
interest and is therefore irrevocable) for Grantor to collect such Insurance
Premiums;
() apply the undisbursed balance of any Net Proceeds
or any Net Proceeds Deficiency deposit, together with interest thereon, to the
payment of the Debt in such order, priority and proportions as Beneficiary shall
deem to be appropriate in its discretion;
() prohibit Grantor and anyone claiming on behalf of
or through Grantor from making use of or withdrawing any sums from any lockbox
or similar account, if any;
() pursue such other remedies as Beneficiary may
have under applicable law.
() In the event of a sale, by foreclosure, power of sale, or
otherwise, of less than all of the Property, this Security Instrument shall
continue as a lien and security interest on the remaining portion of the
Property unimpaired and without loss of priority. Notwithstanding the provisions
of this Section 11.1 to the contrary, if any Event of Default as described in
Subsection 10.1 (h)(i) or (ii) shall occur, the entire unpaid Debt shall be
automatically due and payable, without any further notice, demand or other
action by Beneficiary.
() Beneficiary may adjourn from time to time any
sale by it to be made under or by virtue of this Security Instrument by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and, except as otherwise provided by any applicable provision of
law, Beneficiary, without further notice or publication, may make such sale at
the time and place to which the same shall be so adjourned.
() Upon any sale made under or by virtue of this Section
11.1, whether made under a power of sale or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Beneficiary may
bid for and acquire the Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the Debt
the net sales price after deducting therefrom the expenses of the sale and costs
of the action and any other sums which Beneficiary is authorized to deduct under
this Security Instrument.
<PAGE>
Section . Application of Proceeds. The purchase
money, proceeds and avails of any disposition of the Property, or any part
thereof, or any other sums collected by Beneficiary pursuant to the Guaranty,
this Security Instrument or the Other Security Documents, may be applied by
Beneficiary to the payment of the Debt in such priority and proportions as
Beneficiary in its discretion shall deem proper.
Section . Right to Cure Defaults. Upon the occurrence of any
Event of Default, Beneficiary may, but without any obligation to do so and
without notice to or demand on Grantor and without releasing Grantor from any
obligation hereunder, cure the same in such manner and to such extent as
Beneficiary may deem necessary to protect the security hereof. Beneficiary is
authorized to enter upon the Property for such purposes, or appear in, defend,
or bring any action or proceeding to protect its interest in the Property or to
foreclose this Security Instrument or collect the Debt, and the cost and expense
thereof (including reasonable attorneys' fees to the extent permitted by law),
with interest as provided in this Section 11.3, shall constitute a portion of
the Debt and shall be due and payable to Beneficiary upon demand. All such costs
and expenses incurred by Beneficiary in remedying such Event of Default or in
appearing in, defending, or bringing any such action or proceeding shall bear
interest at the Default Rate (as defined in the Guaranty), for the period after
notice from Beneficiary that such cost or expense was incurred to the date of
payment to Beneficiary. All such costs and expenses incurred by Beneficiary
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by this Security Instrument and
the Other Security Documents and shall be immediately due and payable upon
demand by Beneficiary therefor.
Section . Actions and Proceedings. After the
occurrence and during the continuance of an Event of Default, Beneficiary has
the right to appear in and defend any action or proceeding brought with respect
to the Property and to bring any action or proceeding, in the name and on behalf
of Grantor, which Beneficiary, in its discretion, decides should be brought to
protect its interest in the Property.
Section . Recovery of Sums Required To Be Paid.
Beneficiary shall have the right from time to time to take action to recover any
sum or sums which constitute a part of the Debt as the same become due, without
regard to whether or not the balance of the Debt shall be due, and without
prejudice to the right of Beneficiary thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Grantor existing
at the time such earlier action was commenced.
Section . Examination of Books and Records. Beneficiary, its
agents, accountants and attorneys shall have the right upon prior written notice
to examine the records, books, management and other papers of Grantor and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Grantor, its
affiliates or any Guarantor or Indemnitor where the books and records are
located. Beneficiary and its agents shall have the right upon notice to make
copies and extracts from the foregoing records and other papers. In addition,
Beneficiary, its agents, accountants and attorneys shall have the right to
examine and audit the books and records of Grantor and its affiliates or of any
Guarantor or Indemnitor pertaining to the income, expenses and operation of the
Property during reasonable business hours at any office of Grantor, its
affiliates or any Guarantor or Indemnitor where the books and records are
located.
Section . Other Rights, Etc. () The failure of Beneficiary to
insist upon strict performance of any term hereof shall not be deemed to be a
waiver of any term of this Security Instrument. Grantor shall not be relieved of
Grantor's obligations hereunder by reason of (i) the failure of Beneficiary to
comply with any request of Grantor, any Guarantor or any Indemnitor to take any
action to foreclose this Security Instrument or otherwise enforce any of the
provisions hereof or of the Guaranty or the Other Security Documents, (ii) the
release, regardless of consideration, of the whole or any part of the Property,
or of any person liable for the Debt or any portion thereof, or (iii) any
agreement or stipulation by Beneficiary extending the time of payment or
otherwise modifying or supplementing the terms of the Guaranty, this Security
Instrument or the Other Security Documents.
<PAGE>
() It is agreed that the risk of loss or damage to
the Property is on Grantor, and Beneficiary shall have no liability whatsoever
for decline in value of the Property, for failure to maintain the Policies, or
for failure to determine whether insurance in force is adequate as to the amount
of risks insured. Possession by Beneficiary shall not be deemed an election of
judicial relief, if any such possession is requested or obtained, with respect
to any Property or collateral not in Beneficiary's possession.
() Beneficiary may resort for the payment of the
Debt to any other security held by Beneficiary in such order and manner as
Beneficiary, in its discretion, may elect. Beneficiary may take action to
recover the Debt, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Beneficiary thereafter to foreclose this
Security Instrument. The rights of Beneficiary under this Security Instrument
shall be separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Beneficiary shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision. Beneficiary shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity.
Section . Right to Release Any Portion of the Property.
Beneficiary, may release any portion of the Property for such consideration as
Beneficiary may require without, as to the remainder of the Property, in any way
impairing or affecting the lien or priority of this Security Instrument, or
improving the position of any subordinate lienholder with respect thereto,
except to the extent that the obligations hereunder shall have been reduced by
the actual monetary consideration, if any, received by Beneficiary for such
release, and may accept by assignment, pledge or otherwise any other property in
place thereof as Beneficiary may require without being accountable for so doing
to any other lienholder. This Security Instrument shall continue as a lien and
security interest in the remaining portion of the Property.
Section . Violation of Laws. If the Property is not
in compliance with Applicable Laws, Beneficiary may impose additional
requirements upon Grantor in connection herewith including, without limitation,
monetary reserves or financial equivalents.
Section . Recourse and Choice of Remedies. Notwithstanding
any other provision of this Security Instrument, including but not limited to
Article 15 hereof, Beneficiary and other Indemnified Parties (defined in Section
13.1 below) are entitled to enforce the obligations of Grantor, Guarantor and
Indemnitor contained in Sections 13.2, 13.3 and 13.4 without first resorting to
or exhausting any security or collateral and without first having recourse to
the Guaranty or any of the Property, through foreclosure or acceptance of a deed
in lieu of foreclosure or otherwise, and in the event Trustee or Beneficiary
commences a foreclosure action against the Property, Beneficiary is entitled to
pursue a deficiency judgment with respect to such obligations against Grantor,
Guarantor and Indemnitor. The provisions of Sections 13.2, 13.3 and 13.4 are
exceptions to any non-recourse or exculpation provisions in the Guaranty, this
Security Instrument or the Other Security Documents, and Grantor, Guarantor and
Indemnitor are fully and personally liable for the obligations pursuant to
Sections 13.2, 13.3 and 13.4. The liability of Grantor, Guarantor and Indemnitor
are not limited to the amounts due under the Guaranty. Notwithstanding the
foregoing, nothing herein shall inhibit or prevent Trustee or Beneficiary from
foreclosing pursuant to this Security Instrument or exercising any other rights
and remedies pursuant to the Guaranty, this Security Instrument and the Other
Security Documents, whether simultaneously with foreclosure proceedings or in
any other sequence. A separate action or actions may be brought and prosecuted
against Grantor, whether or not action is brought against any other person or
entity or whether or not any other person or entity is joined in the action or
actions. In addition, Beneficiary shall have the right but not the obligation to
join and participate in, as a party if it so elects, any administrative or
judicial proceedings or actions initiated in connection with any matter
addressed in Article 12 or Section 13.4.
Section . Right of Entry. Beneficiary and its agents
shall have the right upon prior written notice to enter and inspect the Property
at all reasonable times upon not less than five (5) Business Days' notice
(except in the case of emergencies when no notice shall be required) to Grantor.
<PAGE>
Article - ENVIRONMENTAL HAZARDS
Section . Environmental Representations and Warranties.
Grantor represents and warrants, based upon that certain Phase I Environmental
Site Assessment of the Property dated March 31, 1999, prepared by Environmental
Management Group, and information that Grantor knows, that: (a) there are no
Hazardous Substances (defined below) or underground storage tanks in, on, or
under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Beneficiary in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Beneficiary (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Grantor does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Grantor has truthfully and fully provided to Beneficiary, in writing,
any and all information relating to environmental conditions in, on, under or
from the Property that is known to Grantor and that is contained in Grantor's
files and records, including, but not limited to any reports relating to
Hazardous Substances in, on, under or from the Property and/or to the
environmental condition of the Property. "Environmental Law" means any present,
and for the purposes of Sections 12.2. 12.3 and 13.4 only, future, federal,
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or costs of
Remediation or prevention of Releases of Hazardous Substances or relating to
liability for or costs of other actual or threatened danger to human health or
the environment. "Environmental Law" includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including, but not limited to
Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act;
the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the
Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal
Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the Endangered Species Act; the National Environmental Policy Act; and the
River and Harbors Appropriation Act. "Environmental Law" also includes, but is
not limited to, any present, and for the purposes of Sections 12.2, 12.3 and
13.4 only, future, federal, state and local laws, statutes, ordinances, rules,
regulations and the like, as well as common law: conditioning transfer of
property upon a negative declaration or other approval of a governmental
authority of the environmental condition of the property; requiring notification
or disclosure of Releases of Hazardous Substances or other environmental
condition of the Property to any governmental authority or other person or
entity, whether or not in connection with transfer of title to or interest in
property. "Hazardous Substances" include but are not limited to any and all
substances (whether solid, liquid or gas) (i) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or regulatory
effect under any present, or for the purposes of Sections 12.2. 12.3 and 13.4
only, future, Environmental Laws or (ii) that may have a negative impact on
human health or the environment, including, but not limited to petroleum and
petroleum products, asbestos and asbestos-containing materials, polychlorinated
biphenyls, lead, radon, radioactive materials, flammables and explosives.
"Release" of any Hazardous Substance includes, but is not limited to any
release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping or disposing of
Hazardous Substances. "Remediation" includes, but is not limited to any
response, remedial removal, or corrective action, any activity to cleanup,
detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance,
any actions to prevent, cure or mitigate any Release of any Hazardous Substance,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances.
<PAGE>
Section . Environmental Covenants. Grantor covenants and
agrees that so long as the Grantor owns, manages, is in possession of, or
otherwise controls the operation of the Property: (a) all uses and operations on
or of the Property, whether by Grantor or any other person or entity, shall be
in compliance with all Environmental Laws and permits issued pursuant thereto;
(b) there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d) Grantor
shall keep the Property free and clear of all liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act or omission of
Grantor or any other person or entity (the "Environmental Liens"); (e) Grantor
shall, at its sole cost and expense, fully and expeditiously cooperate in all
activities pursuant to Section 12.3 below, including, but not limited to
providing all relevant information and making knowledgeable persons available
for interviews; (f) Grantor shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of environmental conditions
in connection with the Property, pursuant to any reasonable written request of
Beneficiary after Beneficiary has reason to believe this Section 12.2 has been
violated (including, but not limited to sampling, testing and analysis of soil,
water, air, building materials and other materials and substances whether solid,
liquid or gas), and share with Beneficiary the reports and other results
thereof, and Beneficiary and other Indemnified Parties (defined in Section 13.1)
shall be entitled to rely on such reports and other results thereof; (g) Grantor
shall, at its sole cost and expense, comply with all reasonable written requests
of Beneficiary to (i) reasonably effectuate Remediation of any condition
(including, but not limited to a Release of a Hazardous Substance) in, on, under
or from the Property, (ii) comply with any Environmental Law, (iii) comply with
any directive from any governmental authority, and (iv) take any other
reasonable action necessary or appropriate for protection of human health or the
environment; (h) Grantor shall not do or allow any tenant or other user of the
Property to do any act that materially increases the dangers to human health or
the environment, poses an unreasonable risk of harm to any person or entity
(whether on or off the Property), impairs or may impair the value of the
Property, is contrary to any requirement of any insurer, constitutes a public or
private nuisance, constitutes waste, or violates any covenant, condition,
agreement or easement applicable to the Property; and (i) Grantor shall
immediately notify Beneficiary in writing promptly after it has become aware of
(A) any presence or Releases or threatened Releases of Hazardous Substances in,
on, under, from or migrating towards the Property which is required to be
reported to a governmental authority under any Environmental Law, (B) any actual
Environmental Lien affecting the Property, (C) any required Remediation of
environmental conditions relating to the Property, and (D) any written or oral
notice or other communication of which Grantor becomes aware from any source
whatsoever (including, but not limited to a governmental entity) relating in any
way to Hazardous Substances or Remediation thereof, possible liability of any
person or entity pursuant to any Environmental Law, other environmental
conditions in connection with the Property, or any actual or threatened
administrative or judicial proceedings in connection with anything referred to
in this Article 12.
Section . Beneficiary's Rights. Beneficiary, its
environmental consultant, and any other person or entity designated by
Beneficiary, including, but not limited to any receiver and any representative
of a governmental entity, shall have the right, but not the obligation, at
intervals of not less than one year, or more frequently if the Beneficiary
reasonably believes that a Hazardous Substance or other environmental condition
violates or threatens to violate any Environmental Law, after notice to Grantor,
to enter upon the Property at all reasonable times to assess any and all aspects
of the environmental condition of the Property and its use, including, but not
limited to conducting any environmental assessment or audit of the Property or
portions thereof to confirm Grantor's compliance with the provisions of this
Article 12, and Grantor shall cooperate in all reasonable ways with Beneficiary
in connection with any such audit. Such audit shall be performed in a manner so
as to minimize interference with the conduct of business at the Property. If
such audit discloses that a violation of or a liability under any Environmental
Law exists or if such audit was required or prescribed by law, regulation or
governmental or quasi-governmental authority, Grantor shall pay all costs and
expenses incurred in connection with such audit; otherwise, the costs and
expenses of such audit shall, notwithstanding anything to the contrary set forth
in this Section, be paid by Beneficiary.
<PAGE>
Article - INDEMNIFICATION
Section . General Indemnification. Grantor shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, or punitive damages, of whatever kind or nature (including, but not
limited to attorneys' fees and other costs of defense) (the "Losses") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Beneficiary's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Guaranty, this Security Instrument, or any
Other Security Documents; (c) any and all lawful action that may be taken by
Beneficiary or Trustee in connection with the enforcement of the provisions of
this Security Instrument or the Guaranty or any of the Other Security Documents,
whether or not suit is filed in connection with same, or in connection with
Grantor, any Guarantor or Indemnitor and/or any member, partner, joint venturer
or shareholder thereof becoming a party to a voluntary or involuntary federal or
state bankruptcy, insolvency or similar proceeding; (d) any accident, injury to
or death of persons or loss of or damage to property occurring in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (e) any use, nonuse or
condition in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(f) any failure on the part of Grantor to perform or be in compliance with any
of the terms of this Security Instrument or the Other Security Documents; (g)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Property or any part thereof; (h) the failure of any
person to file timely with the Internal Revenue Service an accurate Form 1099-B,
Statement for Recipients of Proceeds from Real Estate, Broker and Barter
Exchange Transactions, which may be required in connection with the Security
Instrument, or to supply a copy thereof in a timely fashion to the recipient of
the proceeds of the transaction in connection with which this Security
Instrument is made; (i) any failure of the Property to be in compliance with any
Applicable Laws; (j) the enforcement by any Indemnified Party of the provisions
of this Article 13; (k) any and all claims and demands whatsoever which may be
asserted against Beneficiary 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 Lease; (l) the payment of any commission, charge or
brokerage fee to anyone which may be payable in connection with the funding of
the loan evidenced by the Guaranty and secured by this Security Instrument; or
(m) any misrepresentation made by Grantor in this Security Instrument, the Other
Security Documents, or any documents or information provided pursuant to Section
18.1 hereof. Any amounts payable to Beneficiary by reason of the application of
this Section 13.1 shall become immediately due and payable and shall bear
interest at the Default Rate from the date loss or damage is sustained by
Beneficiary until paid. For purposes of this Article 13, the term "Indemnified
Parties" means Beneficiary and any person or entity who is or will have been
involved in the origination of this loan, any person or entity who is or will
have been involved in the servicing of this loan, any person or entity in whose
name the encumbrance created by this Security Instrument is or will have been
recorded, persons and entities who may hold or acquire or will have held a full
or partial interest in this loan (including, but not limited to Investors or
prospective Investors in the Securities, as well as custodians, trustees and
other fiduciaries who hold or have held a full or partial interest in this loan
for the benefit of third parties) as well as the respective directors, officers,
shareholders, members, partners, employees, agents, servants, representatives,
affiliates, subsidiaries, participants, successors and assigns of any and all of
the foregoing (including, but not limited to any other person or entity who
holds or acquires or will have held a participation or other full or partial
interest in this loan or the Property, whether during the term of this loan or
as a part of or following a foreclosure of this loan and including, but not
limited to any successors by merger, consolidation or acquisition of all or a
substantial portion of Beneficiary's assets and business).
<PAGE>
Section . Mortgage and/or Intangible Tax. Grantor shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and/or
recording of this Security Instrument, the Guaranty or any of the Other Security
Documents or in connection with a transfer of all or a portion of the Property
pursuant to a foreclosure, deed in lieu of foreclosure or otherwise.
Section . ERISA Indemnification. Grantor shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of Losses incurred in correcting any prohibited transaction or in
the sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Beneficiary's sole
discretion) that Beneficiary may incur, directly or indirectly, as a result of a
default under Sections 4.2 or 5.9.
Section . Environmental Indemnification. Grantor shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses and costs of
Remediation (whether or not performed voluntarily), engineers' fees,
environmental consultants' fees, and costs of investigation (including, but not
limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
imposed upon or incurred by or asserted against any Indemnified Parties, and
arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Grantor, any
person or entity affiliated with Grantor or tenant or other users of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any time located in, under, on or above the Property;
(d) any activity by Grantor, any person or entity affiliated with Grantor or
tenant or other users of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including, but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened violations of
any Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including, but not limited
to any failure by Grantor, any person or entity affiliated with Grantor or
tenant or other users of the Property to comply with any order of any
governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Grantor or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Grantor or other users, at any facility or incineration vessel owned or operated
by another person or entity and containing such or similar Hazardous Substance;
(j) any acts of Grantor or other users of the Property, in accepting any
Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Grantor or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section . Duty to Defend; Attorneys' Fees and Other Fees and
Expenses. Upon written request by any Indemnified Party, Grantor shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Grantor shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
<PAGE>
Article - WAIVERS
Section . Waiver of Counterclaim. Grantor hereby waives the
right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Beneficiary
arising out of or in any way connected with this Security Instrument, the
Guaranty, any of the Other Security Documents, or the Obligations.
Section . Marshalling and Other Matters. Grantor hereby
waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, Grantor hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Security Instrument on behalf of Grantor, and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by Applicable Law.
Section . Waiver of Notice. To the extent permitted by
Applicable Law, Grantor shall not be entitled to any notices of any nature
whatsoever from Beneficiary except with respect to matters for which this
Security Instrument specifically and expressly provides for the giving of notice
by Trustee or Beneficiary to Grantor and except with respect to matters for
which Trustee or Beneficiary is required by Applicable Law to give notice, and
Grantor hereby expressly waives the right to receive any notice from Trustee or
Beneficiary with respect to any matter for which this Security Instrument does
not specifically and expressly provide for the giving of notice by Trustee or
Beneficiary to Grantor.
Section . Waiver of Statute of Limitations. Grantor hereby
expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.
Section . Sole Discretion of Beneficiary. Wherever pursuant
to this Security Instrument (a) Beneficiary exercises any right given to it to
approve or disapprove, (b) any arrangement or term is to be satisfactory to
Beneficiary, or (c) any other decision or determination is to be made by
Beneficiary, the decision of Beneficiary to approve or disapprove all decisions
that arrangements or terms are satisfactory or not satisfactory, and all other
decisions and determinations made by Beneficiary, shall be in the sole and
absolute discretion of Beneficiary and shall be final and conclusive, except as
may be otherwise expressly and specifically provided herein.
Section . Survival. Except as hereinafter specifically set
forth below, the representations and warranties, covenants, and other
obligations arising under Article 12 shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or
Beneficiary's interest in the Property (but, in such case, shall benefit both
Indemnified Parties and any assignee or transferee), any exercise of
Beneficiary's rights and remedies pursuant hereto including, but not limited to
foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any
rights and remedies pursuant to the Guaranty or any of the Other Security
Documents, any transfer of all or any portion of the Property (whether by
Grantor or by Beneficiary, following foreclosure or acceptance of a deed in lieu
of foreclosure or at any other time), any amendment to this Security Instrument,
the Guaranty or the Other Security Documents, and any act or omission that might
otherwise be construed as a release or discharge of Grantor from the obligations
pursuant hereto. All obligations and liabilities of Grantor under Article 12
shall cease and terminate on the first (1st) anniversary of the date of payment
to Beneficiary in cash of the entire Debt, provided that contemporaneously with
or subsequent to such payment, Grantor, at its sole cost and expense, delivers
to Beneficiary an environmental audit of the Property in form and substance, and
prepared by a qualified environmental consultant, reasonably satisfactory in all
respects to Beneficiary and indicating the Property is in full compliance with
all applicable Environmental Laws.
Section . Waiver of Trial By Jury. Grantor HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE Guaranty, THE APPLICATION
FOR THE LOAN EVIDENCED BY THE Guaranty, THE Guaranty, THIS SECURITY INSTRUMENT
OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF Beneficiary, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
<PAGE>
Article - EXCULPATION
Section . Exculpation. Notwithstanding anything to the
contrary contained in this Security Instrument or in any Other Security Document
(but subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5),
Beneficiary shall not enforce the liability and obligation of Grantor to perform
and observe the obligations contained in the Guaranty or this Security
Instrument by any action or proceeding to collect damages or wherein a money
judgment or any deficiency judgment or order or any judgment establishing any
personal obligation or liability shall be sought against Grantor or any
principal director, officer, employee, beneficiary, shareholder, partner,
member, trustee, agent or affiliate of Grantor or any person owning, directly or
indirectly, any legal or beneficial interest in Grantor, or any successors or
assigns of any of the foregoing (collectively, the "Exculpated Parties").
Beneficiary or Trustee may bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable Beneficiary to
enforce and realize upon this Security Instrument, the Other Security Documents,
and the interest in the Property, the Rents and any other collateral given to
Beneficiary created by this Security Instrument and the Other Security
Documents; provided, however, subject to the provisions of Sections 15.2, 15.3,
15.4 and 15.5, that any judgment in any action or proceeding shall be
enforceable against Grantor only to the extent of Grantor's interest in the
Property, in the Rents and in any other collateral given to Beneficiary in
connection with the Guaranty. Beneficiary, by accepting the Guaranty and this
Security Instrument, agrees that it shall not, except as otherwise provided
below, sue for or demand any deficiency judgment against Grantor or any of the
Exculpated Parties in any action or proceeding, under or by reason of or under
or in connection with the Guaranty, the Other Security Documents or this
Security Instrument.
Section . Reservation of Certain Rights. The provisions of
Section 15.1 shall not (a) constitute a waiver, release or impairment of the
Obligations; (b) impair the right of Beneficiary to name Grantor as a party
defendant in any action or suit for judicial foreclosure and sale under this
Security Instrument; (c) affect the validity or enforceability of any indemnity,
guaranty, master lease or similar instrument made in connection with the
Guaranty, this Security Instrument, or the Other Security Documents; (d) impair
the ability of Beneficiary or Trustee to obtain the appointment of a receiver;
or (e) impair the enforcement of the Assignment of Leases and Rents executed in
connection herewith.
Section . Exceptions to Exculpation. Notwithstanding the
provisions of Article 15.1 to the contrary, Grantor and Indemnitor shall be
personally liable to Beneficiary on a joint and several basis for the Losses
Beneficiary incurs due to: (a) fraud or intentional misrepresentation by Grantor
or any other person or entity in connection with the execution and the delivery
of the Guaranty, this Security Instrument or the Other Security Documents; (b)
Grantor's misapplication or misappropriation of Rents received by Grantor after
the occurrence and during the continuance of an Event of Default; (c) Grantor's
misapplication or misappropriation of tenant security deposits or Rents
collected in advance; (d) the misapplication or misappropriation of insurance
proceeds or condemnation awards after the occurrence and during the continuance
of an Event of Default; (e) any fees or commissions paid by Grantor after the
occurrence and during the continuance of an Event of Default to any principal,
affiliate or general partner of Grantor, Indemnitor or Guarantor in violation of
the terms of the Guaranty, this Security Instrument or the Other Security
Documents; (f) gross negligence or criminal acts perpetrated by it resulting in
forfeiture, seizure or loss of any portion of the security; (g) any failure by
Grantor or Indemnitor to comply with the terms and provisions of Section 13.4
hereof or of the Environmental Indemnity; (h) any failure by Grantor or any
general partner or the SPE Member of Grantor to comply with the terms and
provisions of Section 4.3 hereof; or (i) any sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer of the Property or any part
thereof, within the meaning of Article 8 hereof, without the prior written
consent of Beneficiary.
Section . Recourse. Notwithstanding the foregoing, the
agreement of Beneficiary not to pursue recourse liability as set forth in
Section 15.1 above SHALL BECOME NULL AND VOID and shall be of no further force
and effect in the event (i) Grantor fails to comply with the terms and
conditions of Section 4.3, 8.1, 8.2 or 8.3, (ii) the Property or any part
thereof shall become an asset in (A) a voluntary bankruptcy or insolvency
proceeding, or (B) an involuntary bankruptcy or insolvency proceeding commenced
by any Person (other than Beneficiary) and Grantor fails to use its best efforts
to obtain a dismissal of such proceedings, or (iii) Grantor or any Guarantor or
Indemnitor fails to comply with the terms and provisions of Section 3.11 hereof
within thirty (30) days after written notice from Beneficiary to Grantor (which
notice shall be a second notice given after the expiration of any notice given
pursuant to Section 10.1(e)); provided, however, so long as PREIT Associates,
L.P., a Delaware limited partnership, maintains that certain line of credit with
First Union National Bank, as agent, pursuant to that certain Revolving Credit
Loan Agreement with Corestates Bank, N.A.(predecessor-in-interest to First Union
National Bank), as agent, and First Trust Savings Bank, Fleet Bank, N.A. and PNC
Bank, as lenders, dated September 30, 1997 (or another credit arrangement
containing market standard financial covenants for net worth, leverage and
liquidity), the occurrence of any of the events referred to in subsections
(i)-(iii) above shall not create recourse liability against Grantor or any
Guarantor or Indemnitor.
<PAGE>
Section . Bankruptcy Claims. Nothing herein shall be deemed
to be a waiver of any right which Beneficiary may have under Sections 506(a),
506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a
claim for the full amount of the Debt secured by this Security Instrument or to
require that all collateral shall continue to secure all of the Debt owing to
Beneficiary in accordance with the Guaranty, this Security Instrument and the
Other Security Documents.
Article - NOTICES
Section . Notices. All notices or other written
communications hereunder shall be deemed to have been properly given (a) upon
delivery, if delivered in person or by facsimile transmission with receipt
acknowledged by the recipient thereof, (b) one (1) Business Day (defined below)
after having been deposited for overnight delivery with any reputable overnight
courier service, or (c) three (3) Business Days after having been deposited in
any post office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Grantor: PR MARYLANDER LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
If to Beneficiary: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
If to Trustee: Joseph M. Zablotski
Commonwealth Land Title Insurance Company
31 Light Street, Suite 500
Baltimore, Maryland 21202
Facsimile No. (410)
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a
day on which commercial banks are not authorized or required by law to close in
the State of New York.
<PAGE>
Article - APPLICABLE LAW
Section . Choice of Law. THIS SECURITY INSTRUMENT SHALL BE
GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE WHERE THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.
Section . Usury Laws. This Security Instrument and the
Guaranty are subject to the express condition that at no time shall Grantor be
obligated or required to pay interest on the Debt at a rate which could subject
the holder of the Guaranty to either civil or criminal liability as a result of
being in excess of the maximum interest rate which Grantor is permitted by
applicable law to contract or agree to pay. If by the terms of this Security
Instrument or the Guaranty, Grantor is at any time required or obligated to pay
interest on the Debt at a rate in excess of such maximum rate, the rate of
interest under the Security Instrument and the Guaranty shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Guaranty. All sums paid or agreed to
be paid to Beneficiary for the use, forbearance, or detention of the Debt shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full stated term of the Guaranty until payment in full
so that the rate or amount of interest on account of the Debt does not exceed
the maximum lawful rate of interest from time to time in effect and applicable
to the Debt for so long as the Debt is outstanding.
Section . Provisions Subject to Applicable Law. All rights,
powers and remedies provided in this Security Instrument may be exercised only
to the extent that the exercise thereof does not violate any applicable
provisions of law and are intended to be limited to the extent necessary so that
they will not render this Security Instrument invalid, unenforceable or not
entitled to be recorded, registered or filed under the provisions of any
Applicable Law.
Section . Inapplicable Provision. If any term of this
Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.
<PAGE>
Article - SECONDARY MARKET
Section . Dissemination of Information. If Beneficiary
determines at any time to sell, transfer or assign the Guaranty, this Security
Instrument and the Other Security Documents, and any or all servicing rights
with respect thereto, or to grant participations therein (the "Participations")
or issue mortgage pass-through certificates or other securities (such sale
and/or issuance, the "Securitization") evidencing a beneficial interest in a
rated or unrated public offering or private placement (the "Securities"),
Beneficiary may forward to each purchaser, transferee, assignee, servicer,
participant, investor, or their respective successors in such Participations
and/or Securities (collectively, the "Investor") or any Rating Agency rating
such Securities and each prospective Investor, all documents and information
which Beneficiary now has or may hereafter acquire relating to the Debt and to
Grantor, any Guarantor, any Indemnitors and the Property (including, without
limitation, all financial statements), which shall have been furnished by
Grantor, any Guarantor or any Indemnitors, as Beneficiary determines necessary
or desirable. Grantor, any Guarantor and any Indemnitor agree to cooperate with
Beneficiary in connection with any transfer made or any Securities created
pursuant to this Section, including, without limitation, the delivery of an
estoppel certificate required in accordance with Subsection 7.4(c) hereof and
such other documents as may be reasonably requested by Beneficiary and, upon
Beneficiary's reasonable request, meeting with any Rating Agency for due
diligence purposes. Grantor shall also furnish and Grantor, any Guarantor and
any Indemnitor consent to Beneficiary furnishing to such Investors or such
prospective Investors or any Rating Agency any and all information concerning
the Property, the Leases, the financial condition of Grantor, any Guarantor and
any Indemnitor as may be requested by Beneficiary, any Investor or any
prospective Investor or Rating Agency in connection with any sale, transfer or
Participation, provided, however, PREIT Associates, L.P. and Pennsylvania Real
Estate Investment Trust shall only be required under this Section 18.1 to
disclose information that is deemed to be "public" information. Grantor shall
not be responsible for Beneficiary's fees and expenses incurred in connection
with the transactions contemplated by this Section 18.1. Beneficiary shall
reimburse Grantor for the reasonable actual out-of-pocket third party costs
incurred by Grantor in excess of $1,500.00 in connection with the transactions
contemplated by this Section 18.1. Grantor shall deliver on the date hereof, at
Grantor's sole cost and expense, a nonconsolidation opinion, and within ten (10)
Business Days after demand of Beneficiary, an update of same (which update
Grantor will not be required to provide more than once), each in form and
substance and delivered by counsel acceptable to Beneficiary and the Rating
Agency rating or proposed to rate the Securities, as may be required by
Beneficiary and/or such Rating Agency. Grantor's failure to deliver the opinions
required hereby shall constitute an Event of Default hereunder.
<PAGE>
Article - COSTS
Section . Performance at Grantor's Expense. Grantor
acknowledges and confirms that Beneficiary shall impose certain administrative
processing and/or commitment fees in connection with (a) the extension, renewal,
modification, amendment and termination of its loans, (b) the release or
substitution of collateral therefor (provided, however, no commitment fee shall
be imposed in connection with the substitution of collateral), (c) obtaining
certain consents, waivers and approvals with respect to the Property, or (d) the
review of any Lease or proposed Lease or the preparation or review of any
subordination, non-disturbance agreement (the occurrence of any of the above
shall be called an "Event"). Grantor further acknowledges and confirms that it
shall be responsible for the payment of all costs of reappraisal of the Property
or any part thereof, whether required by law, regulation, Beneficiary or any
governmental or quasi-governmental authority. Grantor hereby acknowledges and
agrees to pay, immediately, with or without demand, all such fees (as the same
may be increased or decreased from time to time), and any additional fees of a
similar type or nature which may be imposed by Beneficiary from time to time,
upon the occurrence of any Event or otherwise. Wherever it is provided for
herein that Grantor pay any costs and expenses, such costs and expenses shall
include, but not be limited to, all legal fees and disbursements of Beneficiary
(whether of retained firms, the reimbursement for the expenses of in-house staff
or otherwise) and all costs and expenses of Beneficiary, if any.
Section . Attorney's Fees for Enforcement. (a) Grantor shall
pay all legal fees incurred by Beneficiary in connection with (i) the
preparation of the Guaranty, this Security Instrument and the Other Security
Documents; and (ii) the items set forth in Section 19.1 above, and (b) Grantor
shall pay to Beneficiary on demand any and all expenses, including legal
expenses and attorneys' fees, incurred or paid by Beneficiary in protecting its
interest in the Property or the Collateral or in collecting any amount payable
hereunder or in enforcing its rights hereunder with respect to the Property or
the Collateral, whether or not any legal proceeding is commenced hereunder or
thereunder and whether or not any default or Event of Default shall have
occurred and is continuing, together with interest thereon at the Default Rate
from the date paid or incurred by Beneficiary until such expenses are paid by
Grantor.
Article - DEFINITIONS
Section . General Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Security Instrument may be used interchangeably in singular
or plural form and the word "Grantor" shall mean "each Grantor and any
subsequent owner or owners of the Property or any part thereof or any interest
therein," the word "Beneficiary" shall mean "Beneficiary and any subsequent
holder of the Guaranty," the word "Guaranty" shall mean "the Guaranty and any
other evidence of indebtedness secured by this Security Instrument," the word
"person" shall include an individual, corporation, limited liability company,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, the word "Property" shall include any portion
of the Property and any interest therein, the word "Trustee" shall mean "Trustee
and its successors and assigns", and the phrases "attorneys' fees" and "counsel
fees" shall include any and all attorneys', paralegal and law clerk fees and
disbursements, including, but not limited to fees and disbursements at the
pre-trial, trial and appellate levels incurred or paid by Beneficiary in
protecting its interest in the Property, the Leases and the Rents and enforcing
its rights under this Security Instrument.
Section . Headings, Etc. The headings and captions of
various Sections of this Security Instrument are for convenience of reference
only and are not to be construed as defining or limiting, in any way, the scope
or intent of the provisions hereof.
<PAGE>
Article - MISCELLANEOUS PROVISIONS
Section . No Oral Change. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Grantor, or Beneficiary, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
Section . Liability. If Grantor consists of more than one
person, the obligations and liabilities of each such person hereunder shall be
joint and several. This Security Instrument shall be binding upon and inure to
the benefit of Grantor and Beneficiary and their respective successors and
assigns forever.
Section . Duplicate Originals; Counterparts. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security Instrument
may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a
single Security Instrument.
Section . Number and Gender. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
Section . Subrogation. If any or all of the proceeds of the
Guaranty have been used to extinguish, extend or renew any indebtedness
heretofore existing against the Property, then, to the extent of the funds so
used, Beneficiary shall be subrogated to all of the rights, claims, liens,
titles, and interests existing against the Property heretofore held by, or in
favor of, the holder of such indebtedness and such former rights, claims, liens,
titles, and interests, if any, are not waived but rather are continued in full
force and effect in favor of Beneficiary and are merged with the lien and
security interest created herein as cumulative security for the repayment of the
Debt, the performance and discharge of Grantor's obligations hereunder, under
the Guaranty and the Other Security Documents and the performance and discharge
of the Other Obligations.
Section . Entire Agreement. The Guaranty, this Security
Instrument and the Other Security Documents constitute the entire understanding
and agreement between Grantor and Beneficiary with respect to the transactions
arising in connection with the Debt and supersede all prior written or oral
understandings and agreements between Grantor and Beneficiary with respect
thereto. Grantor hereby acknowledges that, except as incorporated in writing in
the Guaranty, this Security Instrument and the Other Security Documents, there
are not, and were not, and no persons are or were authorized by Beneficiary to
make, any representations, understandings, stipulations, agreements or promises,
oral or written, with respect to the transaction which is the subject of the
Guaranty, this Security Instrument and the Other Security Documents.
<PAGE>
Article - TRUSTEE PROVISIONS
Section . The Trustee. () It shall be no part of the duty of
Trustee to see to any recording, filing or registration of this Security
Instrument or any other instrument in addition or supplemental hereto, or to
give any notice thereof, or to see to the payment of or be under any duty in
respect of any Tax or assessment or other governmental charge which may be
levied or assessed on the Property, or any part thereof, or against Grantor, or
to see to the performance or observance by Grantor of any of the covenants and
agreements contained herein. Trustee shall not be responsible for the execution,
acknowledgment or validity of this Security Instrument or of any instrument in
addition or supplemental hereto or for the sufficiency of the security purported
to be created hereby, and makes no representation in respect thereof or in
respect of the rights of Beneficiary. Trustee shall have the right to advice of
counsel upon any matters arising hereunder and shall be fully protected in
relying as to legal matters on the advice of counsel. Trustee shall not incur
any personal liability hereunder except for his own gross negligence or willful
misconduct and Trustee shall have the right to rely on any instrument, document
or signature authorizing or supporting any action taken or proposed to be taken
by Trustee hereunder and believed by Trustee in good faith to be genuine.
() Trustee may resign by an instrument in writing addressed
to Beneficiary, or Trustee may be removed at any time with or without cause by
an instrument in writing executed by Beneficiary. In case of the death,
resignation, removal or disqualification of Trustee, or if for any reason
Beneficiary shall deem it desirable to appoint a substitute or successor trustee
to act instead of the herein named trustee or any substitute or successor
trustee, then Beneficiary shall have the right and is hereby authorized and
empowered to appoint a successor trustee, or a substitute trustee, without other
formality than appointment and designation in writing executed by Beneficiary,
which substituted trustee may be Beneficiary or an affiliate of Beneficiary, and
the authority hereby conferred shall extend to the appointment of other
successor and substitute trustees successively until the Obligations secured
hereby have been performed and paid in full, or until the Property is fully and
finally sold hereunder. Such appointment and designation by Beneficiary shall be
full evidence of the right and authority to make the same and of all facts
therein recited. If Beneficiary is a corporation or association and such
appointment is executed in its behalf by an officer of such corporation or
association, such appointment shall be conclusively presumed to be executed with
authority and shall be valid and sufficient without proof of any action by the
board of directors or any superior officer of the corporation or association.
Upon the making of any such appointment and designation, all of the estate and
title of Trustee in the Property shall vest in the named successor or substitute
Trustee, and he shall thereupon succeed to and shall hold, possess and execute
all of the rights, powers, privileges, immunities and duties herein conferred
upon Trustee; but, nevertheless, upon the written request of Beneficiary or of
the successor or substitute Trustee, the trustee ceasing to act shall execute
and deliver an instrument transferring to such successor or substitute Trustee
all of the estate and title in the Property of the trustee so ceasing to act,
together with all the rights, powers, privileges, immunities and duties herein
conferred upon the Trustee, and shall duly assign, transfer and deliver any of
the properties and moneys held by said trustee hereunder to said successor or
substitute Trustee. All references herein to "Trustee" shall be deemed to refer
to Trustee (including any successor or substitute appointed and designated as
herein provided) from time to time acting hereunder.
<PAGE>
() Trustee shall not be liable for any error of judgement or
act done by Trustee in good faith, or be otherwise responsible or accountable
under any circumstances whatsoever (including Trustee's negligence), except for
Trustee's gross negligence or willful misconduct. Trustee shall have the right
to rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by him hereunder, believed by him in good
faith to be genuine. All moneys received by Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other moneys (except
to the extent required by law), and Trustee shall be under no liability for
interest on any moneys received by him hereunder. Grantor hereby ratifies and
confirms any and all acts which the herein-named Trustee or his successor or
successors, substitute or substitutes, in this trust, shall do lawfully by
virtue hereof. Grantor will reimburse Trustee for, and save him harmless
against, any and all liability and expenses which may be incurred by him in the
performance of his duties. The foregoing indemnity shall not terminate upon
discharge of the obligations secured hereby or foreclosure, or release or other
termination, of this Security Instrument.
() Except as otherwise provided in the Loan Documents,
Grantor shall indemnify, defend and hold Trustee and Beneficiary, individually
and collectively, harmless against any and all losses, claims, demands,
liabilities, costs and/or expenses (including reasonable attorneys' fees) which
either may incur, in the execution of the trusts created hereunder, or in the
performance of any act or obligation required or permitted hereunder or by law
or otherwise arising out of or in connection with the Loan Documents, except to
the extent any of the foregoing results solely from the active gross negligence
or willful misconduct of such indemnified party. All of Trustee's expenses,
including reasonable attorneys' fees, shall be borne by Grantor.
[The remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been
executed by Grantor as of the date first above written.
Grantor:
PR MARYLANDER LLC,
a Delaware limited liability company
By: PR Marylander Manager LLC
By: /s/ Jeffrey A. Linn
----------------------------
Name: Jeffrey A. Linn
----------------------------
Title: Authorized Signatory
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the
buildings and improvements thereon, situate, lying and being
<PAGE>
EXHIBIT B
(Local Law Provisions)
<PAGE>
Exhibit 10.5
PROMISSORY NOTE
$7,250,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PR KENWOOD GARDENS LLC, a Delaware limited liability company ("Borrower"),
promises to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation ("Lender"), at Lender's office located at 650 Dresher
Road, P.O. Box 809, Horsham, Pennsylvania 19044-0809, Attn: Servicing -
Accounting Manager, or at such other place as Lender may designate to Borrower
in writing from time to time, the principal sum of SEVEN MILLION TWO HUNDRED
FIFTY THOUSAND AND 00/100 DOLLARS ($7,250,000.00), or so much thereof as is
outstanding and unpaid, together with interest thereon at the rate of 6.773% per
annum ("Interest Rate"), in lawful money of the United States of America, which,
at the time of payment, shall be legal tender in payment of all debts and dues,
public and private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay
principal and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments
of principal and interest in the amount of $47,622.16 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the
entire outstanding principal balance hereof, together with all accrued but
unpaid interest thereon and any other amounts due under the Note or the other
Loan Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a
date other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days from and including the date of
<PAGE>
this Note to and including the ninth day of such month (or if the date of this
Note is after the ninth day of the month, then the next following month) (b) by
a daily rate based on the Interest Rate calculated for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not
be deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall
be applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05,
or as required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30)
days prior written notice to Lender specifying a date ("Defeasance Date") which
shall be a Payment Date, on which the amount required to defease the Loan
("Defeasance Deposit") is to be made and on which the Defeasance is to occur, as
well as the anticipated outstanding principal amount of this Note as of the
Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and
unpaid interest on the outstanding principal balance of this Note to but not
including the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums,
not including scheduled interest or principal payments, then due under this
Note, the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the
Defeasance Date.
(v) Borrower shall pay to Lender the required
Defeasance Deposit for the Defeasance, or at Borrower's option, Borrower shall
deliver to Lender U.S. Government Securities which provide payments on or prior
to, but as close as possible to, all successive Payment Dates after the
Defeasance Date (including the outstanding principal balance of this Note due on
the Maturity Date), and in amounts equal to the full amounts due on each Payment
Date under this Note.
(vi) Borrower shall execute and deliver one or more
security agreements in form and substance satisfactory to Lender (collectively,
"Security Agreement"), creating a first priority lien on, and security interest
in, the Defeasance Deposit and the U.S. Government Securities purchased with
Defeasance Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies,
Borrower also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification
from Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and
expenses of Lender incurred in connection with the Defeasance, including any
costs and expenses associated with the Release Instruments (as defined in
Section 2.05(f) hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a
confirmation, in form and substance satisfactory to Lender, by a "Big Five"
independent certified public accounting firm, that Defeasance Deposit is
sufficient to pay all Scheduled Defeasance Payments and other amounts required
to be paid by Borrower hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation,
in form and substance satisfactory to Lender, that all conditions to Defeasance
have been met from any applicable Rating Agency that has required as a condition
to Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with
the Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee. The Successor Borrower shall assume in
<PAGE>
writing the obligations under this Note, the Security Agreement and the other
Loan Documents, by agreements in form and substance satisfactory to Lender,
whereupon Borrower shall, pursuant to the express terms of such agreement, be
relieved of its obligations thereunder. Borrower shall pay $10 to any such
Successor Borrower as consideration for assuming Borrower's obligations under
the Note and the Security Agreement. Notwithstanding anything in this Note or
the Security Instrument to the contrary, no other assumption fee shall be
payable upon a transfer of this Note in accordance with this Section 2.05(d),
but Borrower shall pay all out-of-pocket costs and expenses incurred by Lender,
including Lender's reasonable attorneys fees and expenses, incurred in
connection therewith.
(e) Repayment Upon Default. If all or any part of the
principal amount of this Note is prepaid upon acceleration of this Note
following the occurrence of an Event of Default prior to the Optional Defeasance
Date, then, in addition to such principal payment, Borrower shall be required to
make such payments ("Yield Maintenance Payments") in an amount equal to the
greater of (i) one percent (1%), or (ii) the excess, if any, of (A) the
aggregate respective present values of all scheduled interest and principal
payments payable on each Payment Date in respect of this Note for the period
from the date of such prepayment upon acceleration to the Maturity Date,
discounted monthly at a rate equal to the Treasury Constant Maturity Yield Index
(defined below) and based on a 360-day year of twelve 30-day months over (B) the
then current outstanding principal amount of this Note. For purposes hereof,
"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) ("FRB Release") published during the second full week
preceding the Prepayment Date for instruments having a maturity coterminous with
the remaining term of this Note. In the event the FRB Release is no longer
published, Lender shall select a comparable publication to determine the
Treasury Constant Maturity Yield Index. If there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with the
remaining term of this Note, then 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 shall be used, 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). The Yield
Maintenance Payments to be paid in connection with any prepayment under this
Section 2.05(e) shall be determined by Lender and shall be conclusive and
binding on Borrower (absent manifest error). For purposes of this Section
2.05(e), the unpaid principal amount due on this Note on the date of prepayment
shall be determined after giving effect to any payment of scheduled amortization
made on such date.
(f) Release of the Mortgaged Property. No repayment,
prepayment or Defeasance of all or any portion of this Note shall cause, give
rise to a right to require, or otherwise result in, the release of the real or
personal property subject to the lien or mortgage created by the Security
Instrument (referred to in this Section 2.05(f) as "Mortgaged Property"), except
as follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Mortgaged Property
shall be released from the lien and mortgage created by the Security Instrument,
whereupon the U.S. Government Securities pledged pursuant to the Security
Agreement shall be the sole source of Borrower's collateral securing this Note.
Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the
Security Instrument shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release of the
Mortgaged Property (and related Loan Documents approved by Lender) for execution
by Lender which shall be in a form appropriate in the applicable state and
otherwise satisfactory to Lender in its reasonable discretion, along with all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following
shall constitute an event of default ("Event of Default") under this Note: (a)
if any payment of principal and interest or any other payment required under
this Note is not received by Lender on or before the date such payment is due;
or (b) if any default should occur under any of the other Loan Documents which
is not fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
<PAGE>
4.02 Late Charges. If any payment is not received by Lender on
or before the date on which such payment originally was due, then, in addition
to any default interest payments due hereunder, Borrower also shall pay to
Lender a late charge in an amount equal to five percent (5.0%) of the amount of
such overdue payment to defray the expenses incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of the
use of the delinquent payment. Such late charge shall be immediately due and
payable, without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full
on or before the Maturity Date or the date on which the due date of the
indebtedness has been accelerated pursuant to the provisions hereof, the unpaid
principal and accrued interest and other amounts then due shall bear interest at
a rate per annum ("Default Interest Rate") equal to the lesser of (a) five
percent (5.0%) in excess of the Interest Rate or (b) the maximum rate of
interest, if any, which may be charged or collected from Borrower under
applicable law. In addition, Lender shall have the right, without acceleration
of the indebtedness, to collect interest at the Default Interest Rate on any
payment due hereunder (including without limitation late charges and fees for
legal counsel) which is not received by Lender on or before the date on which
such payment originally was due. Interest at the Default Interest Rate shall be
immediately due and payable from the due date specified herein and shall accrue
until all Events of Default have been fully cured or full payment is received,
as applicable.
4.04 Interest on Judgments. Interest shall accrue on any
judgment obtained by Lender in connection with the enforcement or collection of
this Note from the date any such judgment becomes due until such judgment amount
is paid in full at a rate equal to the greater of (a) the Default Interest Rate
or (b) the legal rate applicable to judgments within such jurisdiction;
provided, however, that interest shall not accrue at a rate in excess of the
maximum rate of interest, if any, which may be charged or collected from
Borrower under applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of
Lender in this Note and in the other Loan Documents, or at law or in equity,
shall be cumulative and concurrent, and may be pursued singly, successively or
together in Lender's sole discretion and as often as occasion therefor shall
arise. If Borrower's obligations under this Note or any of the other Loan
Documents are enforced by Lender through an attorney-at-law, or any payment due
under this Note or the other Loan Documents is collected by or through an
attorney-at-law or collection agency, Borrower agrees to pay all costs incurred
by Lender in connection therewith, including, but not limited to, reasonable
fees and disbursements of legal counsel (whether with respect to a retained firm
or Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
<PAGE>
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
<PAGE>
7.02 Borrower's Waivers. Borrower, for itself and all others
who may become liable for payment of all or any part of the indebtedness
evidenced by this Note, hereby waives presentment for payment, demand, protest,
and notice of dishonor, protest, nonpayment, demand, intent to accelerate, and
acceleration. Borrower, for itself and all others who may become liable for
payment of all or any part of the indebtedness evidenced by this Note, 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 party and property (real and
personal), against the enforcement and collection of the obligations evidenced
by this Note or the other Loan Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full
power, authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note
shall be deemed a negotiable instrument, even though this Note, absent this
paragraph, may not otherwise qualify as a negotiable instrument under applicable
law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this
Note or under the other Loan Documents are to be in writing, addressed to the
<PAGE>
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
Borrower: PR Kenwood Gardens LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together
with the other Loan Documents and Lender's commitment letter to Borrower,
contain the entire agreements between Borrower and Lender relating to the
subject matter hereof and thereof, and supersede all prior discussions and
agreements (oral or written) relative hereto and thereto which are not contained
herein or therein. Borrower represents and warrants that it is not relying on
any promises, covenants, representations or agreements in connection with this
Note or the other Loan Documents, other than as expressly set forth herein or
therein. In the event of any conflict between the terms of the Loan Documents,
the following order of priority shall be used to resolve such conflict: The Note
shall control over the Security Instrument and the Security Instrument shall
control over all other Loan Documents. Time is of the essence with respect to
all provisions of this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
<PAGE>
an agreement in writing signed by the party against whom enforcement thereof is
sought and then only to the extent expressly set forth in such writing. No
person other than a duly authorized officer or agent of Lender shall be deemed
an agent of Lender nor have any authority to waive, modify, supplement or
terminate in any manner whatsoever any of the terms of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms
and provisions of this Note and the other Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or
the other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this
Note nor any uncertainty or ambiguity herein shall be construed or resolved
against Lender by virtue of the fact that such document has originated with
Lender as drafter. Borrower acknowledges that it has reviewed this Note and has
had the opportunity to consult with counsel on same. This Note, therefore, shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of the parties hereto.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other
words of similar import refer to this Note as a whole and not to any particular
section, paragraph or other subdivision; "Section" refers to the entire section
and not to any particular subsection, paragraph of other subdivision. Reference
to days for performance shall mean calendar days unless Business Days are
expressly indicated.
8.07 Governing Law. This Note and the other Loan Documents
shall be interpreted, construed and enforced according to the laws of the state
in which the real property encumbered by the Security Instrument is located
(without giving effect to its conflict of laws rules).
<PAGE>
8.08 Consent to Jurisdiction. Borrower and Lender, by its
acceptance of this Note, agree and consent to the exclusive jurisdiction and
venue of any state or federal court sitting in the county and state where the
real property encumbered by the Security Instrument is located with respect to
any legal action, proceeding, or controversy between them and hereby expressly
waive any and all rights under applicable law or in equity to object to the
jurisdiction and venue of said courts. Borrower further irrevocably consents to
service of process by certified mail, return receipt requested, to Borrower at
the address for Borrower last provided to Lender in accordance with the notice
provision of this Note and agrees that such service shall be effective ten (10)
days after mailing. Nothing herein shall, however, preclude or prevent Lender
from bringing any one or more actions against Borrower in any other jurisdiction
as may be necessary to enforce or realize upon the Security or other collateral
provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN
ANY LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PR KENWOOD GARDENS LLC,
a Delaware limited liability company
By: PR Kenwood Gardens Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
Date:______________________________
<PAGE>
Exhibit 10.6
================================================================================
PR KENWOOD GARDENS LLC, as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 2629 Alisdale Road
Toledo, OH
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged. 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Single Purpose Entity. 17
Section 4.4 Restoration After Casualty/Condemnation. 19
Article 5 - REPRESENTATIONS AND WARRANTIES 24
Section 5.1 Warranty of Title. 24
Section 5.2 Authority. 24
Section 5.3 Legal Status and Authority. 24
Section 5.4 Validity of Documents. 24
<PAGE>
Section 5.5 Litigation. 25
Section 5.6 Status of Property. 25
Section 5.7 No Foreign Person. 26
Section 5.8 Separate TAX Lot. 26
Section 5.9 ERISA Compliance. 26
Section 5.10 Leases. 27
Section 5.11 Financial Condition. 27
Section 5.12 Business Purposes. 28
Section 5.13 Taxes. 28
Section 5.14 Mailing Address. 28
Section 5.15 No Change in Facts or Circumstances. 28
Section 5.16 Disclosure. 28
Section 5.17 Third Party Representations. 28
Section 5.18 Illegal Activity. 28
Section 5.19 FUNB Line of Credit. 28
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 29
Section 6.1 Relationship of Borrower and Lender. 29
Section 6.2 Servicing of the Loan. 29
Article 7 - FURTHER ASSURANCES 29
Section 7.1 Recording of Security Instrument, Etc. 29
Section 7.2 Further Acts, Etc. 29
Section 7.3 Changes in TAX, Debt Credit and Documentary Stamp Laws. 30
Section 7.4 Estoppel Certificates. 30
Section 7.5 Flood Insurance. 31
Section 7.6 Splitting of Security Instrument. 31
Section 7.7 Replacement Documents. 31
Section 7.8 Amended Financing Statements. 32
Article 8 - DUE ON SALE/ENCUMBRANCE 32
Section 8.1 No Sale/Encumbrance. 32
Section 8.2 Sale/Encumbrance Defined. 32
Section 8.3 Lender's Rights. 33
Section 8.4 Right To Substitute Property. 34
Article 9 - PREPAYMENT 34
Section 9.1 Prepayment Only in Accordance with Note. 34
Article 10 - DEFAULT 34
Section 10.1 Events of Default. 34
Article 11 - RIGHTS AND REMEDIES 35
Section 11.1 Remedies. 36
<PAGE>
Section 11.2 Application of Proceeds. 38
Section 11.3 Right to Cure Defaults. 39
Section 11.4 Actions and Proceedings. 39
Section 11.5 Recovery of Sums Required To Be Paid. 39
Section 11.6 Examination of Books and Records. 39
Section 11.7 Other Rights, Etc. 40
Section 11.8 Right to Release Any Portion of the Property. 40
Section 11.9 Violation of Laws. 40
Section 11.10 Right of Entry. 41
Article 12 - ENVIRONMENTAL HAZARDS 41
Section 12.1 Environmental Representations and Warranties. 41
Section 12.2 Environmental Covenants. 42
Section 12.3 Lender's Rights. 43
Article 13 - INDEMNIFICATION 44
Section 13.1 General Indemnification. 44
Section 13.2 Mortgage and/or Intangible TAX. 45
Section 13.3 ERISA Indemnification. 45
Section 13.4 Environmental Indemnification. 45
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees and Expenses. 46
Article 14 - WAIVERS 47
Section 14.1 Waiver of Counterclaim. 47
Section 14.2 Marshalling and Other Matters. 47
Section 14.3 Waiver of Notice. 47
Section 14.4 Waiver of Statute of Limitations. 47
Section 14.5 Sole Discretion of Lender. 47
Section 14.6 Survival. 47
Section 14.7 Waiver of Trial By Jury. 48
Article 15 - EXCULPATION 48
Section 15.1 Exculpation. 48
Section 15.2 Reservation of Certain Rights. 49
Section 15.3 Exceptions to Exculpation. 49
Section 15.4 Recourse. 49
Section 15.5 Bankruptcy Claims. 50
Article 16 - NOTICES 50
Section 16.1 Notices. 50
Article 17 - APPLICABLE LAW 51
Section 17.1 Choice of Law. 51
Section 17.2 Usury Laws. 51
<PAGE>
Section 17.3 Provisions Subject to Applicable Law. 52
Section 17.4 Inapplicable Provision. 52
Article 18 - SECONDARY MARKET 52
Section 18.1 Dissemination of Information. 52
Article 19 - COSTS 53
Section 19.1 Performance at Borrower's Expense. 53
Section 19.2 Attorney's Fees for Enforcement. 53
Article 20 - DEFINITIONS 54
Section 20.1 General Definitions. 54
Section 20.2 Headings, Etc. 54
Article 21 - MISCELLANEOUS PROVISIONS 54
Section 21.1 No Oral Change. 54
Section 21.2 Liability. 54
Section 21.3 Duplicate Originals; Counterparts. 54
Section 21.4 Number and Gender. 55
Section 21.5 Subrogation. 55
Section 21.6 Entire Agreement. 55
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
. ADA: Subsection 3.10(a);
. Applicable Law: Subsection 3.10(a);
. Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
. Bankruptcy Code: Subsection 1.1(f);
. Borrower: Preamble;
. Business Day: Section 16.1;
. Casualty Consultant: Subsection 4.4(b)(iii);
. Casualty Retainage: Subsection 4.4(b)(iii);
. Collateral: Section 1.3;
. Debt: Section 2.1;
. Default Rate: Section 10.3;
. Environmental Indemnity: Subsection 10.1(c);
. Environmental Law: Section 12.1;
. Environmental Liens: Section 12.2;
. Environmental Report: Section 12.1;
. ERISA: Subsection 4.2(a);
. Escrow Fund: Section 3.5;
. Event: Section 19.1;
. Event of Default: Section 10.1;
. Exculpated Parties: Section 15.1;
. Force Majeure: Subsection 4.4(b);
. Guarantor: Section 5.5;
. Hazardous Substances: Section 12.1;
. Improvements: Subsection 1.1(c);
. Indemnified Parties: Section 13.1;
. Indemnitor: Subsection 10.1(c);
. Independent Director: Subsection 4.3(c);
. Insurance Premiums: Subsection 3.3(b);
. Investor: Section 18.1;
. Land: Subsection 1.1(a);
. Lease Guaranty: Subsection 3.7(a);
. Leases: Subsection 1.1(f);
. Lender: Preamble;
. Loan Application: Section 5.15;
. Losses: Section 13.1;
. Net Proceeds: Subsection 4.4(b);
<PAGE>
. Net Proceeds Deficiency: Subsection 4.4(b)(v);
. Note: Recitals;
. Obligations: Section 2.3;
. Other Charges: Subsection 3.4(a);
. Other Obligations: Section 2.2;
. Other Security Documents: Section 3.2;
. Participations: 18.1;
. Permitted Exceptions: Section 5.1;
. Person: Section 20.1;
. Personal Property: Subsection 1.1(e);
. Policies/Policy: Subsection 3.3(b), 3.3(b);
. Property: Section 1.1;
. Qualified Insurer: Subsection 3.3(b);
. Rating Agency: Subsection 3.3(b);
. Registrar: Section 18.2;
. Release: Section 12.1;
. Remediation: Section 12.1;
. Rents: Subsection 1.1(f);
. Restoration: Subsection 3.3(d);
. Securities: Section 18.1;
. Securitization: Section 18.1;
. Security Instrument: Preamble;
. Servicer: Section 6.2;
. SPE Member: Subsection 4.3(b);
. Taxes: Subsection 3.4(a); and
. Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument") is
made as of the 13th day of April, 1999, by PR KENWOOD GARDENS LLC, a Delaware
limited liability company, having its principal place of business at The
Bellevue, Suite 300, 200 South Broad Street, Philadelphia, Pennsylvania 19102,
as mortgagor ("Borrower"), to GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation, having an address at 650 Dresher Road, Horsham, Pennsylvania
19044-8015, as mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of $7,250,000 in lawful money of the
United States of America (the note together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.
Borrower desires to secure the payment of the Debt (as defined in
Article 2) and the performance of all of its obligations under the Note and the
Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section . Property Mortgaged. Borrower does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Lender and to its successors and assigns with power of sale in accordance with
the terms and conditions hereof, for the use and benefit of Lender, and (ii)
grant a security interest to Lender and to its successors and assigns with power
of sale, in accordance with the terms and conditions hereof, for the use and
benefit of Lender, in, the following property, rights, interests and estates now
owned, or hereafter acquired by Borrower (collectively, the "Property"):
() Land. The real property described in Exhibit A attached hereto and
made a part hereof (the "Land");
() Additional Land. All additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the Land and
the development of the Land that may, from time to time, by supplemental
mortgage or otherwise be expressly made subject to the lien of this Security
Instrument;
() Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (the "Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment, fixtures
(including, but not limited to all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Borrower, or in which Borrower has or shall have
an interest, now or hereafter located upon the Land or the Improvements, or
appurtenant thereto, and used in connection with the present or future operation
and occupancy of the Land and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located upon the Land
and the Improvements, or appurtenant thereto, or used in connection with the
present or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or states where any of the Property is located (the
"Uniform Commercial Code"), superior in lien to the lien of this Security
Instrument and all proceeds and products of the above;
() Leases and Rents. All leases and other agreements affecting the
use, enjoyment or occupancy of all or any part of the Land or the Improvements
heretofore or hereafter entered into whether before or after the filing by or
against Borrower of any petition for relief under 11 U.S.C. ss. 101 et seq. (the
"Bankruptcy Code"), as the same may be amended from time to time (the "Leases")
and all right, title and interest of Borrower, its successors and assigns
therein and thereunder, including, without limitation, all guarantees, letters
of credit and any other credit support given by any guarantor in connection
therewith, cash or securities deposited under the Leases to secure the
performance by the lessees of their obligations thereunder and all rents,
additional rents, revenues, issues and profits (including all oil and gas or
other mineral royalties and bonuses) from the Land and the Improvements whether
paid or accruing before or after the filing by or against Borrower of any
petition for relief under the Bankruptcy Code (the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;
<PAGE>
() Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain (including,
but not limited to any transfer made in lieu of or in anticipation of the
exercise of the right), or for a change of grade, or for any other injury to or
decrease in the value of the Property;
() Insurance Proceeds. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation, the
right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
() Tax Certiorari. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction;
() Rights. The right, in the name and on behalf of Borrower, to
commence any action or proceeding to protect the interest of Lender in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with respect
to the Property;
() Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right, title and
interest of Borrower therein and thereunder, including, without limitation, the
right, while an Event of Default remains uncured, to receive and collect any
sums payable to Borrower thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims, deposits,
trade names, trademarks, servicemarks, logos, copyrights, goodwill, books and
records and all other general intangibles specific to or used in connection with
the operation of the Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, proceeds of
insurance and condemnation awards, into cash or liquidation claims;
() Other Rights. Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (m) above.
<PAGE>
Section . Assignment of Leases and Rents. Borrower hereby absolutely
and unconditionally assigns to Lender Borrower's right, title and interest in
and to all current and future Leases and Rents; it being intended by Borrower
that this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Nevertheless, subject to the terms of
this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable license
to collect and receive the Rents. Borrower shall hold the Rents, or a portion
thereof, sufficient to discharge all current sums due on the Debt, for use in
the payment of such sums.
Section . Security Agreement. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code, the "Collateral").
Section . Pledge of Monies Held. Borrower hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, any sums deposited in the Escrow
Fund (defined in Section 3.5) and the Net Proceeds (defined in Section 4.4), as
additional security for the Obligations until expended or applied as provided in
this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto the
Lender and its successors and assigns, with power of sale in accordance with the
terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section . Debt. This Security Instrument and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Lender may determine in its sole
discretion (the "Debt"):
<PAGE>
() the payment of the indebtedness evidenced by the Note in lawful
money of the United States of America;
() the payment of interest, default interest, late charges and other
sums, as provided in the Note, this Security Instrument or the Other Security
Documents (defined in Section 3.2);
() the payment of any prepayment consideration, defeasance payment,
exit fee or similar fees provided in the Note;
() the payment of all other monies agreed or provided to be paid by
Borrower in the Note, this Security Instrument or the Other Security Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the security
interest created hereby; and
() the payment of all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal, extension,
modification, consolidation, change, substitution, replacement, restatement or
increase of the Debt or any part thereof, or the acquisition or perfection of
the security therefor, whether made or incurred at the request of Borrower or
Lender.
Section . Other Obligations. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower contained
herein;
() the performance of each obligation of Borrower contained in the Note
in addition to the payment of the Debt and of Borrower and of any Guarantor
(defined in Section 5.5) contained in the Other Security Documents; and
() the performance of each obligation of Borrower and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part of the
Note, this Security Instrument or the Other Security Documents.
Section . Debt and Other Obligations. Borrower's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
Section . Payments. Unless payments are made in the required amount in
immediately available funds at the place where the Note is payable, remittances
in payment of all or any part of the Debt shall not, regardless of any receipt
<PAGE>
or credit issued therefor, constitute payment until the required amount is
actually received by Lender in funds immediately available at the place where
the Note is payable (or any other place as Lender, in Lender's sole discretion,
may have established by delivery of written notice thereof to Borrower) and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting bank
or banks. Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and the failure to pay
the entire amount then due shall be and continue to be an Event of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section . Payment of Debt. Borrower will pay the Debt at the time and
in the manner provided in the Note and in this Security Instrument.
Section . Incorporation by Reference. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note or the other Obligations (the "Other Security
Documents"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
Section . Insurance.
() Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
() Property Insurance. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the classification
"All Risks of Physical Loss" in amounts at all times sufficient to prevent
Lender from becoming a co-insurer within the terms of the applicable policies
and under applicable law, but in any event such insurance shall be maintained in
an amount equal to the full insurable value of the Improvements and building
equipment, the term "full insurable value" to mean the actual replacement cost
of the Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a recognized
independent insurance broker or an independent appraiser selected and paid by
Borrower and in no event less than the coverage required pursuant to the terms
of any Lease. Absent such annual adjustment, each policy shall contain inflation
guard coverage insuring that the policy limit will be increased over time to
reflect the effect of inflation. Borrower shall also maintain insurance against
loss or damage to such furniture, furnishings, fixtures, equipment and other
items (whether personalty or fixtures) included in the Property and owned by
<PAGE>
Borrower from time to time, to the extent applicable, in the amount of the cost
of replacing the same, in each case, with inflation guard coverage to reflect
the effect of inflation, or annual valuation. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any co-insurance provisions) or a waiver of any
co-insurance provisions, all subject to Lender's approval. The maximum
deductible shall be $10,000.00;
() Liability Insurance. Comprehensive general liability insurance,
including personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to the
extent insurable and imposed upon Lender and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession, use, leasing,
operation, maintenance or condition of the Property in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to the Property but
in no event for a combined single limit of less than $5,000,000. During any
construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers' compensation
insurance with respect to any work on or about the Property covering all persons
subject to the workers' compensation laws of the state in which the Property is
located;
() Business Interruption. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance penalty and
to provide proceeds which will cover a period of not less than one (1) year from
the date of casualty or loss with a six month extended period of indemnity, the
term "rental income" to mean the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.
() Boiler and Machinery Insurance. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000 or such other amount reasonably determined
by Lender. If one or more large HVAC units is in operation at the Property,
"System Breakdowns" coverage shall be required, as determined by Lender. Minimum
liability coverage per accident must equal the value of such unit(s);
<PAGE>
() Flood Insurance. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum amount
required, under the terms of coverage, to compensate for any damage or loss on a
replacement basis (or the unpaid balance of the indebtedness secured hereby if
replacement cost coverage is not available for the type of building insured); or
(B) the maximum insurance available under the appropriate National Flood
Insurance Administration program. The deductible may not exceed $25,000.
() During the period of any construction, renovation or alteration of
the Improvements, the cost of which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Lender's request, a completed value, "All
Risk" Builder's Risk form, or "Course of Construction" insurance policy in
non-reporting form for any Improvements under construction, renovation or
alteration in an amount approved by Lender may be required. During the period of
any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto as may from
time to time be required by Lender against other insurable hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated, including, without limitation, sinkhole, mine subsidence, earthquake
and environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
() All insurance provided for in Subsection 3.3(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25 million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Lender (a "Rating Agency"), (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall
name Lender as an additional named insured and the Policy referred to in
Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds
be payable to Lender as set forth in Section 4.4 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omission
of Lender. All Policies described in Subsection 3.3(a) above shall contain (i) a
provision that such Policies shall not be canceled or terminated, nor shall they
<PAGE>
expire, without at least thirty (30) days' prior written notice to Lender in
each instance; and (ii) include effective waivers by the insurer of all claims
for Insurance Premiums (defined below) against any mortgage, loss payees,
additional insureds and named insureds (other than Borrower). In the event that
the Property or the Improvements constitutes a legal non-conforming use under
applicable building, zoning or land use laws or ordinances, the policy shall
include an ordinance or law coverage endorsement which will contain Coverage A:
"Loss Due to Operation of Law" (with a minimum liability limit equal to
Replacement Cost With Agreed Value Endorsement), Coverage B: "Demolition Cost"
and Coverage C: "Increased Cost of Construction" coverages. Certificates of
insurance with respect to all renewal and replacement Policies shall be
delivered to Lender not less than thirty (30) days prior to the expiration date
of any of the Policies required to be maintained hereunder which certificates
shall bear notations evidencing payment of applicable premiums (the "Insurance
Premiums"). Originals or certificates of such replacement Policies shall be
delivered to Lender promptly after Borrower's receipt thereof but in any case
within thirty (30) days after the effective date thereof. If Borrower fails to
maintain and deliver to Lender copies of the Policies or certificates of
insurance required by this Security Instrument, upon ten (10) days' prior notice
to Borrower, Lender may procure such insurance at Borrower's sole cost and
expense.
() Borrower shall comply with all insurance requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Borrower shall give prompt notice of such damage to
Lender and provided that Borrower shall have received the Net Proceeds, Borrower
shall promptly commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with such
alterations as may be approved by Lender (the "Restoration") and otherwise in
accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may be effected
under a blanket policy or policies covering the Property and other properties
and assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property, and any sublimit in such blanket policy applicable to the
Property, and shall in any case comply in all other respects with the
requirements of this Section 3.3.
() The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and Excess
Liability Policies, but in no event will the Commercial General Liability policy
be written for an amount less than $1,000,000 per occurrences and $2,000,000
aggregate for bodily injury and property damage liability.
<PAGE>
() The delivery to Lender of the insurance policies or the certificates
of insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by Borrower to Lender
as further security for the indebtedness secured hereby. In the event of
foreclosure of this Security Instrument, 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 Borrower 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 Lender or other transferee in the event of
such other transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance.
() Lender 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 Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance. Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance complies with all of the applicable requirements set forth
herein.
Section . Payment of Taxes, Etc. () Subject to the terms and conditions
of Section 3.5 hereof, Borrower shall pay by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have been deposited with Lender in accordance with the terms of
this Security Instrument, Borrower shall furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall become
delinquent.
<PAGE>
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any of the Taxes, provided that (i) no Event of Default has
occurred and is continuing under the Note, this Security Instrument or any of
the Other Security Documents, (ii) Borrower is permitted to do so under the
provisions of any other mortgage, deed of trust or deed to secure debt affecting
the Property, (iii) such proceeding shall suspend the collection of the Taxes
from Borrower and from the Property or Borrower shall have paid all of the Taxes
under protest, (iv) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower is
subject and shall not constitute a default thereunder, (v) neither the Property
nor any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, canceled or lost, (vi) Borrower shall have set aside
adequate reserves for the payment of the Taxes, together with all interest and
penalties thereon, unless Borrower has paid all of the Taxes under protest, and
(vii) Borrower shall have furnished the security as may be required in the
proceeding, or as may be reasonably requested by Lender to insure the payment of
any contested Taxes, together with all interest and penalties thereon, taking
into consideration the amount in the Escrow Fund available for payment of Taxes.
Section . Escrow Fund. At the option of Lender, Lender may require
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of Insurance Premiums and Taxes pursuant to Sections
3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance Premiums shall be
made by Borrower to Lender in amounts determined by Lender in its discretion on
the date hereof to be held by Lender in escrow. Additionally, Borrower shall pay
to Lender on the tenth (10th) day of each calendar month (a) one-twelfth of an
amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, upon the due dates established by the appropriate taxing
authority during the next ensuing twelve (12) months and (b) one-twelfth of an
amount which would be sufficient to pay the Insurance Premiums due for the
renewal of the coverage afforded by the Policies upon the expiration thereof
(the initial deposits together with the amounts in (a) and (b) above shall be
called the "Escrow Fund"). Borrower agrees to notify Lender immediately of any
changes to the amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has obtained knowledge and authorizes Lender or
its agent to obtain the bills for Taxes and Other Charges directly from the
appropriate tax authority. Monthly payments to the Escrow Fund as required
hereunder and the monthly payments of interest or principal or both, payable
pursuant to the Note, shall be added together and shall be paid as an aggregate
sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 3.3 and
3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above, Borrower shall promptly pay to Lender, upon demand,
an amount which Lender shall reasonably estimate as sufficient to make up the
deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by Lender.
<PAGE>
Section . Condemnation. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, Borrower shall deliver
to Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Borrower shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the award by the condemning authority but shall
be entitled to receive out of the award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by the
power of eminent domain, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of in accordance with Section 4.4 of this Security Instrument. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the award or payment, Lender shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive the award or payment, or a portion thereof sufficient to pay the Debt.
Section . Leases and Rents. () Except as otherwise consented to by
Lender, all Leases shall be written on a standard form of lease which shall have
been approved by Lender. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior written consent of Lender,
which consent shall not be unreasonably withheld or delayed. All proposed leases
shall be subject to the prior approval of Lender except that all proposed leases
which (i) are on the same form of lease which has been approved by Lender, (ii)
are the result of an arms-length transaction, (iii) which provide for rental
rates comparable to existing market rates, (iv) where space to be leased does
not exceed more than ten percent (10%) of total rentable space of the Property,
(v) where the proposed tenant is an independent third party not affiliated with
the Borrower, and (vi) do not contain any terms which would materially affect
Lender's rights under this Security Instrument, the Note or the Other Security
Documents, shall not be subject to the prior approval of Lender. Notwithstanding
subsections (ii), (iii) and (v) above, Borrower may lease units to employees of
<PAGE>
Borrower, but the aggregate number of units leased to such employees shall not
exceed 1.5% of the total number of units at the Property. Borrower (i) shall
observe and perform all the obligations imposed upon the lessor under the Leases
if the failure to perform or observe the same would materially and adversely
affect the value of the Property taken as a whole and shall not do or permit to
be done anything to impair the value of the Leases as security for the Debt;
(ii) shall promptly send copies to Lender of all notices of default which
Borrower shall send or receive thereunder; (iii) shall enforce in a commercially
reasonable manner all of the terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or performed;
provided, however, with respect to multifamily residential property, a
residential Lease may be terminated in the event of a default by the tenant
thereunder; (iv) shall not collect any of the Rents more than one (1) month in
advance (provided that a security deposit shall not be deemed rent collected in
advance); (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (vi) shall not (A) materially alter, modify or change
the terms of the Leases without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed if the alteration,
modification or change does not materially and adversely affect the value of the
Property taken as a whole and provided further that such Lease, as altered,
modified or changed, is otherwise in compliance with the requirements of this
Security Instrument, or (B) cancel or terminate any Lease (except for defaults
thereunder) of more than ten (10%) percent of the rentable space of the Property
or accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (vii) shall not alter, modify or change the
terms of any guaranty, letter of credit or other credit support with respect to
the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty
without the prior written consent of Lender; and (viii) shall not consent to any
assignment of or subletting under the Leases not in accordance with their terms,
without the prior written consent of Lender. Notwithstanding the foregoing,
subdivisions (ii), (vi), (vii) and (viii) shall not apply to residential Leases
for space in a multifamily residential property.
Section . Maintenance of Property. Borrower shall cause the Property to
be maintained in a good and safe condition and repair. The Improvements and the
Personal Property shall not be removed, demolished or altered if the costs of
same would exceed $500,000 (except for normal replacement of the Personal
Property) without the consent of Lender. Subject to Section 4.4(c) hereof,
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
Section 3.6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Borrower shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof. If
under applicable zoning provisions the use of all or any portion of the Property
is or shall become a nonconforming use, Borrower will not cause or permit the
nonconforming use or Improvement to be discontinued or abandoned without the
express written consent of Lender.
<PAGE>
Section . Waste. Borrower shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section . Compliance With Laws. () Borrower shall promptly comply with
all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof including, but not limited to, the Americans with Disabilities
Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request, provide
Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, Borrower shall not
alter the Property in any manner which would materially increase Borrower's
responsibilities for compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans, specifications, or working
drawings for alterations of the Property shall create no responsibility or
liability on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of compliance with
Applicable Laws from an independent architect, engineer, or other person
acceptable to Lender.
() Borrower shall give prompt notice to Lender of the receipt by
Borrower of any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the Applicable Laws affecting the Property,
provided that (i) no Event of Default has occurred and is continuing under the
Note, this Security Instrument or any of the Other Security Documents; (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property; (iii) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
default thereunder; (iv) neither the Property nor any part thereof or interest
therein nor any of the tenants or occupants thereof shall be affected in any
material adverse way as a result of such proceeding; and (v) Borrower shall have
furnished to Lender all other items reasonably requested by Lender.
<PAGE>
Section . Books and Records. () Borrower and any Guarantors and
Indemnitors shall keep adequate books and records of account in accordance with
the methods utilized by them as of the date hereof, consistently applied and
furnish to Lender:
() quarterly certified rent rolls signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing the total
revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of Borrower,
any Guarantors and any Indemnitors, in the form required by Lender, prepared and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly basis
consistent with the quarterly certified rent rolls described above within ninety
(90) days after the close of each fiscal year;
() an annual operating budget presented on a monthly basis consistent
with the annual operating statement described above for the Property and all
proposed capital replacements and improvements at least thirty (30) days prior
to the start of each calendar year; and
() such other financial statements, including monthly operating
statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its affiliates
shall furnish to Lender:
() a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and deposits received from tenants and any other information requested
by Lender, in reasonable detail and certified by Borrower under penalty of
perjury to be true and complete, but no more frequently than quarterly; and
<PAGE>
() an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and Indemnitor shall
furnish Lender with such other additional financial or management information as
may, from time to time, be reasonably required by Lender in form and substance
satisfactory to Lender.
Section . Payment For Labor and Materials. Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in
respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section . Performance of Other Agreements. Borrower shall observe and
perform each and every term to be observed or performed by Borrower pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Property.
Section . Change of Name, Identity or Structure. Borrower will not
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days prior
to the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of the Lender.
Section . Existence. Borrower will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names.
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section . Property Use. The Property shall be used only for multifamily
apartments, and for no other use without the prior written consent of Lender,
which consent may be withheld in Lender's discretion.
<PAGE>
Section . ERISA. () It shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Security Instrument and the
Other Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Security Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(32) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests
in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R.ss.2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29
C.F.R.ss.2510.3-101(c) or (e) or an investment company registered
under The Investment Company Act of 1940.
Section . Single Purpose Entity. () It has not and shall not:
() engage in any business or activity other than the ownership,
operation and maintenance of the Property, and activities incidental thereto;
() acquire or own any material assets other than (A) the Property, and
(B) such incidental Personal Property as may be necessary for the operation of
the Property;
() merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent;
() fail to preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the jurisdiction
of its organization or formation, or without the prior written consent of
<PAGE>
Lender, amend, modify, terminate or fail to comply with the provisions of
Borrower's Partnership Agreement, Articles or Certificate of Incorporation,
Operating Agreement or similar organizational documents, as the case may be, as
same may be further amended or supplemented, if such amendment, modification,
termination or failure to comply would adversely affect the ability of Borrower
to perform its obligations hereunder, under the Note or under the Other Security
Documents;
() own any subsidiary or make any investment in, any person or entity
without the consent of Lender;
() commingle its assets with the assets of any of its general partners,
members, shareholders, affiliates, principals or of any other person or entity;
() incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
incurred in the ordinary course of business, provided same are paid when due;
() fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, members, shareholders,
principals and affiliates of Borrower, the affiliates of a general partner or
member, or shareholder of Borrower, and any other person or entity;
() enter into any contract or agreement with any general partner,
member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than any general partner, member, shareholder, principal or
affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof;
() seek the dissolution or winding up in whole, or in part, of
Borrower;
() maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, member, shareholder, principal or affiliate of Borrower,
or any general partner, member, shareholder, principal or affiliate thereof or
any other person;
() hold itself out to be responsible for the debts of another person;
() make any loans or advances to any third party, including any general
partner, member, shareholder, principal or affiliate of Borrower, or any general
partner, principal or affiliate thereof;
<PAGE>
() fail to file its own TAX returns;
() agree to, enter into or consummate any transaction which would
render Borrower unable to furnish the certification or other evidence referred
to in Section 4.2(b) hereof;
() fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business
solely in its own name in order not (A) to mislead others as to the identity
with which such other party is transacting business, or (B) to suggest that
Borrower is responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner, principal
or affiliate thereof);
() fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; or
() file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
() If Borrower is a limited partnership or a limited liability company,
each general partner or at least one member (the "SPE Member") of Borrower, as
applicable, is a corporation or limited liability company whose sole asset is
its interest in Borrower and each general partner or the SPE Member of Borrower,
as applicable, will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(a) as if
such representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a manager under
the law where the Borrower is organized.
() Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors (an "Independent Director") of each
general partner of Borrower (or of the SPE Member of Borrower) reasonably
satisfactory to Lender who shall not have been at the time of such individual's
initial appointment, and may not have been at any time during the preceding five
years, and shall not be at any time while serving as a director of the general
partner (or SPE Member) either (i) a shareholder of, or an officer, director
(other than an Independent Director), partner or employee of, Borrower or any of
its shareholders, partners, members, subsidiaries or affiliates, (ii) a customer
of, or supplier to, Borrower or any of its shareholders, partners, members,
subsidiaries or affiliates, (iii) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, member, employee, supplier or
customer. As used herein, the term "control": means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policy of a person or entity, whether through ownership of voting securities, by
contract or otherwise.
<PAGE>
() Borrower shall not cause or permit the board of directors of the
general partner of Borrower (or of the SPE Member of Borrower) to take any
action which, under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a vote of the
board of directors of the general partner of Borrower (or the SPE Member of
Borrower) unless at the time of such action there shall be at least one member
of the board of directors who is an Independent Director.
Section . Restoration After Casualty/Condemnation. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed $500,000
("Casualty Amount"); (ii) the costs of completing the Restoration as reasonably
estimated by Borrower shall be less than or equal to the Casualty Amount; (iii)
no Event of Default shall have occurred and be continuing under the Note, this
Security Instrument or any of the Other Security Documents; (iv) the Property
and the use thereof after the Restoration will be in compliance with, and
permitted under, all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental Laws (defined in
Section 12.1); and (v) such fire or other casualty or taking, as applicable,
does not materially impair access to the Property or the Improvements, then the
Net Proceeds will be disbursed directly to Borrower and Borrower shall commence
and diligently prosecute to completion, subject to Force Majeure (defined
herein), the Restoration of the Property to as nearly as possible the condition
it was in immediately prior to such fire or other casualty or to such taking.
Except upon the occurrence and continuance of an Event of Default, Borrower
shall settle any insurance claims with respect to the Net Proceeds which in the
aggregate are less than or equal to the Casualty Amount. Lender shall have the
right to participate in and reasonably approve any settlement for insurance
claims with respect to the Net Proceeds which in the aggregate are equal to or
greater than the Casualty Amount. If an Event of Default shall have occurred and
be continuing, Borrower hereby irrevocably empowers Lender, in the name of
Borrower as its true and lawful attorney-in-fact, to file and prosecute such
claim and to collect and to make receipt for any such payment. If the Net
Proceeds are received by Borrower, such Net Proceeds shall, until the completion
of the related work, be held in trust for Lender and shall be segregated from
other funds of Borrower to be used to pay for the cost of the Restoration in
accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount, such Net
Proceeds shall, subject to the provisions of the Leases that are superior to the
lien of this Security Instrument or with respect to which subordination,
non-disturbance agreements binding upon Lender have entered into concerning the
deposits of Net Proceeds, be forthwith paid to Lender to be held by Lender in a
segregated account to be made available to Borrower for the Restoration in
accordance with the provisions of this Subsection 4.4(b). Subject to Section
4.4(c) hereof, Borrower shall commence and diligently prosecute to completion,
<PAGE>
subject to Force Majeure (defined below), the Restoration (in the case of a
taking, to the extent the Property is capable of being restored). The term "Net
Proceeds" for purposes of this Section 4.4 shall mean: (i) the net amount of all
insurance proceeds received by Lender under the Policies carried pursuant to
Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security Instrument as
a result of such damage or destruction, after deduction of its reasonable costs
and expenses (including, but not limited to reasonable counsel fees), if any, in
collecting the same, or (ii) the net amount of all awards and payments received
by Lender with respect to a taking referenced in Section 3.6 of this Security
Instrument, after deduction of its reasonable costs and expenses (including, but
not limited to reasonable counsel fees), if any, in collecting the same,
whichever the case may be. The term "Force Majeure" for the purpose of this
Section 4.4 shall have the following meaning: Borrower shall be excused for the
period of any delay in the performance of any obligations hereunder when
prevented from so doing by cause or causes beyond Borrower's control such as,
without limitation, all labor disputes, civil commotion, war, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, and acts of God.
() If the Net Proceeds are greater than the Casualty Amount, the Net
Proceeds shall be made available to Borrower for payment of, or reimbursement of
Borrower's expenses in connection with, the Restoration, subject to the
following conditions:
(A) no Event of Default shall have occurred and be continuing under the
Note, this Security Instrument or any of the Other Security
Documents;
(B) Lender shall, within a reasonable period of time prior to request
for initial disbursement, be furnished with an estimate of the
cost of the Restoration accompanied by an independent architect's
certification as to such costs and appropriate plans and
specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by Borrower with Lender, are sufficient to cover the
cost of the Restoration as such costs are certified by the
independent architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds, less
than fifty percent (50%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered unusable
as a result of such fire or other casualty; or (2) in the event
that the Net Proceeds are condemnation awards, less than fifty
percent (50%) of the Land constituting the Property is taken,
such Land that is taken is located along the perimeter or
periphery of the Property and no portion of the Improvements is
located in such Lands;
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note
which will be incurred with respect to the Property as a result
of the occurrence of any such fire or other casualty or taking,
whichever the case may be, will be covered out of (1) the Net
Proceeds, or (2) other funds of Borrower;
<PAGE>
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash
flow of the Property will be restored to a level sufficient to
cover all carrying costs and operating expenses of the Property,
including, without limitation, debt service on the Note at a
coverage ratio (on a "normalized" basis, i.e., after deducting
replacement reserve requirements and reserves for tenant
improvements and leasing commissions from net operating income,
whether or not such sums are escrowed with Lender) of at least
1.30 : 1.0 (assuming an interest rate equal to 9.0% per annum),
or, if lower, the coverage ratio which existed as of the date
immediately preceding such casualty or taking as the case may be;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity
Date (as defined in the Note), (2) the earliest date required for
such completion under the terms of any Lease and (3) such time as
may be required under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the Property to as
nearly as possible the condition it was in immediately prior to
such fire or other casualty or to such taking, as applicable;
(H) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws,
ordinances, rules and regulations (including, without limitation,
all applicable Environmental Laws (defined in Section 12.1)); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net Proceeds
shall be held by Lender and, until disbursed in accordance with the provisions
of this Subsection 4.4(b), shall constitute additional security for the
Obligations. The Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
<PAGE>
() If the Net Proceeds exceed the Casualty Amount, Lender shall have
the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. If the Net Proceeds
exceed the Casualty Amount, the identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and an independent consulting engineer selected by Lender (the "Casualty
Consultant"), such acceptance not to be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration including, without limitation, reasonable counsel
fees and disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There shall be
no Casualty Retainage with respect to costs actually incurred by Borrower for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
<PAGE>
() If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit the
deficiency (the "Net Proceeds Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Subsection 4.4(b) shall constitute additional security for the
Obligations.
() The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section . Warranty of Title. Borrower has good and marketable title to
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
<PAGE>
Section . Authority. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's part
to be performed.
Section . Legal Status and Authority. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section . Validity of Documents. (a) The execution, delivery and
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section . Litigation. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of Borrower's knowledge, threatened or contemplated
against Borrower, any person guaranteeing the payment of the Debt or any portion
thereof or performance by Borrower of any terms of this Security Instrument (a
"Guarantor"), if any, an Indemnitor (defined in Subsection 10.1(c)), if any, or
against or affecting the Property that (a) has not been disclosed to Lender, and
has a material, adverse effect on the Property or Borrower's, any Guarantor's or
any Indemnitor's ability to perform its obligations under the Note, this
Security Instrument or the Other Security Documents, or (b) is not adequately
covered by insurance, each as determined by Lender in its sole and absolute
discretion.
<PAGE>
Section . Status of Property. () No portion of the Improvements is
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be
amended, or any successor law, or, if any portion of the Improvements is now or
at any time in the future located within any such area, Borrower has obtained
and will maintain the insurance prescribed in Section 3.3 hereof.
() Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Property and the conduct of its business and all required zoning, building code,
land use, environmental and other similar permits or approvals, all of which are
in full force and effect as of the date hereof and, to the best of Borrower's
knowledge, not subject to revocation, suspension, forfeiture or modification.
() To the best of Borrower's knowledge, and except as
expressly set forth in that certain Property Condition Survey of the Property,
dated April 1, 1999, by the Environmental Management Group, and that certain
Phase I Environmental Site Assessment of the Property dated March 30, 1999,
prepared by Environmental Management Group, the Property and the present and
contemplated use and occupancy thereof are in full compliance with all
Applicable Laws, including, without limitation, zoning ordinances, building
codes, land use and Environmental Laws, laws relating to the disabled (including
but not limited to, the ADA) and other similar laws.
() The Property is served by all utilities required for the current or
contemplated use thereof. All utility service is provided by public utilities
and the Property has accepted or is equipped to accept such utility service.
() To the best of Borrower's knowledge, all public roads and streets
necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other casualty.
() All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
<PAGE>
() Borrower has paid in full for, and is the owner of, all furnishings,
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby.
() To the best of Borrower's knowledge, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a good and
safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on the
certified rent roll delivered to Lender have been collected by Borrower except
as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the Property.
Section . No Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.
Section . Separate TAX Lot. The Property is assessed for real estate
TAX purposes as one or more wholly independent TAX lot or lots, separate from
any adjoining land or improvements not constituting a part of such lot or lots,
and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section . ERISA Compliance. () As of the date hereof and throughout the
term of this Security Instrument, (i) Borrower is not and will not be an
"employee benefit plan" as defined in Section 3(32) of ERISA, which is subject
to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this Security
Instrument, (i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA, and (ii) transactions by or with Borrower are
not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Section . Leases. Except as disclosed in the certified rent roll for
the Property delivered to and approved by Lender, or as otherwise set forth on
Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's interest
in the Leases; (b) the Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to the Leases are reflected in the
certified rent roll delivered to and approved by Lender; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
<PAGE>
(except to Lender); (e) none of the Rents have been collected for more than one
(1) month in advance (provided that a security deposit shall not be deemed rent
collected in advance); (f) the premises demised under the Leases have been
completed and the tenants under the Leases have accepted the same and have taken
possession of the same on a rent-paying basis; (g) to the best of Borrower's
knowledge, there exist no offsets or defenses to the payment of any portion of
the Rents; (h) Borrower has received no notice from any tenant challenging the
validity or enforceability of any Lease; (i) all payments due under the Leases
are current and are consistent with the certified rent roll for the Property
delivered to and approved by Lender; (j) to the best of Borrower's knowledge, no
tenant under any Lease is in default thereunder, or is a debtor in any
bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the tenants under the Leases other than
expressly set forth in each Lease; (l) the Leases are valid and enforceable
against Borrower and, to the best of Borrower's knowledge, the tenants set forth
therein; (m) no Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (n) to the best of Borrower's
knowledge, no person or entity has any possessory interest in, or right to
occupy, the Property except under and pursuant to a Lease; (o) each Lease (other
than a residential Lease) is subordinate to this Security Instrument, either
pursuant to its terms or a recorded subordination agreement; and (p) to the best
of Borrower's knowledge, no brokerage commissions or finders fees are due and
payable regarding any Lease.
Section . Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section . Business Purposes. The loan evidenced by the Note is solely
for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section . Taxes. Borrower, any Guarantor and any Indemnitor have filed
all federal, state, county, municipal, and city income and other TAX returns
required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section . Mailing Address. Borrower's mailing address, as set forth in
the opening paragraph hereof or as changed in accordance with Article 16, is
true and correct.
<PAGE>
Section . No Change in Facts or Circumstances. All
information in the application for the loan submitted to Lender (the "Loan
Application") and in all financing statements, rent rolls, reports, certificates
and other documents submitted in connection with the Loan Application or in
satisfaction of the terms thereof, are accurate, complete and correct in all
material respects. There has been no adverse change in any condition, fact,
circumstance or event that would make any such information materially
inaccurate, incomplete or otherwise misleading.
Section . Disclosure. To the best of Borrower's knowledge, Borrower has
disclosed to Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty made herein to be
materially misleading.
Section . Third Party Representations. To the best of Borrower's
knowledge, each of the representations and the warranties made by each Guarantor
and Indemnitor herein or in any Other Security Document(s) is true and correct
in all material respects.
Section . Illegal Activity. To the best of Borrower's knowledge, no
portion of the Property has been or will be purchased, improved, fixtured,
equipped or furnished with proceeds of any criminal or other illegal activity
and to the best of Borrower's knowledge, there are no illegal activities or
activities relating to controlled substance at the Property.
Section . FUNB Line of Credit. No more than five (5) Business Days
after the expiration or earlier termination of, or concurrently with the giving
of notice by PREIT Associates, L.P. to the public that an event of default has
occurred under, that certain Revolving Credit Loan Agreement between PREIT
Associates, L.P. and Corestates Bank, N.A., as agent (predecessor-in-interest to
First Union National Bank, as agent), and First Trust Savings Bank, Fleet Bank,
N.A. and PNC Bank, as lenders, dated September 30, 1997, Borrower shall notify
Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section . Relationship of Borrower and Lender. The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or condition
of any of the Note, this Security Instrument and the Other Security Documents
shall be construed so as to deem the relationship between Borrower and Lender to
be other than that of debtor and creditor.
Section . Servicing of the Loan. At the option of Lender, the loan
secured hereby may be serviced by a servicer/trustee (the "Servicer") selected
by Lender and Lender may delegate all or any portion of its responsibilities
under the Note, this Security Instrument, and the Other Security Documents to
the Servicer.
<PAGE>
Article - FURTHER ASSURANCES
Section . Recording of Security Instrument, Etc. Borrower forthwith
upon the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, this Security Instrument, the Other Security
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Security Instrument,
any mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section . Further Acts, Etc. Borrower will, at the cost of Borrower,
and without expense to Lender, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Lender, the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument, or
for complying with all Applicable Laws. Borrower, on demand, will execute and
deliver and hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, one
or more financing statements, chattel mortgages or other instruments, to
evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section . Changes in TAX, Debt Credit and Documentary Stamp Laws. () If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a TAX, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower will pay the TAX, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of TAX by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.
<PAGE>
() Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate TAX purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
() If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the Other Security
Documents or impose any other TAX or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.
Section . Estoppel Certificates. () After request by Lender, Borrower,
within twenty (20) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the terms of payment and
maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by Section 18.1
hereof, at Lender's request, Borrower, any Guarantors and any Indemnitors shall
provide an estoppel certificate to the Investor (defined in Section 18.1) or any
prospective Investor confirming the accuracy of information provided by such
person to Lender under or in respect of this Security Instrument.
<PAGE>
() After written request by Borrower not more than twice annually,
Lender shall furnish Borrower a statement setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the balance of the sums in
the Escrow Fund, if any, and (v) to the best of Lender's knowledge, whether
Borrower is currently in default.
Section . Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).
Section . Splitting of Security Instrument. This Security Instrument
and the Note shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and deliver
to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount secured by this Security Instrument, and containing terms,
provisions and clauses no less favorable to Borrower than those contained herein
and in the Note, and such other documents and instruments as may be required by
Lender to effect the splitting of the Note and this Security Instrument.
Section . Replacement Documents. Upon receipt of an affidavit
of an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any Other Security Document which is not of public record, and, in the
case of any such mutilation, upon surrender and cancellation of such Note or
Other Security Document, Borrower will issue, in lieu thereof, a replacement
Note or Other Security Document, dated the date of such lost, stolen, destroyed
or mutilated Note or Other Security Document in the same principal amount
thereof and otherwise of like tenor. Borrower shall not be responsible to Lender
for Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section . Amended Financing Statements. Borrower will execute and
deliver to the Lender, prior to or contemporaneously with the effective date of
any such change, any financing statement or financing statement change required
by the Lender to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Lender, Borrower
shall execute a certificate in form satisfactory to the Lender listing the trade
names under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect to
the Property.
<PAGE>
Article - DUE ON SALE/ENCUMBRANCE
Section . No Sale/Encumbrance. Borrower agrees that Borrower shall not,
without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign, or otherwise transfer the Property or any
part thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred. Notwithstanding the foregoing, the Property may be transferred with
the prior written consent of Lender which consent shall not be unreasonably
withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, provided that (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one quarter of one percent (.25%) of
the outstanding principal balance of the Note shall be paid by Borrower to
Lender upon notice being given to Borrower of approval of the proposed transfer
(unless the proposed transferee is an affiliate of Borrower, in which event no
transfer fee shall be due and payable), (iv) no transfer shall be permitted
hereunder if an Event of Default, or an event which with the giving of notice or
lapse of time or both could become an Event of Default, has occurred and is
continuing, and (v) such transferee shall be a single purpose bankruptcy remote
entity and Borrower shall cause to be delivered to Lender a non-consolidation
opinion or an update of the same, in form and substance reasonably acceptable to
Lender, upon Lender's request to do so. Borrower agrees that Borrower shall not
incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Debt and trade payables incurred in
the ordinary course of business in connection with the operation of the
Property, provided same are paid when due.
Section . Sale/Encumbrance Defined. A sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning
of this Article 8 shall be deemed to include, but not be limited to (a) an
installment sales agreement wherein Borrower agrees to sell the Property or any
part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower or any general partner or
managing member (or if no managing member, any member) of Borrower is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation's stock; (d) if Borrower or any general
partner or managing member (or if no managing member, any member) of Borrower is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest or the transfer or pledge of any partnership interest of
any limited partner or any profits or proceeds relating to any such partnership
<PAGE>
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged; and (e) if Borrower or any general
partner or member of Borrower is a limited liability company, the change,
removal or resignation of a managing member or the transfer of the membership
interest of a managing member or any profits or proceeds relating to such
membership interest or the transfer or pledge of any membership interest of any
other member or any profits or proceeds relating to any such membership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged. Notwithstanding the foregoing, the
following transfers shall not be deemed to be a sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment or transfer within the meaning
of this Article 8: (a) transfer by devise or descent or by operation of law upon
the death of a member, general partner or stockholder of Borrower, any Guarantor
or Indemnitor or any member or general partner thereof, (b) a sale, transfer or
hypothecation of a membership, partnership or shareholder interest in Borrower,
whichever the case may be, by a current member, general partner or shareholder,
as applicable, to an immediate family member (i.e., parents, spouses, siblings,
children or grandchildren) of such member, general partner or shareholder, or to
a trust for the benefit of an immediate family member of such member, general
partner or shareholder, and (c) a change in the form of organizational structure
or name of Borrower, provided that there is no transfer or change in the
ownership interests in Borrower, and provided further that Borrower shall remain
in full compliance with Section 4.3 of this Security Instrument, provided that,
as to each of clauses (a), (b) and (c) of this sentence, with respect to any
such sale, transfer, hypothecation or change in organizational structure,
Borrower shall deliver a non-consolidation opinion or an update of the same, in
form and substance reasonably satisfactory to Lender, upon Lender's request to
do so.
Section . Lender's Rights. Lender reserves the right to condition the
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section . Right To Substitute Property. The terms and conditions of
this Article 8 shall be subject to Borrower's rights pursuant to that certain
letter dated the date hereof from Lender to Borrower regarding Borrower's rights
to substitute security for the Debt. Inquiries regarding the aforementioned
letter shall be made to Borrower at the address set forth in Article 16 below.
<PAGE>
Article - PREPAYMENT
Section . Prepayment Only in Accordance with Note. The Debt may be
prepaid only in strict accordance with the express terms and conditions of the
Note including, without limitation, payment of the Prepayment Consideration if
applicable.
Article - DEFAULT
Section . Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for purposes of
this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the provisions
of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE Member of
Borrower violates or does not comply with any of the provisions of Section 4.3;
() if any representation or warranty of Borrower, Indemnitor (as
defined in that certain Environmental Indemnity Agreement dated as of the date
hereof (the "Environmental Indemnity") or any Guarantor, or any member, general
partner, principal or beneficial owner of any of the foregoing, made herein or
in the Environmental Indemnity or in any guaranty, or in any certificate,
report, financial statement or other instrument or document furnished to Lender
shall have been false or misleading in any material respect when made;
() if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
() except for the specific defaults set forth in this Section 10.1, any
other default hereunder or any of the Other Security Documents by Borrower,
which default is not cured (i) in the case of any default which can be cured by
the payment of a sum of money, within five (5) days after written notice from
Lender to Borrower, or (ii) in the case of any other default, within thirty (30)
days after written notice from Lender to Borrower; provided that if such default
cannot reasonably be cured within such thirty (30) day period and Borrower shall
have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of one hundred twenty (120) days,
unless, only in the case of cures that require construction or remedial work,
such cure cannot with diligence be completed within such one hundred twenty
(120) day period, in which case such period shall be extended for an additional
one hundred twenty (120) days;
<PAGE>
() if Borrower or any Guarantor or Indemnitor shall make an assignment
for the benefit of creditors or if Borrower shall generally not be paying its
debts as they become due; or
() if the Policies are not kept in full force and effect, or Borrower
has not delivered evidence of the renewal of the Policies ten (10) days prior to
their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any Guarantor or Indemnitor shall make a general
assignment for the benefit of its creditors'; or (ii) there shall be commenced
against Borrower or any Guarantor or Indemnitor any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety (90) days;
or (iii) there shall be commenced against the Borrower or any Guarantor or
Indemnitor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within ninety (90) days from the entry thereof; or (iv) the
Borrower or any Guarantor or Indemnitor shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
Article - RIGHTS AND REMEDIES
Section . Remedies. () Upon the occurrence of any Event of Default,
Borrower agrees that Lender, may take such action, without notice or demand, as
it deems advisable to protect and enforce the rights of Lender against Borrower
and in and to the Property, including, but not limited to the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Lender:
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() declare the entire unpaid Debt to be immediately due and payable;
() institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
() with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;
() sell for cash or upon credit the Property or any part thereof and
all estate, claim, demand, right, title and interest of Borrower therein and
rights of redemption thereof, pursuant to power of sale or otherwise, at one or
more sales, as an entity or in parcels, at such time and place, upon such terms
and after such notice thereof as may be required or permitted by law;
() subject to the provisions of Article 15, institute an action, suit
or proceeding in equity for the specific performance of any covenant, condition
or agreement contained herein, in the Note or in the Other Security Documents;
() subject to the provisions of Article 15, recover judgment on the
Note either before, during or after any proceedings for the enforcement of this
Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnitor or of any person, firm or other entity liable for the
payment of the Debt;
() subject to any applicable law, the license granted to Borrower under
Section 1.2 shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or servants
wholly therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the Property and
of such books, records and accounts to Lender upon demand, and thereupon Lender
may (A) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (B) complete any construction on the Property in such manner and form
as Lender deems advisable; (C) make alterations, additions, renewals,
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replacements and improvements to or on the Property; (D) exercise all rights and
powers of Borrower with respect to the Property, whether in the name of Borrower
or otherwise, including, without limitation, the right to make, cancel, enforce
or modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents of the Property and every part thereof; (E) require Borrower
to pay monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Borrower; (F) require Borrower to
vacate and surrender possession of the Property to Lender or to such receiver
and, in default thereof, Borrower may be evicted by summary proceedings or
otherwise; and (G) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Lender shall deem appropriate
in its sole discretion after deducting therefrom all expenses (including
reasonable attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the Taxes, Other Charges, insurance and other
expenses in connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and employees;
() exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (A) the right to take possession of the Collateral
or any part thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the Collateral, and (B)
request Borrower at its expense to assemble the Collateral and make it available
to Lender at a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the Collateral
sent to Borrower in accordance with the provisions hereof at least five (5) days
prior to such action, shall constitute commercially reasonable notice to
Borrower;
() apply any sums then deposited in the Escrow Fund and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the Note; and all
other sums payable pursuant to the Note, this Security Instrument
and the Other Security Documents, including, without limitation,
advances made by Lender pursuant to the terms of this Security
Instrument;
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() surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit on the
Debt in such priority and proportion as Lender in its discretion shall deem
proper, and in connection therewith, Borrower hereby appoints Lender as agent
and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any Net
Proceeds Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or through
Borrower from making use of or withdrawing any sums from any lockbox or similar
account, if any;
() pursue such other remedies as Lender may have under applicable law.
() In the event of a sale, by foreclosure, power of sale, or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property unimpaired
and without loss of priority. Notwithstanding the provisions of this Section
11.1 to the contrary, if any Event of Default as described in Subsection 10.1
(h)(i) or (ii) shall occur, the entire unpaid Debt shall be automatically due
and payable, without any further notice, demand or other action by Lender.
() Lender may adjourn from time to time any sale by it to be made under
or by virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without further
notice or publication, may make such sale at the time and place to which the
same shall be so adjourned.
() Upon any sale made under or by virtue of this Section 11.1, whether
made under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire the
Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Debt the net sales price
after deducting therefrom the expenses of the sale and costs of the action and
any other sums which Lender is authorized to deduct under this Security
Instrument.
Section . Application of Proceeds. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
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Section . Right to Cure Defaults. Upon the occurrence of any Event of
Default, Lender may, but without any obligation to do so and without notice to
or demand on Borrower and without releasing Borrower from any obligation
hereunder, cure the same in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Lender is authorized to enter upon the
Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law), with interest as
provided in this Section 11.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or in appearing in, defending, or
bringing any such action or proceeding shall bear interest at the Default Rate
(as defined in the Note), for the period after notice from Lender that such cost
or expense was incurred to the date of payment to Lender. All such costs and
expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the Other Security Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section . Actions and Proceedings. After the occurrence and during the
continuance of an Event of Default, Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its discretion, decides should be brought to protect its interest in the
Property.
Section . Recovery of Sums Required To Be Paid. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
Section . Examination of Books and Records. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during reasonable business hours at any office of Borrower, its affiliates or
any Guarantor or Indemnitor where the books and records are located.
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Section . Other Rights, Etc. () The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this Security Instrument. Borrower shall not be relieved of Borrower's
obligations hereunder by reason of (i) the failure of Lender to comply with any
request of Borrower, any Guarantor or any Indemnitor to take any action to
foreclose this Security Instrument or otherwise enforce any of the provisions
hereof or of the Note or the Other Security Documents, (ii) the release,
regardless of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (iii) any agreement or
stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Security Instrument or the Other
Security Documents.
() It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property or
collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other security
held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Security Instrument. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
Section . Right to Release Any Portion of the Property. Lender, may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section . Violation of Laws. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
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Section . Right of Entry. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less than five (5) Business Days' notice (except in the case of
emergencies when no notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section . Environmental Representations and Warranties. Borrower
represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated March 30, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger to human health or the environment.
"Environmental Law" includes, but is not limited to, the following statutes, as
amended, any successor thereto, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations and the
like addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community
Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource
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Conservation and Recovery Act (including, but not limited to Subtitle I relating
to underground storage tanks); the Solid Waste Disposal Act; the Clean Water
Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking
Water Act; the Occupational Safety and Health Act; the Federal Water Pollution
Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the
Endangered Species Act; the National Environmental Policy Act; and the River and
Harbors Appropriation Act. "Environmental Law" also includes, but is not limited
to, any present, and for the purposes of Sections 12.2, 12.3 and 13.4 only,
future, federal, state and local laws, statutes, ordinances, rules, regulations
and the like, as well as common law: conditioning transfer of property upon a
negative declaration or other approval of a governmental authority of the
environmental condition of the property; requiring notification or disclosure of
Releases of Hazardous Substances or other environmental condition of the
Property to any governmental authority or other person or entity, whether or not
in connection with transfer of title to or interest in property. "Hazardous
Substances" include but are not limited to any and all substances (whether
solid, liquid or gas) (i) defined, listed, or otherwise classified as
pollutants, hazardous wastes, hazardous substances, hazardous materials,
extremely hazardous wastes, or words of similar meaning or regulatory effect
under any present, or for the purposes of Sections 12.2. 12.3 and 13.4 only,
future, Environmental Laws or (ii) that may have a negative impact on human
health or the environment, including, but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives. "Release" of any
Hazardous Substance includes, but is not limited to any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping or disposing of Hazardous Substances.
"Remediation" includes, but is not limited to any response, remedial removal, or
corrective action, any activity to cleanup, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance, any actions to prevent, cure or
mitigate any Release of any Hazardous Substance, any action to comply with any
Environmental Laws or with any permits issued pursuant thereto, any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous
Substances.
Section . Environmental Covenants. Borrower covenants and agrees that
so long as the Borrower owns, manages, is in possession of, or otherwise
controls the operation of the Property: (a) all uses and operations on or of the
Property, whether by Borrower or any other person or entity, shall be in
compliance with all Environmental Laws and permits issued pursuant thereto; (b)
there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d)
Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
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cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender after Lender has reason to
believe this Section 12.2 has been violated (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas), and share with Lender
the reports and other results thereof, and Lender and other Indemnified Parties
(defined in Section 13.1) shall be entitled to rely on such reports and other
results thereof; (g) Borrower shall, at its sole cost and expense, comply with
all reasonable written requests of Lender to (i) reasonably effectuate
Remediation of any condition (including, but not limited to a Release of a
Hazardous Substance) in, on, under or from the Property, (ii) comply with any
Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) Borrower shall not do or
allow any tenant or other user of the Property to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Property), impairs
or may impair the value of the Property, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) Borrower shall immediately notify Lender in writing promptly
after it has become aware of (A) any presence or Releases or threatened Releases
of Hazardous Substances in, on, under, from or migrating towards the Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting the Property, (C)
any required Remediation of environmental conditions relating to the Property,
and (D) any written or oral notice or other communication of which Borrower
becomes aware from any source whatsoever (including, but not limited to a
governmental entity) relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or threatened administrative or judicial proceedings in
connection with anything referred to in this Article 12.
Section . Lender's Rights. Lender, its environmental consultant, and
any other person or entity designated by Lender, including, but not limited to
any receiver and any representative of a governmental entity, shall have the
right, but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Substance or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to Borrower, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, but not limited to conducting any environmental assessment
or audit of the Property or portions thereof to confirm Borrower's compliance
with the provisions of this Article 12, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Such audit shall
be performed in a manner so as to minimize interference with the conduct of
business at the Property. If such audit discloses that a violation of or a
liability under any Environmental Law exists or if such audit was required or
prescribed by law, regulation or governmental or quasi-governmental authority,
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Borrower shall pay all costs and expenses incurred in connection with such
audit; otherwise, the costs and expenses of such audit shall, notwithstanding
anything to the contrary set forth in this Section, be paid by Lender.
Article - INDEMNIFICATION
Section . General Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, or
punitive damages, of whatever kind or nature (including, but not limited to
attorneys' fees and other costs of defense) (the "Losses") imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws;
(j) the enforcement by any Indemnified Party of the provisions of this Article
13; (k) any and all claims and demands whatsoever which may be asserted against
Lender 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
Lease; (l) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the loan evidenced by the
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Note and secured by this Security Instrument; or (m) any misrepresentation made
by Borrower in this Security Instrument, the Other Security Documents, or any
documents or information provided pursuant to Section 18.1 hereof. Any amounts
payable to Lender by reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender and any person or entity
who is or will have been involved in the origination of this loan, any person or
entity who is or will have been involved in the servicing of this loan, any
person or entity in whose name the encumbrance created by this Security
Instrument is or will have been recorded, persons and entities who may hold or
acquire or will have held a full or partial interest in this loan (including,
but not limited to Investors or prospective Investors in the Securities, as well
as custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in this loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, members, partners, employees,
agents, servants, representatives, affiliates, subsidiaries, participants,
successors and assigns of any and all of the foregoing (including, but not
limited to any other person or entity who holds or acquires or will have held a
participation or other full or partial interest in this loan or the Property,
whether during the term of this loan or as a part of or following a foreclosure
of this loan and including, but not limited to any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
Section . Mortgage and/or Intangible TAX. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any TAX on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents or
in connection with a transfer of all or a portion of the Property pursuant to a
foreclosure, deed in lieu of foreclosure or otherwise.
Section . ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
attorneys' fees and costs incurred in the investigation, defense, and settlement
of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion) that
Lender may incur, directly or indirectly, as a result of a default under
Sections 4.2 or 5.9.
Section . Environmental Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), reasonable engineers' fees, reasonable
environmental consultants' fees, and costs of investigation (including, but not
limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
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imposed upon or incurred by or asserted against any Indemnified Parties, and
arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Borrower, any
person or entity affiliated with Borrower or tenant or other users of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any time located in, under, on or above the Property;
(d) any activity by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including, but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened violations of
any Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including, but not limited
to any failure by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property to comply with any order of any
governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
<PAGE>
Section . Duty to Defend; Attorneys' Fees and Other Fees and Expenses.
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
<PAGE>
Article - WAIVERS
Section . Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section . Marshalling and Other Matters. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by Applicable Law.
Section . Waiver of Notice. To the extent permitted by Applicable Law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument
specifically and expressly provides for the giving of notice by Lender to
Borrower and except with respect to matters for which Lender is required by
Applicable Law to give notice, and Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Security Instrument does not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section . Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section . Sole Discretion of Lender. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section . Survival. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 12 shall in no way be impaired by: any satisfaction or other
<PAGE>
termination of this Security Instrument, any assignment or other transfer of all
or any portion of this Security Instrument or Lender's interest in the Property
(but, in such case, shall benefit both Indemnified Parties and any assignee or
transferee), any exercise of Lender's rights and remedies pursuant hereto
including, but not limited to foreclosure or acceptance of a deed in lieu of
foreclosure, any exercise of any rights and remedies pursuant to the Note or any
of the Other Security Documents, any transfer of all or any portion of the
Property (whether by Borrower or by Lender, following foreclosure or acceptance
of a deed in lieu of foreclosure or at any other time), any amendment to this
Security Instrument, the Note or the Other Security Documents, and any act or
omission that might otherwise be construed as a release or discharge of Borrower
from the obligations pursuant hereto. All obligations and liabilities of
Borrower under Article 12 shall cease and terminate on the first (1st)
anniversary of the date of payment to Lender in cash of the entire Debt,
provided that contemporaneously with or subsequent to such payment, Borrower, at
its sole cost and expense, delivers to Lender an environmental audit of the
Property in form and substance, and prepared by a qualified environmental
consultant, reasonably satisfactory in all respects to Lender and indicating the
Property is in full compliance with all applicable Environmental Laws.
Section . Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH
Article - EXCULPATION .
Section . Exculpation. Notwithstanding anything to the contrary
contained in this Security Instrument or in any Other Security Document (but
subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note or this Security Instrument by any action or
proceeding to collect damages or wherein a money judgment or any deficiency
judgment or order or any judgment establishing any personal obligation or
liability shall be sought against Borrower or any principal director, officer,
employee, beneficiary, shareholder, partner, member, trustee, agent or affiliate
of Borrower or any person owning, directly or indirectly, any legal or
beneficial interest in Borrower, or any successors or assigns of any of the
foregoing (collectively, the "Exculpated Parties"). Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon this Security
Instrument, the Other Security Documents, and the interest in the Property, the
Rents and any other collateral given to Lender created by this Security
Instrument and the Other Security Documents; provided, however, subject to the
provisions of Sections 15.2, 15.3, 15.4 and 15.5, that any judgment in any
<PAGE>
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower's interest in the Property, in the Rents and in any other collateral
given to Lender in connection with the Note. Lender, by accepting the Note and
this Security Instrument, agrees that it shall not, except as otherwise provided
below, sue for or demand any deficiency judgment against Borrower or any of the
Exculpated Parties in any action or proceeding, under or by reason of or under
or in connection with the Note, the Other Security Documents or this Security
Instrument.
Section . Reservation of Certain Rights. The provisions of Section 15.1
shall not (a) constitute a waiver, release or impairment of the Obligations; (b)
impair the right of Lender to name Borrower as a party defendant in any action
or suit for judicial foreclosure and sale under this Security Instrument; (c)
affect the validity or enforceability of any indemnity, guaranty, master lease
or similar instrument made in connection with the Note, this Security
Instrument, or the Other Security Documents; (d) impair the ability of Lender to
obtain the appointment of a receiver; or (e) impair the enforcement of the
Assignment of Leases and Rents executed in connection herewith.
Section . Exceptions to Exculpation. Notwithstanding the provisions of
Article 15.1 to the contrary, Borrower and Indemnitor shall be personally liable
to Lender on a joint and several basis for the Losses Lender incurs due to: (a)
fraud or intentional misrepresentation by Borrower or any other person or entity
in connection with the execution and the delivery of the Note, this Security
Instrument or the Other Security Documents; (b) Borrower's misapplication or
misappropriation of Rents received by Borrower after the occurrence and during
the continuance of an Event of Default; (c) Borrower's misapplication or
misappropriation of tenant security deposits or Rents collected in advance; (d)
the misapplication or misappropriation of insurance proceeds or condemnation
awards after the occurrence and during the continuance of an Event of Default;
(e) any fees or commissions paid by Borrower after the occurrence and during the
continuance of an Event of Default to any principal, affiliate or general
partner of Borrower, Indemnitor or Guarantor in violation of the terms of the
Note, this Security Instrument or the Other Security Documents; (f) gross
negligence or criminal acts perpetrated by it resulting in forfeiture, seizure
or loss of any portion of the security; (g) any failure by Borrower or
Indemnitor to comply with the terms and provisions of Section 13.4 hereof or of
the Environmental Indemnity; (h) any failure by Borrower or any general partner
or the SPE Member of Borrower to comply with the terms and provisions of Section
4.3 hereof; or (i) any sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment or transfer of the Property or any part thereof, within the
meaning of Article 8 hereof, without the prior written consent of Lender.
Section . Recourse. Notwithstanding the foregoing, the agreement of
Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect in the event
(i) Borrower fails to comply with the terms and conditions of Section 4.3, 8.1,
8.2 or 8.3, (ii) the Property or any part thereof shall become an asset in (A) a
voluntary bankruptcy or insolvency proceeding, or (B) an involuntary bankruptcy
or insolvency proceeding commenced by any Person (other than Lender) and
Borrower fails to use its best efforts to obtain a dismissal of such
proceedings, or (iii) Borrower or any Guarantor or Indemnitor fails to comply
with the terms and provisions of Section 3.11 hereof within thirty (30) days
<PAGE>
after written notice from Lender to Borrower (which notice shall be a second
notice given after the expiration of any notice given pursuant to Section
10.1(e)); provided, however, so long as PREIT Associates, L.P., a Delaware
limited partnership, maintains that certain line of credit with First Union
National Bank, as agent, pursuant to that certain Revolving Credit Loan
Agreement with Corestates Bank, N.A. (predecessor-in-interest to First Union
National Bank), as agent, and First Trust Savings Bank, Fleet Bank, N.A. and PNC
Bank, as lenders, dated September 30, 1997 (or another credit arrangement
containing market standard financial covenants for net worth, leverage and
liquidity), the occurrence of any of the events referred to in subsections
(i)-(iii) above shall not create recourse liability against Borrower or any
Guarantor or Indemnitor.
Section . Bankruptcy Claims. Nothing herein shall be deemed to be a
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
Article - NOTICES
Section . Notices. All notices or other written communications
hereunder shall be deemed to have been properly given (a) upon delivery, if
delivered in person or by facsimile transmission with receipt acknowledged by
the recipient thereof, (b) one (1) Business Day (defined below) after having
been deposited for overnight delivery with any reputable overnight courier
service, or (c) three (3) Business Days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Borrower: PR Kenwood Gardens LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Facsimile No. (215) 546-0240
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
<PAGE>
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in the
State of New York.
Article - APPLICABLE LAW
Section . Choice of Law. THIS SECURITY INSTRUMENT SHALL BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE
THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section . Usury Laws. This Security Instrument and the Note
are subject to the express condition that at no time shall Borrower be obligated
or required to pay interest on the Debt at a rate which could subject the holder
of the Note to either civil or criminal liability as a result of being in excess
of the maximum interest rate which Borrower is permitted by applicable law to
contract or agree to pay. If by the terms of this Security Instrument or the
<PAGE>
Note, Borrower is at any time required or obligated to pay interest on the Debt
at a rate in excess of such maximum rate, the rate of interest under the
Security Instrument and the Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of the Note. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.
Section . Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section . Inapplicable Provision. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
Article - SECONDARY MARKET
Section . Dissemination of Information. If Lender determines at any
time to sell, transfer or assign the Note, this Security Instrument and the
Other Security Documents, and any or all servicing rights with respect thereto,
or to grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities (such sale and/or issuance, the
"Securitization") evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "Securities"), Lender may forward to each
purchaser, transferee, assignee, servicer, participant, investor, or their
respective successors in such Participations and/or Securities (collectively,
the "Investor") or any Rating Agency rating such Securities and each prospective
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the Debt and to Borrower, any Guarantor, any Indemnitors and
the Property (including, without limitation, all financial statements), which
shall have been furnished by Borrower, any Guarantor or any Indemnitors, as
Lender determines necessary or desirable. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section, including, without
limitation, the delivery of an estoppel certificate required in accordance with
Subsection 7.4(c) hereof and such other documents as may be reasonably requested
by Lender and, upon Lender's reasonable request, meeting with any Rating Agency
for due diligence purposes. Borrower shall also furnish and Borrower, any
<PAGE>
Guarantor and any Indemnitor consent to Lender furnishing to such Investors or
such prospective Investors or any Rating Agency any and all information
concerning the Property, the Leases, the financial condition of Borrower, any
Guarantor and any Indemnitor as may be requested by Lender, any Investor or any
prospective Investor or Rating Agency in connection with any sale, transfer or
Participation, provided, however, PREIT Associates, L.P. and Pennsylvania Real
Estate Investment Trust shall only be required under this Section 18.1 to
disclose information that is deemed to be "public" information. Borrower shall
not be responsible for Lender's fees and expenses incurred in connection with
the transactions contemplated by this Section 18.1. Lender shall reimburse
Borrower for the reasonable actual out-of-pocket third party costs incurred by
Borrower in excess of $1,500.00 in connection with the transactions contemplated
by this Section 18.1. Borrower shall deliver on the date hereof, at Borrower's
sole cost and expense, a nonconsolidation opinion, and within ten (10) Business
Days after demand of Lender, an update of same (which update Borrower will not
be required to provide more than once), each in form and substance and delivered
by counsel acceptable to Lender and the Rating Agency rating or proposed to rate
the Securities, as may be required by Lender and/or such Rating Agency.
Borrower's failure to deliver the opinions required hereby shall constitute an
Event of Default hereunder.
Article - COSTS
Section . Performance at Borrower's Expense. Borrower acknowledges and
confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, provided, however, no commitment fee shall be imposed in
connection with the substitution of collateral, (c) obtaining certain consents,
waivers and approvals with respect to the Property, or (d) the review of any
Lease or proposed Lease or the preparation or review of any subordination,
non-disturbance agreement (the occurrence of any of the above shall be called an
"Event"). Borrower further acknowledges and confirms that it shall be
responsible for the payment of all costs of reappraisal of the Property or any
part thereof, whether required by law, regulation, Lender or any governmental or
quasi-governmental authority. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any Event or otherwise. Wherever it is provided for herein that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, all legal fees and disbursements of Lender (whether of retained firms, the
reimbursement for the expenses of in-house staff or otherwise) and all costs and
expenses of Lender, if any.
Section . Attorney's Fees for Enforcement. (a) Borrower shall pay all
legal fees incurred by Lender in connection with (i) the preparation of the
Note, this Security Instrument and the Other Security Documents; and (ii) the
items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender on
demand any and all expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender in protecting its interest in the Property or the
Collateral or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property or the Collateral, whether or not
any legal proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by Lender
until such expenses are paid by Borrower.
<PAGE>
Article - DEFINITIONS
Section . General Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Security Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any subsequent owner or
owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender and any subsequent holder of the Note," the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, limited liability company, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word
"Property" shall include any portion of the Property and any interest therein,
and the phrases "attorneys' fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights under this Security Instrument.
Section . Headings, Etc. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section . No Oral Change. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower, or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section . Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section . Duplicate Originals; Counterparts. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument.
<PAGE>
Section . Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section . Subrogation. If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower's obligations hereunder, under the Note and the Other Security
Documents and the performance and discharge of the Other Obligations.
Section . Entire Agreement. The Note, this Security Instrument and the
Other Security Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Security Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Security Documents.
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been
executed by Borrower as of the date first above written.
BORROWER:
Signed and Acknowledged PR KENWOOD GARDENS LLC
in the presence of: a Delaware limited liability company
/s/ Karen Deans By: PR Kenwood Gardens Manager, LLC
- ---------------------- its manager
/s/ Clare Dobbins
- ---------------------- By: /s/ Jeffrey A. Linn
-------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this 13th day of
April, 1999, by Jeffrey A. Linn, Authorized Signatory of PR Kenwood Gardens
Manager, LLC, a Delaware limited liability company, manager of and on behalf of
PR Kenwood Gardens LLC.
/s/ Illegible
__________________________________
This instrument was prepared by:
Robert Hempstead, Esq.
Sills Cummis Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the
buildings and improvements thereon, situate, lying and being
<PAGE>
Exhibit 10.7
PROMISSORY NOTE
$13,850,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
GP STONES LIMITED PARTNERSHIP, a Florida limited partnership ("Borrower"),
promises to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation ("Lender"), at Lender's office located at 650 Dresher
Road, P.O. Box 809, Horsham, Pennsylvania 19044-0809, Attn: Servicing -
Accounting Manager, or at such other place as Lender may designate to Borrower
in writing from time to time, the principal sum of THIRTEEN MILLION EIGHT
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($13,850,000.00), or so much thereof
as is outstanding and unpaid, together with interest thereon at the rate of
6.773% per annum ("Interest Rate"), in lawful money of the United States of
America, which, at the time of payment, shall be legal tender in payment of all
debts and dues, public and private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay principal
and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments of
principal and interest in the amount of $90,974.74 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note or the other Loan
Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a
date other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days
<PAGE>
from and including the date of this Note to and including the ninth day of such
month (or if the date of this Note is after the ninth day of the month, then the
next following month) (b) by a daily rate based on the Interest Rate calculated
for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of
interest on principal.
2.04 Application of Payments. Payments under this Note shall
be applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05,
or as required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days
prior written notice to Lender specifying a date ("Defeasance Date") which shall
be a Payment Date, on which the amount required to defease the Loan ("Defeasance
Deposit") is to be made and on which the Defeasance is to occur, as well as the
anticipated outstanding principal amount of this Note as of the Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the outstanding principal balance of this Note to but not including
the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments, then due under this Note,
the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the Defeasance
Date.
(v) Borrower shall pay to Lender the required Defeasance
Deposit for the Defeasance, or at Borrower's option, Borrower shall deliver to
Lender U.S. Government Securities which provide payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date
(including the outstanding principal balance of this Note due on the Maturity
Date), and in amounts equal to the full amounts due on each Payment Date under
this Note.
(vi) Borrower shall execute and deliver one or more
security agreements in form and substance satisfactory to Lender (collectively,
"Security Agreement"), creating a first priority lien on, and security interest
in, the Defeasance Deposit and the U.S. Government Securities purchased with
Defeasance Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies,
Borrower also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification
from Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and expenses
of Lender incurred in connection with the Defeasance, including any costs and
expenses associated with the Release Instruments (as defined in Section 2.05(f)
hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a confirmation, in
form and substance satisfactory to Lender, by a "Big Five" independent certified
public accounting firm, that Defeasance Deposit is sufficient to pay all
Scheduled Defeasance Payments and other amounts required to be paid by Borrower
hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation, in
form and substance satisfactory to Lender, that all conditions to Defeasance
have been met from any applicable Rating Agency that has required as a condition
to Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with
the Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee. The
<PAGE>
Successor Borrower shall assume in writing the obligations under this Note, the
Security Agreement and the other Loan Documents, by agreements in form and
substance satisfactory to Lender, whereupon Borrower shall, pursuant to the
express terms of such agreement, be relieved of its obligations thereunder.
Borrower shall pay $10 to any such Successor Borrower as consideration for
assuming Borrower's obligations under the Note and the Security Agreement.
Notwithstanding anything in this Note or the Security Instrument to the
contrary, no other assumption fee shall be payable upon a transfer of this Note
in accordance with this Section 2.05(d), but Borrower shall pay all
out-of-pocket costs and expenses incurred by Lender, including Lender's
reasonable attorneys fees and expenses, incurred in connection therewith.
(e) Repayment Upon Default. If all or any part of the principal
amount of this Note is prepaid upon acceleration of this Note following the
occurrence of an Event of Default prior to the Optional Defeasance Date, then,
in addition to such principal payment, Borrower shall be required to make such
payments ("Yield Maintenance Payments") in an amount equal to the greater of (i)
one percent (1%), or (ii) the excess, if any, of (A) the aggregate respective
present values of all scheduled interest and principal payments payable on each
Payment Date in respect of this Note for the period from the date of such
prepayment upon acceleration to the Maturity Date, discounted monthly at a rate
equal to the Treasury Constant Maturity Yield Index (defined below) and based on
a 360-day year of twelve 30-day months over (B) the then current outstanding
principal amount of this Note. For purposes hereof, "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) ("FRB
Release") published during the second full week preceding the Prepayment Date
for instruments having a maturity coterminous with the remaining term of this
Note. In the event the FRB Release is no longer published, Lender shall select a
comparable publication to determine the Treasury Constant Maturity Yield Index.
If there is no Treasury Constant Maturity Yield Index for instruments having a
maturity coterminous with the remaining term of this Note, then 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
shall be used, 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). The Yield Maintenance Payments to be paid in connection with
any prepayment under this Section 2.05(e) shall be determined by Lender and
shall be conclusive and binding on Borrower (absent manifest error). For
purposes of this Section 2.05(e), the unpaid principal amount due on this Note
on the date of prepayment shall be determined after giving effect to any payment
of scheduled amortization made on such date.
(f) Release of the Mortgaged Property. No repayment, prepayment
or Defeasance of all or any portion of this Note shall cause, give rise to a
right to require, or otherwise result in, the release of the real or personal
property subject to the lien or mortgage created by the Security Instrument
(referred to in this Section 2.05(f) as "Mortgaged Property"), except as
follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Mortgaged Property
shall be released from the lien and mortgage created by the Security Instrument,
whereupon the U.S. Government Securities pledged pursuant to the Security
Agreement shall be the sole source of Borrower's collateral securing this Note.
Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the
Security Instrument shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release of the
Mortgaged Property (and related Loan Documents approved by Lender) for execution
by Lender which shall be in a form appropriate in the applicable state and
otherwise satisfactory to Lender in its reasonable discretion, along with all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Note: (a) if any
payment of principal and interest or any other payment required under this Note
is not received by Lender on or before the date such payment is due; or (b) if
any default should occur under any of the other Loan Documents which is not
fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
4.02 Late Charges. If any payment is not received by Lender on
or before the date on which such payment originally was due, then, in addition
to any default interest
<PAGE>
payments due hereunder, Borrower also shall pay to Lender a late charge in an
amount equal to five percent (5.0%) of the amount of such overdue payment to
defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of the
delinquent payment. Such late charge shall be immediately due and payable,
without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full on or
before the Maturity Date or the date on which the due date of the indebtedness
has been accelerated pursuant to the provisions hereof, the unpaid principal and
accrued interest and other amounts then due shall bear interest at a rate per
annum ("Default Interest Rate") equal to the lesser of (a) five percent (5.0%)
in excess of the Interest Rate or (b) the maximum rate of interest, if any,
which may be charged or collected from Borrower under applicable law. In
addition, Lender shall have the right, without acceleration of the indebtedness,
to collect interest at the Default Interest Rate on any payment due hereunder
(including without limitation late charges and fees for legal counsel) which is
not received by Lender on or before the date on which such payment originally
was due. Interest at the Default Interest Rate shall be immediately due and
payable from the due date specified herein and shall accrue until all Events of
Default have been fully cured or full payment is received, as applicable.
4.04 Interest on Judgments. Interest shall accrue on any judgment
obtained by Lender in connection with the enforcement or collection of this Note
from the date any such judgment becomes due until such judgment amount is paid
in full at a rate equal to the greater of (a) the Default Interest Rate or (b)
the legal rate applicable to judgments within such jurisdiction; provided,
however, that interest shall not accrue at a rate in excess of the maximum rate
of interest, if any, which may be charged or collected from Borrower under
applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of Lender in
this Note and in the other Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's sole discretion and as often as occasion therefor shall arise. If
Borrower's obligations under this Note or any of the other Loan Documents are
enforced by Lender through an attorney-at-law, or any payment due under this
Note or the other Loan Documents is collected by or through an attorney-at-law
or collection agency, Borrower agrees to pay all costs incurred by Lender in
connection therewith, including, but not limited to, reasonable fees and
disbursements of legal counsel (whether with respect to a retained firm or
Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
<PAGE>
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others who may
become liable for payment of all or any part of the indebtedness evidenced by
this Note, hereby waives
<PAGE>
presentment for payment, demand, protest, and notice of dishonor, protest,
nonpayment, demand, intent to accelerate, and acceleration. Borrower, for itself
and all others who may become liable for payment of all or any part of the
indebtedness evidenced by this Note, 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 party and property (real and personal), against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note, absent this paragraph,
may not otherwise qualify as a negotiable instrument under applicable law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this
Note or under
<PAGE>
the other Loan Documents are to be in writing, addressed to the respective party
as set forth in this section, and shall be deemed to have been duly given (a)
upon delivery, if delivered in person with receipt acknowledged by the recipient
thereof, (b) one (1) business day after having been deposited for overnight
delivery, fee prepaid, with any reputable overnight courier service, or (c)
three (3) business days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested. Initial
addresses for each party are as follows:
Borrower: GP Stones Limited Partnership
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together with the
other Loan Documents and Lender's commitment letter to Borrower, contain the
entire agreements between Borrower and Lender relating to the subject matter
hereof and thereof, and supersede all prior discussions and agreements (oral or
written) relative hereto and thereto which are not contained herein or therein.
Borrower represents and warrants that it is not relying on any promises,
covenants, representations or agreements in connection with this Note or the
other Loan Documents, other than as expressly set forth herein or therein. In
the event of any conflict between the terms of the Loan Documents, the following
order of priority shall be used to resolve such conflict: The Note shall control
over the Security Instrument and the Security Instrument shall control over all
other Loan Documents. Time is of the essence with respect to all provisions of
this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party
<PAGE>
against whom enforcement thereof is sought and then only to the extent expressly
set forth in such writing. No person other than a duly authorized officer or
agent of Lender shall be deemed an agent of Lender nor have any authority to
waive, modify, supplement or terminate in any manner whatsoever any of the terms
of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms and
provisions of this Note and the other Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or the
other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this
Note nor any uncertainty or ambiguity herein shall be construed or resolved
against Lender by virtue of the fact that such document has originated with
Lender as drafter. Borrower acknowledges that it has reviewed this Note and has
had the opportunity to consult with counsel on same. This Note, therefore, shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of the parties hereto.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other
words of similar import refer to this Note as a whole and not to any particular
section, paragraph or other subdivision; "Section" refers to the entire section
and not to any particular subsection, paragraph of other subdivision. Reference
to days for performance shall mean calendar days unless Business Days are
expressly indicated.
8.07 Governing Law. This Note and the other Loan Documents shall be
interpreted, construed and enforced according to the laws of the state in which
the real property encumbered by the Security Instrument is located (without
giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its
acceptance of this Note, agree and consent to the exclusive jurisdiction and
venue of any state or federal court sitting in the county and state where the
real property encumbered by the Security Instrument
<PAGE>
is located with respect to any legal action, proceeding, or controversy between
them and hereby expressly waive any and all rights under applicable law or in
equity to object to the jurisdiction and venue of said courts. Borrower further
irrevocably consents to service of process by certified mail, return receipt
requested, to Borrower at the address for Borrower last provided to Lender in
accordance with the notice provision of this Note and agrees that such service
shall be effective ten (10) days after mailing. Nothing herein shall, however,
preclude or prevent Lender from bringing any one or more actions against
Borrower in any other jurisdiction as may be necessary to enforce or realize
upon the Security or other collateral provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
GP STONES LIMITED PARTNERSHIP
By: PR Cobblestone LLC, its general partner
By: PREIT Associates, L.P., its sole member
By: Pennsylvania Real Estate Investment Trust, its
general partner
By: /s/ Jeffrey A. Linn
------------------------------------
Name: Jeffrey A. Linn
Title: Senior Vice President
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:__________________________________________________
Name:________________________________________________
Title:_______________________________________________
Date:________________________________________________
<PAGE>
Exhibit 10.8
================================================================================
GP STONES LIMITED PARTNERSHIP, as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 1275 S.W. 46th Avenue
Pompano Beach, FL
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Single Purpose Entity. 17
Section 4.4 Restoration After Casualty/Condemnation. 19
Article 5 - REPRESENTATIONS AND WARRANTIES 24
Section 5.1 Warranty of Title. 24
Section 5.2 Authority. 24
Section 5.3 Legal Status and Authority. 24
Section 5.4 Validity of Documents. 24
<PAGE>
Section 5.5 Litigation. 25
Section 5.6 Status of Property. 25
Section 5.7 No Foreign Person. 26
Section 5.8 Separate Tax Lot. 26
Section 5.9 ERISA Compliance. 26
Section 5.10 Leases. 27
Section 5.11 Financial Condition. 27
Section 5.12 Business Purposes. 27
Section 5.13 Taxes. 27
Section 5.14 Mailing Address. 28
Section 5.15 No Change in Facts or Circumstances. 28
Section 5.16 Disclosure. 28
Section 5.17 Third Party Representations. 28
Section 5.18 Illegal Activity. 28
Section 5.19 FUNB Line of Credit. 28
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 29
Section 6.1 Relationship of Borrower and Lender. 29
Section 6.2 Servicing of the Loan. 29
Article 7 - FURTHER ASSURANCES 29
Section 7.1 Recording of Security Instrument, Etc. 29
Section 7.2 Further Acts, Etc. 29
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws. 30
Section 7.4 Estoppel Certificates. 30
Section 7.5 Flood Insurance. 31
Section 7.6 Splitting of Security Instrument. 31
Section 7.7 Replacement Documents. 31
Section 7.8 Amended Financing Statements. 32
Article 8 - DUE ON SALE/ENCUMBRANCE 32
Section 8.1 No Sale/Encumbrance. 32
Section 8.2 Sale/Encumbrance Defined. 32
Section 8.3 Lender's Rights. 33
Section 8.4 Right To Substitute Property. 34
Article 9 - PREPAYMENT 34
Section 9.1 Prepayment Only in Accordance with Note. 34
Article 10 - DEFAULT 34
Section 10.1 Events of Default. 34
Article 11 - RIGHTS AND REMEDIES 35
Section 11.1 Remedies. 36
<PAGE>
Section 11.2 Application of Proceeds. 38
Section 11.3 Right to Cure Defaults. 39
Section 11.4 Actions and Proceedings. 39
Section 11.5 Recovery of Sums Required To Be Paid. 39
Section 11.6 Examination of Books and Records. 39
Section 11.7 Other Rights, Etc. 40
Section 11.8 Right to Release Any Portion of the Property. 40
Section 11.9 Violation of Laws. 40
Section 11.10 Right of Entry. 41
Article 12 - ENVIRONMENTAL HAZARDS 41
Section 12.1 Environmental Representations and Warranties. 41
Section 12.2 Environmental Covenants. 42
Section 12.3 Lender's Rights. 43
Article 13 - INDEMNIFICATION 44
Section 13.1 General Indemnification. 44
Section 13.2 Mortgage and/or Intangible Tax. 45
Section 13.3 ERISA Indemnification. 45
Section 13.4 Environmental Indemnification. 45
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. 46
Article 14 - WAIVERS 47
Section 14.1 Waiver of Counterclaim. 47
Section 14.2 Marshalling and Other Matters. 47
Section 14.3 Waiver of Notice. 47
Section 14.4 Waiver of Statute of Limitations. 47
Section 14.5 Sole Discretion of Lender. 47
Section 14.6 Survival. 47
Section 14.7 Waiver of Trial By Jury. 48
Article 15 - EXCULPATION 48
Section 15.1 Exculpation. 48
Section 15.2 Reservation of Certain Rights. 49
Section 15.3 Exceptions to Exculpation. 49
Section 15.4 Recourse. 49
Section 15.5 Bankruptcy Claims. 50
Article 16 - NOTICES 50
Section 16.1 Notices. 50
Article 17 - APPLICABLE LAW 51
Section 17.1 Choice of Law. 51
Section 17.2 Usury Laws. 51
<PAGE>
Section 17.3 Provisions Subject to Applicable Law. 52
Section 17.4 Inapplicable Provision. 52
Article 18 - SECONDARY MARKET 52
Section 18.1 Dissemination of Information. 52
Article 19 - COSTS 53
Section 19.1 Performance at Borrower's Expense. 53
Section 19.2 Attorney's Fees for Enforcement. 53
Article 20 - DEFINITIONS 54
Section 20.1 General Definitions. 54
Section 20.2 Headings, Etc. 54
Article 21 - MISCELLANEOUS PROVISIONS 54
Section 21.1 No Oral Change. 54
Section 21.2 Liability. 54
Section 21.3 Duplicate Originals; Counterparts. 54
Section 21.4 Number and Gender. 54
Section 21.5 Subrogation. 55
Section 21.6 Entire Agreement. 55
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
o ADA: Subsection 3.10(a);
o Applicable Law: Subsection 3.10(a);
o Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
o Bankruptcy Code: Subsection 1.1(f);
o Borrower: Preamble;
o Business Day: Section 16.1;
o Casualty Consultant: Subsection 4.4(b)(iii);
o Casualty Retainage: Subsection 4.4(b)(iii);
o Collateral: Section 1.3;
o Debt: Section 2.1;
o Default Rate: Section 10.3;
o Environmental Indemnity: Subsection 10.1(c);
o Environmental Law: Section 12.1;
o Environmental Liens: Section 12.2;
o Environmental Report: Section 12.1;
o ERISA: Subsection 4.2(a);
o Escrow Fund: Section 3.5;
o Event: Section 19.1;
o Event of Default: Section 10.1;
o Exculpated Parties: Section 15.1;
o Force Majeure: Subsection 4.4(b);
o Guarantor: Section 5.5;
o Hazardous Substances: Section 12.1;
o Improvements: Subsection 1.1(c);
o Indemnified Parties: Section 13.1;
o Indemnitor: Subsection 10.1(c);
o Independent Director: Subsection 4.3(c);
o Insurance Premiums: Subsection 3.3(b);
o Investor: Section 18.1;
o Land: Subsection 1.1(a);
o Lease Guaranty: Subsection 3.7(a);
o Leases: Subsection 1.1(f);
o Lender: Preamble;
o Loan Application: Section 5.15;
o Losses: Section 13.1;
o Net Proceeds: Subsection 4.4(b);
<PAGE>
o Net Proceeds Deficiency: Subsection 4.4(b)(v);
o Note: Recitals;
o Obligations: Section 2.3;
o Other Charges: Subsection 3.4(a);
o Other Obligations: Section 2.2;
o Other Security Documents: Section 3.2;
o Participations: 18.1;
o Permitted Exceptions: Section 5.1;
o Person: Section 20.1;
o Personal Property: Subsection 1.1(e);
o Policies/Policy: Subsection 3.3(b), 3.3(b);
o Property: Section 1.1;
o Qualified Insurer: Subsection 3.3(b);
o Rating Agency: Subsection 3.3(b);
o Registrar: Section 18.2;
o Release: Section 12.1;
o Remediation: Section 12.1;
o Rents: Subsection 1.1(f);
o Restoration: Subsection 3.3(d);
o Securities: Section 18.1;
bd Securitization: Section 18.1;
o Security Instrument: Preamble;
o Servicer: Section 6.2;
o SPE Member: Subsection 4.3(b);
o Taxes: Subsection 3.4(a); and
o Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument") is
made as of the 13th day of April, 1999, by GP STONES LIMITED PARTNERSHIP, a
Florida limited partnership, having its principal place of business at The
Bellevue, Suite 300, 200 South Broad Street, Philadelphia, Pennsylvania 19102,
as mortgagor ("Borrower"), to GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation, having an address at 650 Dresher Road, Horsham, Pennsylvania
19044-8015, as mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of $13,850,000.00 in lawful money of
the United States of America (the note together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.
Borrower desires to secure the payment of the Debt (as defined in
Article 2) and the performance of all of its obligations under the Note and the
Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section. Property Mortgaged. Borrower does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Lender and to its successors and assigns with power of sale in accordance with
the terms and conditions hereof, for the use and benefit of Lender, and (ii)
grant a security interest to Lender and to its successors and assigns with power
of sale, in accordance with the terms and conditions hereof, for the use and
benefit of Lender, in, the following property, rights, interests and estates now
owned, or hereafter acquired by Borrower (collectively, the "Property"):
() Land. The real property described in Exhibit A attached hereto and
made a part hereof (the "Land");
() Additional Land. All additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the Land
and the development of the Land that may, from time to time, by
supplemental mortgage or otherwise be expressly made subject to the lien of
this Security Instrument;
() Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and
improvements now or hereafter erected or located on the Land (the
"Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and
all estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any
way now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Borrower of, in and to the Land
and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment, fixtures
(including, but not limited to all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every
kind and nature whatsoever owned by Borrower, or in which Borrower has or
shall have an interest, now or hereafter located upon the Land or the
Improvements, or appurtenant thereto, and used in connection with the
present or future operation and occupancy of the Land and the Improvements
and all building equipment, materials and supplies of any nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now
or hereafter located upon the Land and the Improvements, or appurtenant
thereto, or used in connection with the present or future operation and
occupancy of the Land and the Improvements (collectively, the "Personal
Property"), and the right, title and interest of Borrower in and to any of
the Personal Property which may be subject to any security interests, as
defined in the Uniform Commercial Code, as adopted and enacted by the state
or states where any of the Property is located (the "Uniform Commercial
Code"), superior in lien to the lien of this Security Instrument and all
proceeds and products of the above;
() Leases and Rents. All leases and other agreements affecting the use,
enjoyment or occupancy of all or any part of the Land or the Improvements
heretofore or hereafter entered into whether before or after the filing by
or against Borrower of any petition for relief under 11 U.S.C. ss. 101 et
seq. (the "Bankruptcy Code"), as the same may be amended from time to time
(the "Leases") and all right, title and interest of Borrower, its
successors and assigns therein and thereunder, including, without
limitation, all guarantees, letters of credit and any other credit support
given by any guarantor in connection therewith, cash or securities
deposited under the Leases to secure the performance by the lessees of
their obligations thereunder and all rents, additional rents, revenues,
issues and profits (including all oil and gas or other mineral royalties
and bonuses) from the Land and the Improvements whether paid or accruing
before or after the filing by or against Borrower of any petition for
relief under the Bankruptcy Code (the "Rents") and all proceeds from the
sale or other disposition of the Leases and the right to receive and apply
the Rents to the payment of the Debt;
<PAGE>
() Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain
(including, but not limited to any transfer made in lieu of or in
anticipation of the exercise of the right), or for a change of grade, or
for any other injury to or decrease in the value of the Property;
() Insurance Proceeds. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation,
the right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
() Tax Certiorari. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property
as a result of tax certiorari or any applications or proceedings for
reduction;
() Rights. The right, in the name and on behalf of Borrower, to
commence any action or proceeding to protect the interest of Lender in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with
respect to the Property;
() Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents,
now or hereafter entered into, and all rights therein and thereto,
respecting or pertaining to the use, occupation, construction, management
or operation of the Land and any part thereof and any Improvements or
respecting any business or activity conducted on the Land and any part
thereof and all right, title and interest of Borrower therein and
thereunder, including, without limitation, the right, while an Event of
Default remains uncured, to receive and collect any sums payable to
Borrower thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims, deposits,
trade names, trademarks, servicemarks, logos, copyrights, goodwill, books
and records and all other general intangibles specific to or used in
connection with the operation of the Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation,
proceeds of insurance and condemnation awards, into cash or liquidation
claims;
() Other Rights. Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (m) above.
<PAGE>
Section. Assignment of Leases and Rents. Borrower hereby absolutely and
unconditionally assigns to Lender Borrower's right, title and interest in and to
all current and future Leases and Rents; it being intended by Borrower that this
assignment constitutes a present, absolute assignment and not an assignment for
additional security only. Nevertheless, subject to the terms of this Section 1.2
and Section 3.7, Lender grants to Borrower a revocable license to collect and
receive the Rents. Borrower shall hold the Rents, or a portion thereof,
sufficient to discharge all current sums due on the Debt, for use in the payment
of such sums.
Section. Security Agreement. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code, the "Collateral").
Section. Pledge of Monies Held. Borrower hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, any sums deposited in the Escrow
Fund (defined in Section 3.5) and the Net Proceeds (defined in Section 4.4), as
additional security for the Obligations until expended or applied as provided in
this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto the
Lender and its successors and assigns, with power of sale in accordance with the
terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section. Debt. This Security Instrument and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Lender may determine in its sole
discretion (the "Debt"):
<PAGE>
() the payment of the indebtedness evidenced by the Note in lawful
money of the United States of America;
() the payment of interest, default interest, late charges and other
sums, as provided in the Note, this Security Instrument or the Other
Security Documents (defined in Section 3.2);
() the payment of any prepayment consideration, defeasance payment,
exit fee or similar fees provided in the Note;
() the payment of all other monies agreed or provided to be paid by
Borrower in the Note, this Security Instrument or the Other Security
Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the
security interest created hereby; and
() the payment of all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal,
extension, modification, consolidation, change, substitution, replacement,
restatement or increase of the Debt or any part thereof, or the acquisition
or perfection of the security therefor, whether made or incurred at the
request of Borrower or Lender.
Section. Other Obligations. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower contained
herein;
() the performance of each obligation of Borrower contained in the Note
in addition to the payment of the Debt and of Borrower and of any Guarantor
(defined in Section 5.5) contained in the Other Security Documents; and
() the performance of each obligation of Borrower and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part
of the Note, this Security Instrument or the Other Security Documents.
Section. Debt and Other Obligations. Borrower's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
Section. Payments. Unless payments are made in the required amount in
immediately available funds at the place where the Note is payable, remittances
in payment
<PAGE>
of all or any part of the Debt shall not, regardless of any receipt
or credit issued therefor, constitute payment until the required amount is
actually received by Lender in funds immediately available at the place where
the Note is payable (or any other place as Lender, in Lender's sole discretion,
may have established by delivery of written notice thereof to Borrower) and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting bank
or banks. Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and the failure to pay
the entire amount then due shall be and continue to be an Event of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section. Payment of Debt. Borrower will pay the Debt at the time and
in the manner provided in the Note and in this Security Instrument.
Section. Incorporation by Reference. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note or the other Obligations (the "Other Security
Documents"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
Section. Insurance.
() Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
() Property Insurance. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the classification
"All Risks of Physical Loss" in amounts at all times sufficient to prevent
Lender from becoming a co-insurer within the terms of the applicable policies
and under applicable law, but in any event such insurance shall be maintained in
an amount equal to the full insurable value of the Improvements and building
equipment, the term "full insurable value" to mean the actual replacement cost
of the Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a recognized
independent insurance broker or an independent appraiser selected and paid by
Borrower and in no event less than the coverage required pursuant to the terms
of any Lease. Absent such annual adjustment, each policy shall contain inflation
guard coverage insuring that the policy limit will be increased over time to
reflect the effect of inflation. Borrower shall also maintain insurance against
loss or damage to such furniture, furnishings, fixtures, equipment
<PAGE>
and other items (whether personalty or fixtures) included in the Property and
owned by Borrower from time to time, to the extent applicable, in the amount of
the cost of replacing the same, in each case, with inflation guard coverage to
reflect the effect of inflation, or annual valuation. Each policy or policies
shall contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or a waiver
of any co-insurance provisions, all subject to Lender's approval. The maximum
deductible shall be $10,000.00;
() Liability Insurance. Comprehensive general liability insurance,
including personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to the
extent insurable and imposed upon Lender and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession, use, leasing,
operation, maintenance or condition of the Property in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to the Property but
in no event for a combined single limit of less than $5,000,000. During any
construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers' compensation
insurance with respect to any work on or about the Property covering all persons
subject to the workers' compensation laws of the state in which the Property is
located;
() Business Interruption. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance penalty and
to provide proceeds which will cover a period of not less than one (1) year from
the date of casualty or loss with a six month extended period of indemnity, the
term "rental income" to mean the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.
() Boiler and Machinery Insurance. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000 or such other
<PAGE>
amount reasonably determined by Lender. If one or more large HVAC units is in
operation at the Property, "System Breakdowns" coverage shall be required, as
determined by Lender. Minimum liability coverage per accident must equal the
value of such unit(s);
() Flood Insurance. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum amount
required, under the terms of coverage, to compensate for any damage or loss on a
replacement basis (or the unpaid balance of the indebtedness secured hereby if
replacement cost coverage is not available for the type of building insured); or
(B) the maximum insurance available under the appropriate National Flood
Insurance Administration program. The deductible may not exceed $25,000.
() During the period of any construction, renovation or alteration of
the Improvements, the cost of which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Lender's request, a completed value, "All
Risk" Builder's Risk form, or "Course of Construction" insurance policy in
non-reporting form for any Improvements under construction, renovation or
alteration in an amount approved by Lender may be required. During the period of
any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto as may from
time to time be required by Lender against other insurable hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated, including, without limitation, sinkhole, mine subsidence, earthquake
and environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
() All insurance provided for in Subsection 3.3(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Lender (a "Rating Agency"), (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall
name Lender as an additional named insured and the Policy referred to in
Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds
be payable to Lender as set forth in Section 4.4 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omission
of Lender. All Policies
<PAGE>
described in Subsection 3.3(a) above shall contain (i) a provision that such
Policies shall not be canceled or terminated, nor shall they expire, without at
least thirty (30) days' prior written notice to Lender in each instance; and
(ii) include effective waivers by the insurer of all claims for Insurance
Premiums (defined below) against any mortgage, loss payees, additional insureds
and named insureds (other than Borrower). In the event that the Property or the
Improvements constitutes a legal non-conforming use under applicable building,
zoning or land use laws or ordinances, the policy shall include an ordinance or
law coverage endorsement which will contain Coverage A: "Loss Due to Operation
of Law" (with a minimum liability limit equal to Replacement Cost With Agreed
Value Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased
Cost of Construction" coverages. Certificates of insurance with respect to all
renewal and replacement Policies shall be delivered to Lender not less than
thirty (30) days prior to the expiration date of any of the Policies required to
be maintained hereunder which certificates shall bear notations evidencing
payment of applicable premiums (the "Insurance Premiums"). Originals or
certificates of such replacement Policies shall be delivered to Lender promptly
after Borrower's receipt thereof but in any case within thirty (30) days after
the effective date thereof. If Borrower fails to maintain and deliver to Lender
copies of the Policies or certificates of insurance required by this Security
Instrument, upon ten (10) days' prior notice to Borrower, Lender may procure
such insurance at Borrower's sole cost and expense.
() Borrower shall comply with all insurance requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Borrower shall give prompt notice of such damage to
Lender and provided that Borrower shall have received the Net Proceeds, Borrower
shall promptly commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with such
alterations as may be approved by Lender (the "Restoration") and otherwise in
accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may be effected
under a blanket policy or policies covering the Property and other properties
and assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property, and any sublimit in such blanket policy applicable to the
Property, and shall in any case comply in all other respects with the
requirements of this Section 3.3.
() The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and Excess
Liability
<PAGE>
Policies, but in no event will the Commercial General Liability policy be
written for an amount less than $1,000,000 per occurrences and $2,000,000
aggregate for bodily injury and property damage liability.
() The delivery to Lender of the insurance policies or the certificates
of insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by Borrower to Lender
as further security for the indebtedness secured hereby. In the event of
foreclosure of this Security Instrument, 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 Borrower 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 Lender or other transferee in the event of
such other transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance.
() Lender 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 Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance. Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance complies with all of the applicable requirements set forth
herein.
Section. Payment of Taxes, Etc. () Subject to the terms and conditions
of Section 3.5 hereof, Borrower shall pay by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have been deposited with Lender in accordance with the terms of
this Security Instrument, Borrower shall furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall become
delinquent.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any of
<PAGE>
the Taxes, provided that (i) no Event of Default has occurred and is continuing
under the Note, this Security Instrument or any of the Other Security Documents,
(ii) Borrower is permitted to do so under the provisions of any other mortgage,
deed of trust or deed to secure debt affecting the Property, (iii) such
proceeding shall suspend the collection of the Taxes from Borrower and from the
Property or Borrower shall have paid all of the Taxes under protest, (iv) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder, (v) neither the Property nor any part thereof
or interest therein will be in danger of being sold, forfeited, terminated,
canceled or lost, (vi) Borrower shall have set aside adequate reserves for the
payment of the Taxes, together with all interest and penalties thereon, unless
Borrower has paid all of the Taxes under protest, and (vii) Borrower shall have
furnished the security as may be required in the proceeding, or as may be
reasonably requested by Lender to insure the payment of any contested Taxes,
together with all interest and penalties thereon, taking into consideration the
amount in the Escrow Fund available for payment of Taxes.
Section. Escrow Fund. At the option of Lender, Lender may require
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of Insurance Premiums and Taxes pursuant to Sections
3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance Premiums shall be
made by Borrower to Lender in amounts determined by Lender in its discretion on
the date hereof to be held by Lender in escrow. Additionally, Borrower shall pay
to Lender on the tenth (10th) day of each calendar month (a) one-twelfth of an
amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, upon the due dates established by the appropriate taxing
authority during the next ensuing twelve (12) months and (b) one-twelfth of an
amount which would be sufficient to pay the Insurance Premiums due for the
renewal of the coverage afforded by the Policies upon the expiration thereof
(the initial deposits together with the amounts in (a) and (b) above shall be
called the "Escrow Fund"). Borrower agrees to notify Lender immediately of any
changes to the amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has obtained knowledge and authorizes Lender or
its agent to obtain the bills for Taxes and Other Charges directly from the
appropriate tax authority. Monthly payments to the Escrow Fund as required
hereunder and the monthly payments of interest or principal or both, payable
pursuant to the Note, shall be added together and shall be paid as an aggregate
sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 3.3 and
3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above, Borrower shall promptly pay to
<PAGE>
Lender, upon demand, an amount which Lender shall reasonably estimate as
sufficient to make up the deficiency. The Escrow Fund shall not constitute a
trust fund and may be commingled with other monies held by Lender.
Section. Condemnation. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, Borrower shall deliver
to Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Borrower shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the award by the condemning authority but shall
be entitled to receive out of the award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by the
power of eminent domain, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of in accordance with Section 4.4 of this Security Instrument. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the award or payment, Lender shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive the award or payment, or a portion thereof sufficient to pay the Debt.
Section. Leases and Rents. () Except as otherwise consented to by
Lender, all Leases shall be written on a standard form of lease which shall have
been approved by Lender. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior written consent of Lender,
which consent shall not be unreasonably withheld or delayed. All proposed leases
shall be subject to the prior approval of Lender except that all proposed leases
which (i) are on the same form of lease which has been approved by Lender, (ii)
are the result of an arms-length transaction, (iii) which provide for rental
rates comparable to existing market rates, (iv) where space to be leased does
not exceed more than ten percent (10%) of total rentable space of the Property,
(v) where the proposed tenant is an independent third party not affiliated with
the Borrower, and (vi) do not contain any terms which would materially affect
Lender's rights under this Security Instrument, the Note or the Other Security
Documents, shall not be subject to the prior approval of Lender.
<PAGE>
Notwithstanding subsections (ii), (iii) and (v) above, Borrower may lease units
to employees of Borrower, but the aggregate number of units leased to such
employees shall not exceed 1.5% of the total number of units at the Property.
Borrower (i) shall observe and perform all the obligations imposed upon the
lessor under the Leases if the failure to perform or observe the same would
materially and adversely affect the value of the Property taken as a whole and
shall not do or permit to be done anything to impair the value of the Leases as
security for the Debt; (ii) shall promptly send copies to Lender of all notices
of default which Borrower shall send or receive thereunder; (iii) shall enforce
in a commercially reasonable manner all of the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed or
performed; provided, however, with respect to multifamily residential property,
a residential Lease may be terminated in the event of a default by the tenant
thereunder; (iv) shall not collect any of the Rents more than one (1) month in
advance (provided that a security deposit shall not be deemed rent collected in
advance); (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (vi) shall not (A) materially alter, modify or change
the terms of the Leases without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed if the alteration,
modification or change does not materially and adversely affect the value of the
Property taken as a whole and provided further that such Lease, as altered,
modified or changed, is otherwise in compliance with the requirements of this
Security Instrument, or (B) cancel or terminate any Lease (except for defaults
thereunder) of more than ten (10%) percent of the rentable space of the Property
or accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (vii) shall not alter, modify or change the
terms of any guaranty, letter of credit or other credit support with respect to
the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty
without the prior written consent of Lender; and (viii) shall not consent to any
assignment of or subletting under the Leases not in accordance with their terms,
without the prior written consent of Lender. Notwithstanding the foregoing,
subdivisions (ii), (vi), (vii) and (viii) shall not apply to residential Leases
for space in a multifamily residential property.
Section. Maintenance of Property. Borrower shall cause the Property to
be maintained in a good and safe condition and repair. The Improvements and the
Personal Property shall not be removed, demolished or altered if the costs of
same would exceed $500,000 (except for normal replacement of the Personal
Property) without the consent of Lender. Subject to Section 4.4(c) hereof,
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
Section 3.6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Borrower shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof. If
under applicable zoning provisions the use of all or any portion of the Property
is or shall become a nonconforming use, Borrower will not cause or permit the
<PAGE>
nonconforming use or Improvement to be discontinued or abandoned without the
express written consent of Lender.
Section. Waste. Borrower shall not commit or suffer any waste of the
Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section. Compliance With Laws. () Borrower shall promptly comply with
all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof including, but not limited to, the Americans with Disabilities
Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request, provide
Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, Borrower shall not
alter the Property in any manner which would materially increase Borrower's
responsibilities for compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans, specifications, or working
drawings for alterations of the Property shall create no responsibility or
liability on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of compliance with
Applicable Laws from an independent architect, engineer, or other person
acceptable to Lender.
() Borrower shall give prompt notice to Lender of the receipt by
Borrower of any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the Applicable Laws affecting the Property,
provided that (i) no Event of Default has occurred and is continuing under the
Note, this Security Instrument or any of the Other Security Documents; (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property;
<PAGE>
(iii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder; (iv) neither the Property nor any
part thereof or interest therein nor any of the tenants or occupants thereof
shall be affected in any material adverse way as a result of such proceeding;
and (v) Borrower shall have furnished to Lender all other items reasonably
requested by Lender.
Section. Books and Records. () Borrower and any Guarantors and
Indemnitors shall keep adequate books and records of account in accordance with
the methods utilized by them as of the date hereof, consistently applied and
furnish to Lender:
() quarterly certified rent rolls signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing the total
revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of Borrower,
any Guarantors and any Indemnitors, in the form required by Lender, prepared and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly basis
consistent with the quarterly certified rent rolls described above within ninety
(90) days after the close of each fiscal year;
() an annual operating budget presented on a monthly basis consistent
with the annual operating statement described above for the Property and all
proposed capital replacements and improvements at least thirty (30) days prior
to the start of each calendar year; and
(vii) such other financial statements, including monthly operating
statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its affiliates
shall furnish to Lender:
<PAGE>
() a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and deposits received from tenants and any other information requested
by Lender, in reasonable detail and certified by Borrower under penalty of
perjury to be true and complete, but no more frequently than quarterly; and
() an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and Indemnitor shall
furnish Lender with such other additional financial or management information as
may, from time to time, be reasonably required by Lender in form and substance
satisfactory to Lender.
Section. Payment For Labor and Materials. Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in
respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section. Performance of Other Agreements. Borrower shall observe and
perform each and every term to be observed or performed by Borrower pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Property.
Section. Change of Name, Identity or Structure. Borrower will not
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days prior
to the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of the Lender.
Section. Existence. Borrower will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names.
<PAGE>
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section. Property Use. The Property shall be used only for multifamily
apartments, and for no other use without the prior written consent of Lender,
which consent may be withheld in Lender's discretion.
Section. ERISA. () It shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Security Instrument and the
Other Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Security Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(32) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities, within
the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests in
Borrower are held by "benefit plan investors" within the meaning of 29
C.F.R.ss.2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R.ss.2510.3-101(c) or
(e) or an investment company registered under The Investment Company
Act of 1940.
Section. Single Purpose Entity. () It has not and shall not:
() engage in any business or activity other than the ownership,
operation and maintenance of the Property, and activities incidental thereto;
() acquire or own any material assets other than (A) the Property, and
(B) such incidental Personal Property as may be necessary for the operation of
the Property;
() merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent;
<PAGE>
() fail to preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the jurisdiction
of its organization or formation, or without the prior written consent of
Lender, amend, modify, terminate or fail to comply with the provisions of
Borrower's Partnership Agreement, Articles or Certificate of Incorporation,
Operating Agreement or similar organizational documents, as the case may be, as
same may be further amended or supplemented, if such amendment, modification,
termination or failure to comply would adversely affect the ability of Borrower
to perform its obligations hereunder, under the Note or under the Other Security
Documents;
() own any subsidiary or make any investment in, any person or entity
without the consent of Lender;
() commingle its assets with the assets of any of its general partners,
members, shareholders, affiliates, principals or of any other person or entity;
() incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
incurred in the ordinary course of business, provided same are paid when due;
() fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, members, shareholders,
principals and affiliates of Borrower, the affiliates of a general partner or
member, or shareholder of Borrower, and any other person or entity;
() enter into any contract or agreement with any general partner,
member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with third
parties other than any general partner, member, shareholder, principal or
affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof;
() seek the dissolution or winding up in whole, or in part, of
Borrower;
() maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, member, shareholder, principal or affiliate of Borrower,
or any general partner, member, shareholder, principal or affiliate thereof or
any other person;
() hold itself out to be responsible for the debts of another person;
() make any loans or advances to any third party, including any general
partner, member, shareholder, principal or affiliate of Borrower, or any general
partner, principal or affiliate thereof;
<PAGE>
() fail to file its own tax returns;
() agree to, enter into or consummate any transaction which would
render Borrower unable to furnish the certification or other evidence referred
to in Section 4.2(b) hereof;
() fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business
solely in its own name in order not (A) to mislead others as to the identity
with which such other party is transacting business, or (B) to suggest that
Borrower is responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner, principal
or affiliate thereof);
() fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; or
() file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
() If Borrower is a limited partnership or a limited liability company,
each general partner or at least one member (the "SPE Member") of Borrower, as
applicable, is a corporation or limited liability company whose sole asset is
its interest in Borrower and each general partner or the SPE Member of Borrower,
as applicable, will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(a) as if
such representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a manager under
the law where the Borrower is organized.
() Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors (an "Independent Director") of each
general partner of Borrower (or of the SPE Member of Borrower) reasonably
satisfactory to Lender who shall not have been at the time of such individual's
initial appointment, and may not have been at any time during the preceding five
years, and shall not be at any time while serving as a director of the general
partner (or SPE Member) either (i) a shareholder of, or an officer, director
(other than an Independent Director), partner or employee of, Borrower or any of
its shareholders, partners, members, subsidiaries or affiliates, (ii) a customer
of, or supplier to, Borrower or any of its shareholders, partners, members,
subsidiaries or affiliates, (iii) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, member, employee,
<PAGE>
supplier or customer. As used herein, the term "control": means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policy of a person or entity, whether through ownership of voting
securities, by contract or otherwise.
() Borrower shall not cause or permit the board of directors of the
general partner of Borrower (or of the SPE Member of Borrower) to take any
action which, under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a vote of the
board of directors of the general partner of Borrower (or the SPE Member of
Borrower) unless at the time of such action there shall be at least one member
of the board of directors who is an Independent Director.
Section. Restoration After Casualty/Condemnation. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed $500,000
("Casualty Amount"); (ii) the costs of completing the Restoration as reasonably
estimated by Borrower shall be less than or equal to the Casualty Amount; (iii)
no Event of Default shall have occurred and be continuing under the Note, this
Security Instrument or any of the Other Security Documents; (iv) the Property
and the use thereof after the Restoration will be in compliance with, and
permitted under, all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental Laws (defined in
Section 12.1); and (v) such fire or other casualty or taking, as applicable,
does not materially impair access to the Property or the Improvements, then the
Net Proceeds will be disbursed directly to Borrower and Borrower shall commence
and diligently prosecute to completion, subject to Force Majeure (defined
herein), the Restoration of the Property to as nearly as possible the condition
it was in immediately prior to such fire or other casualty or to such taking.
Except upon the occurrence and continuance of an Event of Default, Borrower
shall settle any insurance claims with respect to the Net Proceeds which in the
aggregate are less than or equal to the Casualty Amount. Lender shall have the
right to participate in and reasonably approve any settlement for insurance
claims with respect to the Net Proceeds which in the aggregate are equal to or
greater than the Casualty Amount. If an Event of Default shall have occurred and
be continuing, Borrower hereby irrevocably empowers Lender, in the name of
Borrower as its true and lawful attorney-in-fact, to file and prosecute such
claim and to collect and to make receipt for any such payment. If the Net
Proceeds are received by Borrower, such Net Proceeds shall, until the completion
of the related work, be held in trust for Lender and shall be segregated from
other funds of Borrower to be used to pay for the cost of the Restoration in
accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount, such Net
Proceeds shall, subject to the provisions of the Leases that are superior to the
lien of this Security Instrument or with respect to which subordination,
non-disturbance agreements binding upon Lender have entered into concerning the
deposits of Net Proceeds, be forthwith paid to Lender to be held by Lender in a
segregated account to be made available to
<PAGE>
Borrower for the Restoration in accordance with the provisions of this
Subsection 4.4(b). Subject to Section 4.4(c) hereof, Borrower shall commence and
diligently prosecute to completion, subject to Force Majeure (defined below),
the Restoration (in the case of a taking, to the extent the Property is capable
of being restored). The term "Net Proceeds" for purposes of this Section 4.4
shall mean: (i) the net amount of all insurance proceeds received by Lender
under the Policies carried pursuant to Subsections 3.3(a)(i), (iv), (v), (vi)
and (vii) of this Security Instrument as a result of such damage or destruction,
after deduction of its reasonable costs and expenses (including, but not limited
to reasonable counsel fees), if any, in collecting the same, or (ii) the net
amount of all awards and payments received by Lender with respect to a taking
referenced in Section 3.6 of this Security Instrument, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any, in collecting the same, whichever the case may be. The term
"Force Majeure" for the purpose of this Section 4.4 shall have the following
meaning: Borrower shall be excused for the period of any delay in the
performance of any obligations hereunder when prevented from so doing by cause
or causes beyond Borrower's control such as, without limitation, all labor
disputes, civil commotion, war, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, fire or other casualty, inability to obtain any materials or services,
and acts of God.
() If the Net Proceeds are greater than the Casualty Amount, the Net
Proceeds shall be made available to Borrower for payment of, or reimbursement of
Borrower's expenses in connection with, the Restoration, subject to the
following conditions:
(A) no Event of Default shall have occurred and be continuing under the
Note, this Security Instrument or any of the Other Security Documents;
(B) Lender shall, within a reasonable period of time prior to request
for initial disbursement, be furnished with an estimate of the cost of the
Restoration accompanied by an independent architect's certification as to
such costs and appropriate plans and specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by Borrower with Lender, are sufficient to cover the cost of the
Restoration as such costs are certified by the independent architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds, less
than fifty percent (50%) of the total floor area of the Improvements has
been damaged or destroyed, or rendered unusable as a result of such fire or
other casualty; or (2) in the event that the Net Proceeds are condemnation
awards, less than fifty percent (50%) of the Land constituting the Property
is taken, such Land that is taken is located along the perimeter or
periphery of the Property and no portion of the Improvements is located in
such Lands;
<PAGE>
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note which will
be incurred with respect to the Property as a result of the occurrence of
any such fire or other casualty or taking, whichever the case may be, will
be covered out of (1) the Net Proceeds, or (2) other funds of Borrower;
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash flow of the
Property will be restored to a level sufficient to cover all carrying costs
and operating expenses of the Property, including, without limitation, debt
service on the Note at a coverage ratio (on a "normalized" basis, i.e.,
after deducting replacement reserve requirements and reserves for tenant
improvements and leasing commissions from net operating income, whether or
not such sums are escrowed with Lender) of at least 1.30 : 1.0 (assuming an
interest rate equal to 9.0% per annum), or, if lower, the coverage ratio
which existed as of the date immediately preceding such casualty or taking
as the case may be;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity Date (as
defined in the Note), (2) the earliest date required for such completion
under the terms of any Lease and (3) such time as may be required under
applicable zoning law, ordinance, rule or regulation in order to repair and
restore the Property to as nearly as possible the condition it was in
immediately prior to such fire or other casualty or to such taking, as
applicable;
(H) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws,
ordinances, rules and regulations (including, without limitation, all
applicable Environmental Laws (defined in Section 12.1)); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net Proceeds
shall be held by Lender and, until disbursed in accordance with the provisions
of this Subsection 4.4(b), shall constitute additional security for the
Obligations. The Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
<PAGE>
() If the Net Proceeds exceed the Casualty Amount, Lender shall have
the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. If the Net Proceeds
exceed the Casualty Amount, the identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and an independent consulting engineer selected by Lender (the "Casualty
Consultant"), such acceptance not to be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration including, without limitation, reasonable counsel
fees and disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There shall be
no Casualty Retainage with respect to costs actually incurred by Borrower for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
<PAGE>
() If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit the
deficiency (the "Net Proceeds Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Subsection 4.4(b) shall constitute additional security for the
Obligations.
() The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section. Warranty of Title. Borrower has good and marketable title to
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
<PAGE>
Section. Authority. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's part
to be performed.
Section. Legal Status and Authority. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section. Validity of Documents. (a) The execution, delivery and
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section. Litigation. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of Borrower's knowledge, threatened or contemplated
against Borrower, any person guaranteeing the payment of the Debt or any portion
thereof or performance by Borrower of any terms of this Security Instrument (a
"Guarantor"), if any, an Indemnitor (defined in Subsection 10.1(c)), if any, or
against or affecting the Property that (a) has not been disclosed to Lender, and
has a material, adverse effect on the Property or Borrower's, any Guarantor's or
any Indemnitor's ability to perform its obligations under the Note, this
<PAGE>
Security Instrument or the Other Security Documents, or (b) is not adequately
covered by insurance, each as determined by Lender in its sole and absolute
discretion.
Section. Status of Property. () No portion of the Improvements is
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be
amended, or any successor law, or, if any portion of the Improvements is now or
at any time in the future located within any such area, Borrower has obtained
and will maintain the insurance prescribed in Section 3.3 hereof.
() Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Property and the conduct of its business and all required zoning, building code,
land use, environmental and other similar permits or approvals, all of which are
in full force and effect as of the date hereof and, to the best of Borrower's
knowledge, not subject to revocation, suspension, forfeiture or modification.
() To the best of Borrower's knowledge, and except as expressly set
forth in that certain Property Condition Survey of Cobblestone Apartments, dated
April 1, 1999, by Environmental Management Group, and that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, the Property and the present and contemplated
use and occupancy thereof are in full compliance with all Applicable Laws,
including, without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited to,
the ADA) and other similar laws.
() The Property is served by all utilities required for the current or
contemplated use thereof. All utility service is provided by public utilities
and the Property has accepted or is equipped to accept such utility service.
() To the best of Borrower's knowledge, all public roads and streets
necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other casualty.
() All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
() Borrower has paid in full for, and is the owner of, all furnishings,
<PAGE>
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby.
() To the best of Borrower's knowledge, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a good and
safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on the
certified rent roll delivered to Lender have been collected by Borrower except
as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the Property.
Section. No Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.
Section. Separate Tax Lot. The Property is assessed for real estate
tax purposes as one or more wholly independent tax lot or lots, separate from
any adjoining land or improvements not constituting a part of such lot or lots,
and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section. ERISA Compliance. () As of the date hereof and throughout the
term of this Security Instrument, (i) Borrower is not and will not be an
"employee benefit plan" as defined in Section 3(32) of ERISA, which is subject
to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this Security
Instrument, (i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA, and (ii) transactions by or with Borrower are
not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Section. Leases. Except as disclosed in the certified rent roll for
the Property delivered to and approved by Lender, or as otherwise set forth on
Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's interest
in the Leases; (b) the Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to the Leases are reflected in the
certified rent roll delivered to and approved by Lender; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
(except to Lender); (e) none of the Rents have been collected for more than one
(1) month in
<PAGE>
advance (provided that a security deposit shall not be deemed rent collected in
advance); (f) the premises demised under the Leases have been completed and the
tenants under the Leases have accepted the same and have taken possession of the
same on a rent-paying basis; (g) to the best of Borrower's knowledge, there
exist no offsets or defenses to the payment of any portion of the Rents; (h)
Borrower has received no notice from any tenant challenging the validity or
enforceability of any Lease; (i) all payments due under the Leases are current
and are consistent with the certified rent roll for the Property delivered to
and approved by Lender; (j) to the best of Borrower's knowledge, no tenant under
any Lease is in default thereunder, or is a debtor in any bankruptcy,
reorganization, insolvency or similar proceeding, or has demonstrated a history
of payment problems which suggest financial difficulty; (k) there are no
agreements with the tenants under the Leases other than expressly set forth in
each Lease; (l) the Leases are valid and enforceable against Borrower and, to
the best of Borrower's knowledge, the tenants set forth therein; (m) no Lease
contains an option to purchase, right of first refusal to purchase, or any other
similar provision; (n) to the best of Borrower's knowledge, no person or entity
has any possessory interest in, or right to occupy, the Property except under
and pursuant to a Lease; (o) each Lease (other than a residential Lease) is
subordinate to this Security Instrument, either pursuant to its terms or a
recorded subordination agreement; and (p) to the best of Borrower's knowledge,
no brokerage commissions or finders fees are due and payable regarding any
Lease.
Section. Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section. Business Purposes. The loan evidenced by the Note is solely
for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section. Taxes. Borrower, any Guarantor and any Indemnitor have filed
all federal, state, county, municipal, and city income and other tax returns
required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section. Mailing Address. Borrower's mailing address, as set forth in
the opening paragraph hereof or as changed in accordance with Article 16, is
true and correct.
Section. No Change in Facts or Circumstances. All information in the
application for the loan submitted to Lender (the "Loan Application") and in all
financing statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application or in satisfaction of the
terms thereof, are accurate, complete and
<PAGE>
correct in all material respects. There has been no adverse change in any
condition, fact, circumstance or event that would make any such information
materially inaccurate, incomplete or otherwise misleading.
Section. Disclosure. To the best of Borrower's knowledge, Borrower has
disclosed to Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty made herein to be
materially misleading.
Section. Third Party Representations. To the best of Borrower's
knowledge, each of the representations and the warranties made by each Guarantor
and Indemnitor herein or in any Other Security Document(s) is true and correct
in all material respects.
Section. Illegal Activity. To the best of Borrower's knowledge, no
portion of the Property has been or will be purchased, improved, fixtured,
equipped or furnished with proceeds of any criminal or other illegal activity
and to the best of Borrower's knowledge, there are no illegal activities or
activities relating to controlled substance at the Property.
Section. FUNB Line of Credit. No more than five (5) Business Days
after the expiration or earlier termination of, or concurrently with the giving
of notice by PREIT Associates, L.P. to the public that an event of default has
occurred under, that certain Revolving Credit Loan Agreement between PREIT
Associates, L.P. and Corestates Bank, N.A., as agent (predecessor-in-interest to
First Union National Bank, as agent), and First Trust Savings Bank, Fleet Bank,
N.A. and PNC Bank, as lenders, dated September 30, 1997, Borrower shall notify
Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section. Relationship of Borrower and Lender. The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or condition
of any of the Note, this Security Instrument and the Other Security Documents
shall be construed so as to deem the relationship between Borrower and Lender to
be other than that of debtor and creditor.
Section. Servicing of the Loan. At the option of Lender, the loan
secured hereby may be serviced by a servicer/trustee (the "Servicer") selected
by Lender and Lender may delegate all or any portion of its responsibilities
under the Note, this Security Instrument, and the Other Security Documents to
the Servicer.
Article - FURTHER ASSURANCES
Section. Recording of Security Instrument, Etc. Borrower forthwith
upon
<PAGE>
the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, this Security Instrument, the Other Security
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Security Instrument,
any mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section. Further Acts, Etc. Borrower will, at the cost of Borrower,
and without expense to Lender, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Lender, the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument, or
for complying with all Applicable Laws. Borrower, on demand, will execute and
deliver and hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, one
or more financing statements, chattel mortgages or other instruments, to
evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section. Changes in Tax, Debt Credit and Documentary Stamp Laws. () If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.
<PAGE>
() Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
() If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the Other Security
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.
Section. Estoppel Certificates. () After request by Lender, Borrower,
within twenty (20) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the terms of payment and
maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by Section 18.1
hereof, at Lender's request, Borrower, any Guarantors and any Indemnitors shall
provide an estoppel certificate to the Investor (defined in Section 18.1) or any
prospective Investor confirming the accuracy of information provided by such
person to Lender under or in respect of this Security Instrument.
() After written request by Borrower not more than twice annually,
Lender shall furnish Borrower a statement setting forth (i) the amount of the
original
<PAGE>
principal amount of the Note, (ii) the unpaid principal amount of the Note,
(iii) the rate of interest of the Note, (iv) the balance of the sums in the
Escrow Fund, if any, and (v) to the best of Lender's knowledge, whether Borrower
is currently in default.
Section. Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).
Section. Splitting of Security Instrument. This Security Instrument
and the Note shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and deliver
to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount secured by this Security Instrument, and containing terms,
provisions and clauses no less favorable to Borrower than those contained herein
and in the Note, and such other documents and instruments as may be required by
Lender to effect the splitting of the Note and this Security Instrument.
Section. Replacement Documents. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any Other Security Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or Other
Security Document, Borrower will issue, in lieu thereof, a replacement Note or
Other Security Document, dated the date of such lost, stolen, destroyed or
mutilated Note or Other Security Document in the same principal amount thereof
and otherwise of like tenor. Borrower shall not be responsible to Lender for
Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section. Amended Financing Statements. Borrower will execute and
deliver to the Lender, prior to or contemporaneously with the effective date of
any such change, any financing statement or financing statement change required
by the Lender to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Lender, Borrower
shall execute a certificate in form satisfactory to the Lender listing the trade
names under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect to
the Property.
Article - DUE ON SALE/ENCUMBRANCE
Section. No Sale/Encumbrance. Borrower agrees that Borrower shall not,
without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain,
<PAGE>
encumber, pledge, assign, or otherwise transfer the Property or any part thereof
or permit the Property or any part thereof to be sold, conveyed, mortgaged,
granted, bargained, encumbered, pledged, assigned, or otherwise transferred.
Notwithstanding the foregoing, the Property may be transferred with the prior
written consent of Lender which consent shall not be unreasonably withheld in
the case of a proposed transferee whose entity status, creditworthiness and
management ability meet standards consistently applied by Lender for approval of
borrowers for similar properties under mortgage loans secured by similar
properties, provided that (i) only one such transfer shall be permitted during
the term of the Note, (ii) prior to the effective date of the transfer, the
transferee shall execute and deliver to Lender a written assumption agreement in
form and substance acceptable to Lender in its sole discretion, (iii) a transfer
fee equal to one quarter of one percent (.25%) of the outstanding principal
balance of the Note shall be paid by Borrower to Lender upon notice being given
to Borrower of approval of the proposed transfer (unless the proposed transferee
is an affiliate of Borrower, in which event no transfer fee shall be due and
payable), (iv) no transfer shall be permitted hereunder if an Event of Default,
or an event which with the giving of notice or lapse of time or both could
become an Event of Default, has occurred and is continuing, and (v) such
transferee shall be a single purpose bankruptcy remote entity and Borrower shall
cause to be delivered to Lender a non-consolidation opinion or an update of the
same, in form and substance reasonably acceptable to Lender, upon Lender's
request to do so. Borrower agrees that Borrower shall not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Debt and trade payables incurred in the ordinary
course of business in connection with the operation of the Property, provided
same are paid when due.
Section. Sale/Encumbrance Defined. A sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning
of this Article 8 shall be deemed to include, but not be limited to (a) an
installment sales agreement wherein Borrower agrees to sell the Property or any
part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower or any general partner or
managing member (or if no managing member, any member) of Borrower is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation's stock; (d) if Borrower or any general
partner or managing member (or if no managing member, any member) of Borrower is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest or the transfer or pledge of any partnership interest of
any limited partner or any profits or proceeds relating to any such partnership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial
<PAGE>
interests in Borrower, or the profits or proceeds relating thereto, having been
transferred or pledged; and (e) if Borrower or any general partner or member of
Borrower is a limited liability company, the change, removal or resignation of a
managing member or the transfer of the membership interest of a managing member
or any profits or proceeds relating to such membership interest or the transfer
or pledge of any membership interest of any other member or any profits or
proceeds relating to any such membership interest, which, whether singly or in
the aggregate, result in more than 49% of the beneficial interests in Borrower,
or the profits or proceeds relating thereto, having been transferred or pledged.
Notwithstanding the foregoing, the following transfers shall not be deemed to be
a sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment or
transfer within the meaning of this Article 8: (a) transfer by devise or descent
or by operation of law upon the death of a member, general partner or
stockholder of Borrower, any Guarantor or Indemnitor or any member or general
partner thereof, (b) a sale, transfer or hypothecation of a membership,
partnership or shareholder interest in Borrower, whichever the case may be, by a
current member, general partner or shareholder, as applicable, to an immediate
family member (i.e., parents, spouses, siblings, children or grandchildren) of
such member, general partner or shareholder, or to a trust for the benefit of an
immediate family member of such member, general partner or shareholder, and (c)
a change in the form of organizational structure or name of Borrower, provided
that there is no transfer or change in the ownership interests in Borrower, and
provided further that Borrower shall remain in full compliance with Section 4.3
of this Security Instrument, provided that, as to each of clauses (a), (b) and
(c) of this sentence, with respect to any such sale, transfer, hypothecation or
change in organizational structure, Borrower shall deliver a non-consolidation
opinion or an update of the same, in form and substance reasonably satisfactory
to Lender, upon Lender's request to do so.
Section. Lender's Rights. Lender reserves the right to condition the
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section. Right To Substitute Property. The terms and conditions of
this Article 8 shall be subject to Borrower's rights pursuant to that certain
letter dated the date hereof from Lender to Borrower regarding Borrower's rights
to substitute security for the Debt. Inquiries regarding the aforementioned
letter shall be made to Borrower at the address set forth in Article 16 below.
<PAGE>
Article - PREPAYMENT
Section. Prepayment Only in Accordance with Note. The Debt may be
prepaid only in strict accordance with the express terms and conditions of the
Note including, without limitation, payment of the Prepayment Consideration if
applicable.
Article - DEFAULT
Section. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for purposes of
this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the provisions
of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE Member of
Borrower violates or does not comply with any of the provisions of Section 4.3;
() if any representation or warranty of Borrower, Indemnitor (as
defined in that certain Environmental Indemnity Agreement dated as of the date
hereof (the "Environmental Indemnity") or any Guarantor, or any member, general
partner, principal or beneficial owner of any of the foregoing, made herein or
in the Environmental Indemnity or in any guaranty, or in any certificate,
report, financial statement or other instrument or document furnished to Lender
shall have been false or misleading in any material respect when made;
() if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
() except for the specific defaults set forth in this Section 10.1, any
other default hereunder or any of the Other Security Documents by Borrower,
which default is not cured (i) in the case of any default which can be cured by
the payment of a sum of money, within five (5) days after written notice from
Lender to Borrower, or (ii) in the case of any other default, within thirty (30)
days after written notice from Lender to Borrower; provided that if such default
cannot reasonably be cured within such thirty (30) day period and Borrower shall
have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of one hundred twenty (120) days,
unless, only in the case of cures that require construction or remedial work,
such cure cannot with diligence be completed within such one hundred twenty
(120) day period, in which case such period shall be extended for an additional
one hundred twenty (120) days;
<PAGE>
() if Borrower or any Guarantor or Indemnitor shall make an assignment
for the benefit of creditors or if Borrower shall generally not be paying its
debts as they become due; or
() if the Policies are not kept in full force and effect, or Borrower
has not delivered evidence of the renewal of the Policies ten (10) days prior to
their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any Guarantor or Indemnitor shall make a general
assignment for the benefit of its creditors'; or (ii) there shall be commenced
against Borrower or any Guarantor or Indemnitor any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety (90) days;
or (iii) there shall be commenced against the Borrower or any Guarantor or
Indemnitor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within ninety (90) days from the entry thereof; or (iv) the
Borrower or any Guarantor or Indemnitor shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
Article - RIGHTS AND REMEDIES
Section. Remedies. () Upon the occurrence of any Event of Default,
Borrower agrees that Lender, may take such action, without notice or demand, as
it deems advisable to protect and enforce the rights of Lender against Borrower
and in and to the Property, including, but not limited to the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Lender:
() declare the entire unpaid Debt to be immediately due and payable;
<PAGE>
() institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
() with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;
() sell for cash or upon credit the Property or any part thereof and
all estate, claim, demand, right, title and interest of Borrower therein and
rights of redemption thereof, pursuant to power of sale or otherwise, at one or
more sales, as an entity or in parcels, at such time and place, upon such terms
and after such notice thereof as may be required or permitted by law;
() subject to the provisions of Article 15, institute an action, suit
or proceeding in equity for the specific performance of any covenant, condition
or agreement contained herein, in the Note or in the Other Security Documents;
() subject to the provisions of Article 15, recover judgment on the
Note either before, during or after any proceedings for the enforcement of this
Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnitor or of any person, firm or other entity liable for the
payment of the Debt;
() subject to any applicable law, the license granted to Borrower under
Section 1.2 shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or servants
wholly therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the Property and
of such books, records and accounts to Lender upon demand, and thereupon Lender
may (A) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (B) complete any construction on the Property in such manner and form
as Lender deems advisable; (C) make alterations, additions, renewals,
replacements and improvements to or on the Property; (D) exercise all rights and
powers of Borrower with respect to the Property, whether in the name of Borrower
or otherwise, including, without limitation, the right to make, cancel, enforce
or modify Leases, obtain and evict tenants, and demand, sue for,
<PAGE>
collect and receive all Rents of the Property and every part thereof; (E)
require Borrower to pay monthly in advance to Lender, or any receiver appointed
to collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Property as may be occupied by Borrower; (F)
require Borrower to vacate and surrender possession of the Property to Lender or
to such receiver and, in default thereof, Borrower may be evicted by summary
proceedings or otherwise; and (G) apply the receipts from the Property to the
payment of the Debt, in such order, priority and proportions as Lender shall
deem appropriate in its sole discretion after deducting therefrom all expenses
(including reasonable attorneys' fees) incurred in connection with the aforesaid
operations and all amounts necessary to pay the Taxes, Other Charges, insurance
and other expenses in connection with the Property, as well as just and
reasonable compensation for the services of Lender, its counsel, agents and
employees;
() exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (A) the right to take possession of the Collateral
or any part thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the Collateral, and (B)
request Borrower at its expense to assemble the Collateral and make it available
to Lender at a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the Collateral
sent to Borrower in accordance with the provisions hereof at least five (5) days
prior to such action, shall constitute commercially reasonable notice to
Borrower;
() apply any sums then deposited in the Escrow Fund and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the Note; and
all other sums payable pursuant to the Note, this Security
Instrument and the Other Security Documents, including, without
limitation, advances made by Lender pursuant to the terms of
this Security Instrument;
() surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit on the
Debt in such priority and proportion as Lender in its discretion shall deem
proper, and in connection therewith, Borrower hereby appoints Lender as agent
and attorney-in-fact (which is coupled
<PAGE>
with an interest and is therefore irrevocable) for Borrower to collect such
Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any Net
Proceeds Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or through
Borrower from making use of or withdrawing any sums from any lockbox or similar
account, if any;
() pursue such other remedies as Lender may have under applicable law.
() In the event of a sale, by foreclosure, power of sale, or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property unimpaired
and without loss of priority. Notwithstanding the provisions of this Section
11.1 to the contrary, if any Event of Default as described in Subsection 10.1
(h)(i) or (ii) shall occur, the entire unpaid Debt shall be automatically due
and payable, without any further notice, demand or other action by Lender.
() Lender may adjourn from time to time any sale by it to be made under
or by virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without further
notice or publication, may make such sale at the time and place to which the
same shall be so adjourned.
() Upon any sale made under or by virtue of this Section 11.1, whether
made under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire the
Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Debt the net sales price
after deducting therefrom the expenses of the sale and costs of the action and
any other sums which Lender is authorized to deduct under this Security
Instrument.
Section. Application of Proceeds. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
Section. Right to Cure Defaults. Upon the occurrence of any Event of
Default, Lender may, but without any obligation to do so and without notice to
or demand on
<PAGE>
Borrower and without releasing Borrower from any obligation hereunder, cure the
same in such manner and to such extent as Lender may deem necessary to protect
the security hereof. Lender is authorized to enter upon the Property for such
purposes, or appear in, defend, or bring any action or proceeding to protect its
interest in the Property or to foreclose this Security Instrument or collect the
Debt, and the cost and expense thereof (including reasonable attorneys' fees to
the extent permitted by law), with interest as provided in this Section 11.3,
shall constitute a portion of the Debt and shall be due and payable to Lender
upon demand. All such costs and expenses incurred by Lender in remedying such
Event of Default or in appearing in, defending, or bringing any such action or
proceeding shall bear interest at the Default Rate (as defined in the Note), for
the period after notice from Lender that such cost or expense was incurred to
the date of payment to Lender. All such costs and expenses incurred by Lender
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by this Security Instrument and
the Other Security Documents and shall be immediately due and payable upon
demand by Lender therefor.
Section. Actions and Proceedings. After the occurrence and during the
continuance of an Event of Default, Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its discretion, decides should be brought to protect its interest in the
Property.
Section. Recovery of Sums Required To Be Paid. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
Section. Examination of Books and Records. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during reasonable business hours at any office of Borrower, its affiliates or
any Guarantor or Indemnitor where the books and records are located.
Section. Other Rights, Etc. () The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this
<PAGE>
Security Instrument. Borrower shall not be relieved of Borrower's obligations
hereunder by reason of (i) the failure of Lender to comply with any request of
Borrower, any Guarantor or any Indemnitor to take any action to foreclose this
Security Instrument or otherwise enforce any of the provisions hereof or of the
Note or the Other Security Documents, (ii) the release, regardless of
consideration, of the whole or any part of the Property, or of any person liable
for the Debt or any portion thereof, or (iii) any agreement or stipulation by
Lender extending the time of payment or otherwise modifying or supplementing the
terms of the Note, this Security Instrument or the Other Security Documents.
() It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property or
collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other security
held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Security Instrument. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
Section. Right to Release Any Portion of the Property. Lender, may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section. Violation of Laws. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
Section. Right of Entry. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less
<PAGE>
than five (5) Business Days' notice (except in the case of emergencies when no
notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section. Environmental Representations and Warranties. Borrower
represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger to human health or the environment.
"Environmental Law" includes, but is not limited to, the following statutes, as
amended, any successor thereto, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations and the
like addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community
Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource
Conservation and Recovery Act (including, but not limited to Subtitle I relating
to underground storage tanks); the Solid Waste Disposal Act; the Clean Water
Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking
Water Act; the Occupational Safety and Health Act; the Federal Water Pollution
<PAGE>
Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the
Endangered Species Act; the National Environmental Policy Act; and the River and
Harbors Appropriation Act. "Environmental Law" also includes, but is not limited
to, any present, and for the purposes of Sections 12.2, 12.3 and 13.4 only,
future, federal, state and local laws, statutes, ordinances, rules, regulations
and the like, as well as common law: conditioning transfer of property upon a
negative declaration or other approval of a governmental authority of the
environmental condition of the property; requiring notification or disclosure of
Releases of Hazardous Substances or other environmental condition of the
Property to any governmental authority or other person or entity, whether or not
in connection with transfer of title to or interest in property. "Hazardous
Substances" include but are not limited to any and all substances (whether
solid, liquid or gas) (i) defined, listed, or otherwise classified as
pollutants, hazardous wastes, hazardous substances, hazardous materials,
extremely hazardous wastes, or words of similar meaning or regulatory effect
under any present, or for the purposes of Sections 12.2. 12.3 and 13.4 only,
future, Environmental Laws or (ii) that may have a negative impact on human
health or the environment, including, but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives. "Release" of any
Hazardous Substance includes, but is not limited to any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping or disposing of Hazardous Substances.
"Remediation" includes, but is not limited to any response, remedial removal, or
corrective action, any activity to cleanup, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance, any actions to prevent, cure or
mitigate any Release of any Hazardous Substance, any action to comply with any
Environmental Laws or with any permits issued pursuant thereto, any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous
Substances.
Section. Environmental Covenants. Borrower covenants and
agrees that so long as the Borrower owns, manages, is in possession of, or
otherwise controls the operation of the Property: (a) all uses and operations on
or of the Property, whether by Borrower or any other person or entity, shall be
in compliance with all Environmental Laws and permits issued pursuant thereto;
(b) there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d)
Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender after Lender has reason to
believe this Section 12.2 has been violated (including, but not limited to
sampling, testing
<PAGE>
and analysis of soil, water, air, building materials and other materials and
substances whether solid, liquid or gas), and share with Lender the reports and
other results thereof, and Lender and other Indemnified Parties (defined in
Section 13.1) shall be entitled to rely on such reports and other results
thereof; (g) Borrower shall, at its sole cost and expense, comply with all
reasonable written requests of Lender to (i) reasonably effectuate Remediation
of any condition (including, but not limited to a Release of a Hazardous
Substance) in, on, under or from the Property, (ii) comply with any
Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) Borrower shall not do or
allow any tenant or other user of the Property to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Property), impairs
or may impair the value of the Property, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) Borrower shall immediately notify Lender in writing promptly
after it has become aware of (A) any presence or Releases or threatened Releases
of Hazardous Substances in, on, under, from or migrating towards the Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting the Property, (C)
any required Remediation of environmental conditions relating to the Property,
and (D) any written or oral notice or other communication of which Borrower
becomes aware from any source whatsoever (including, but not limited to a
governmental entity) relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or threatened administrative or judicial proceedings in
connection with anything referred to in this Article 12.
Section. Lender's Rights. Lender, its environmental consultant, and any
other person or entity designated by Lender, including, but not limited to any
receiver and any representative of a governmental entity, shall have the right,
but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Substance or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to Borrower, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, but not limited to conducting any environmental assessment
or audit of the Property or portions thereof to confirm Borrower's compliance
with the provisions of this Article 12, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Such audit shall
be performed in a manner so as to minimize interference with the conduct of
business at the Property. If such audit discloses that a violation of or a
liability under any Environmental Law exists or if such audit was required or
prescribed by law, regulation or governmental or quasi-governmental authority,
Borrower shall pay all costs and expenses incurred in connection with such
audit; otherwise, the costs and expenses of such audit shall, notwithstanding
anything to the contrary set forth in this Section, be paid by Lender.
<PAGE>
Article - INDEMNIFICATION
Section. General Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, or
punitive damages, of whatever kind or nature (including, but not limited to
attorneys' fees and other costs of defense) (the "Losses") imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws;
(j) the enforcement by any Indemnified Party of the provisions of this Article
13; (k) any and all claims and demands whatsoever which may be asserted against
Lender 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
Lease; (l) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the loan evidenced by the
Note and secured by this Security Instrument; or (m) any misrepresentation made
by Borrower in this Security Instrument, the Other Security Documents, or any
documents or information provided pursuant to Section 18.1 hereof. Any amounts
payable to Lender by reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender
<PAGE>
and any person or entity who is or will have been involved in the origination of
this loan, any person or entity who is or will have been involved in the
servicing of this loan, any person or entity in whose name the encumbrance
created by this Security Instrument is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest in
this loan (including, but not limited to Investors or prospective Investors in
the Securities, as well as custodians, trustees and other fiduciaries who hold
or have held a full or partial interest in this loan for the benefit of third
parties) as well as the respective directors, officers, shareholders, members,
partners, employees, agents, servants, representatives, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including, but not limited to any other person or entity who holds or
acquires or will have held a participation or other full or partial interest in
this loan or the Property, whether during the term of this loan or as a part of
or following a foreclosure of this loan and including, but not limited to any
successors by merger, consolidation or acquisition of all or a substantial
portion of Lender's assets and business).
Section. Mortgage and/or Intangible Tax. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents or
in connection with a transfer of all or a portion of the Property pursuant to a
foreclosure, deed in lieu of foreclosure or otherwise.
Section. ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
attorneys' fees and costs incurred in the investigation, defense, and settlement
of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion) that
Lender may incur, directly or indirectly, as a result of a default under
Sections 4.2 or 5.9.
Section. Environmental Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), reasonable engineers' fees, reasonable
environmental consultants' fees, and costs of investigation (including, but not
limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
imposed upon or incurred by or asserted against any Indemnified Parties, and
arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Borrower, any
person or entity affiliated with Borrower or tenant or other
<PAGE>
users of the Property in connection with any actual, proposed or threatened use,
treatment, storage, holding, existence, disposition or other Release,
generation, production, manufacturing, processing, refining, control,
management, abatement, removal, handling, transfer or transportation to or from
the Property of any Hazardous Substances at any time located in, under, on or
above the Property; (d) any activity by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property in connection
with any actual or proposed Remediation of any Hazardous Substances at any time
located in, under, on or above the Property, whether or not such Remediation is
voluntary or pursuant to court or administrative order, including, but not
limited to any removal, remedial or corrective action; (e) any past, present or
threatened violations of any Environmental Laws (or permits issued pursuant to
any Environmental Law) in connection with the Property or operations thereon,
including, but not limited to any failure by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property to comply with
any order of any governmental authority in connection with Environmental Laws;
(f) the imposition, recording or filing of any Environmental Lien encumbering
the Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section. Duty to Defend; Attorneys' Fees and Other Fees and Expenses.
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
<PAGE>
Article - WAIVERS
Section. Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section. Marshalling and Other Matters. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by Applicable Law.
Section. Waiver of Notice. To the extent permitted by Applicable Law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument
specifically and expressly provides for the giving of notice by Lender to
Borrower and except with respect to matters for which Lender is required by
Applicable Law to give notice, and Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Security Instrument does not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section. Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section. Sole Discretion of Lender. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section. Survival. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 12 shall in no way be impaired by: any satisfaction or other
termination of this Security Instrument, any assignment or other transfer of all
or any portion of this Security Instrument or Lender's
<PAGE>
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender's rights and
remedies pursuant hereto including, but not limited to foreclosure or acceptance
of a deed in lieu of foreclosure, any exercise of any rights and remedies
pursuant to the Note or any of the Other Security Documents, any transfer of all
or any portion of the Property (whether by Borrower or by Lender, following
foreclosure or acceptance of a deed in lieu of foreclosure or at any other
time), any amendment to this Security Instrument, the Note or the Other Security
Documents, and any act or omission that might otherwise be construed as a
release or discharge of Borrower from the obligations pursuant hereto. All
obligations and liabilities of Borrower under Article 12 shall cease and
terminate on the first (1st) anniversary of the date of payment to Lender in
cash of the entire Debt, provided that contemporaneously with or subsequent to
such payment, Borrower, at its sole cost and expense, delivers to Lender an
environmental audit of the Property in form and substance, and prepared by a
qualified environmental consultant, reasonably satisfactory in all respects to
Lender and indicating the Property is in full compliance with all applicable
Environmental Laws.
Section. Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH
Article - EXCULPATION
Section. Exculpation. Notwithstanding anything to the contrary
contained in this Security Instrument or in any Other Security Document (but
subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note or this Security Instrument by any action or
proceeding to collect damages or wherein a money judgment or any deficiency
judgment or order or any judgment establishing any personal obligation or
liability shall be sought against Borrower or any principal director, officer,
employee, beneficiary, shareholder, partner, member, trustee, agent or affiliate
of Borrower or any person owning, directly or indirectly, any legal or
beneficial interest in Borrower, or any successors or assigns of any of the
foregoing (collectively, the "Exculpated Parties"). Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon this Security
Instrument, the Other Security Documents, and the interest in the Property, the
Rents and any other collateral given to Lender created by this Security
Instrument and the Other Security Documents; provided, however, subject to the
provisions of Sections 15.2, 15.3, 15.4 and 15.5, that any judgment in any
action or proceeding shall be enforceable against Borrower
<PAGE>
only to the extent of Borrower's interest in the Property, in the Rents and in
any other collateral given to Lender in connection with the Note. Lender, by
accepting the Note and this Security Instrument, agrees that it shall not,
except as otherwise provided below, sue for or demand any deficiency judgment
against Borrower or any of the Exculpated Parties in any action or proceeding,
under or by reason of or under or in connection with the Note, the Other
Security Documents or this Security Instrument.
Section. Reservation of Certain Rights. The provisions of Section 15.1
shall not (a) constitute a waiver, release or impairment of the Obligations; (b)
impair the right of Lender to name Borrower as a party defendant in any action
or suit for judicial foreclosure and sale under this Security Instrument; (c)
affect the validity or enforceability of any indemnity, guaranty, master lease
or similar instrument made in connection with the Note, this Security
Instrument, or the Other Security Documents; (d) impair the ability of Lender to
obtain the appointment of a receiver; or (e) impair the enforcement of the
Assignment of Leases and Rents executed in connection herewith.
Section. Exceptions to Exculpation. Notwithstanding the provisions of
Article 15.1 to the contrary, Borrower and Indemnitor shall be personally liable
to Lender on a joint and several basis for the Losses Lender incurs due to: (a)
fraud or intentional misrepresentation by Borrower or any other person or entity
in connection with the execution and the delivery of the Note, this Security
Instrument or the Other Security Documents; (b) Borrower's misapplication or
misappropriation of Rents received by Borrower after the occurrence and during
the continuance of an Event of Default; (c) Borrower's misapplication or
misappropriation of tenant security deposits or Rents collected in advance; (d)
the misapplication or misappropriation of insurance proceeds or condemnation
awards after the occurrence and during the continuance of an Event of Default;
(e) any fees or commissions paid by Borrower after the occurrence and during the
continuance of an Event of Default to any principal, affiliate or general
partner of Borrower, Indemnitor or Guarantor in violation of the terms of the
Note, this Security Instrument or the Other Security Documents; (f) gross
negligence or criminal acts perpetrated by it resulting in forfeiture, seizure
or loss of any portion of the security; (g) any failure by Borrower or
Indemnitor to comply with the terms and provisions of Section 13.4 hereof or of
the Environmental Indemnity; (h) any failure by Borrower or any general partner
or the SPE Member of Borrower to comply with the terms and provisions of Section
4.3 hereof; or (i) any sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment or transfer of the Property or any part thereof, within the
meaning of Article 8 hereof, without the prior written consent of Lender.
Section. Recourse. Notwithstanding the foregoing, the agreement of
Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect in the event
(i) Borrower fails to comply with the terms and conditions of Section 4.3, 8.1,
8.2 or 8.3, (ii) the Property or any part thereof shall become an asset in (A) a
voluntary bankruptcy or insolvency proceeding, or (B) an involuntary bankruptcy
or insolvency proceeding commenced by any Person (other than Lender) and
Borrower fails to use its best efforts to obtain a dismissal of such
<PAGE>
proceedings, or (iii) Borrower or any Guarantor or Indemnitor fails to comply
with the terms and provisions of Section 3.11 hereof within thirty (30) days
after written notice from Lender to Borrower (which notice shall be a second
notice given after the expiration of any notice given pursuant to Section
10.1(e)); provided, however, so long as PREIT Associates, L.P., a Delaware
limited partnership, maintains that certain line of credit with First Union
National Bank, as agent, pursuant to that certain Revolving Credit Loan
Agreement with Corestates Bank, N.A.(predecessor-in-interest to First Union
National Bank), as agent, and First Trust Savings Bank, Fleet Bank, N.A. and PNC
Bank, as lenders, dated September 30, 1997 (or another credit arrangement
containing market standard financial covenants for net worth, leverage and
liquidity), the occurrence of any of the events referred to in subsections
(i)-(iii) above shall not create recourse liability against Borrower or any
Guarantor or Indemnitor.
Section. Bankruptcy Claims. Nothing herein shall be deemed to be a
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
Article - NOTICES
Section. Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (a) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof, (b) one (1) Business Day (defined below) after having been deposited
for overnight delivery with any reputable overnight courier service, or (c)
three (3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Borrower: GP STONES LIMITED PARTNERSHIP
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
<PAGE>
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in the
State of New York.
Article - APPLICABLE LAW
Section. Choice of Law. THIS SECURITY INSTRUMENT SHALL BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE
THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section. Usury Laws. This Security Instrument and the Note are subject
to the express condition that at no time shall Borrower be obligated or required
to pay interest on the Debt at a rate which could subject the holder of the Note
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is
<PAGE>
permitted by applicable law to contract or agree to pay. If by the terms of this
Security Instrument or the Note, Borrower is at any time required or obligated
to pay interest on the Debt at a rate in excess of such maximum rate, the rate
of interest under the Security Instrument and the Note shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate of interest from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding.
Section. Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section. Inapplicable Provision. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
Article - SECONDARY MARKET
Section. Dissemination of Information. If Lender determines at any time
to sell, transfer or assign the Note, this Security Instrument and the Other
Security Documents, and any or all servicing rights with respect thereto, or to
grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities (such sale and/or issuance, the
"Securitization") evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "Securities"), Lender may forward to each
purchaser, transferee, assignee, servicer, participant, investor, or their
respective successors in such Participations and/or Securities (collectively,
the "Investor") or any Rating Agency rating such Securities and each prospective
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the Debt and to Borrower, any Guarantor, any Indemnitors and
the Property (including, without limitation, all financial statements), which
shall have been furnished by Borrower, any Guarantor or any Indemnitors, as
Lender determines necessary or desirable. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section, including, without
limitation, the delivery of an estoppel certificate required in accordance with
Subsection 7.4(c) hereof and such other documents as may be reasonably requested
by Lender and, upon Lender's reasonable request,
<PAGE>
meeting with any Rating Agency for due diligence purposes. Borrower shall also
furnish and Borrower, any Guarantor and any Indemnitor consent to Lender
furnishing to such Investors or such prospective Investors or any Rating Agency
any and all information concerning the Property, the Leases, the financial
condition of Borrower, any Guarantor and any Indemnitor as may be requested by
Lender, any Investor or any prospective Investor or Rating Agency in connection
with any sale, transfer or Participation, provided, however, PREIT Associates,
L.P. and Pennsylvania Real Estate Investment Trust shall only be required under
this Section 18.1 to disclose information that is deemed to be "public"
information. Borrower shall not be responsible for Lender's fees and expenses
incurred in connection with the transactions contemplated by this Section 18.1.
Lender shall reimburse Borrower for the reasonable actual out-of-pocket third
party costs incurred by Borrower in excess of $1,500.00 in connection with the
transactions contemplated by this Section 18.1. Borrower shall deliver on the
date hereof, at Borrower's sole cost and expense, a nonconsolidation opinion,
and within ten (10) Business Days after demand of Lender, an update of same
(which update Borrower will not be required to provide more than once), each in
form and substance and delivered by counsel acceptable to Lender and the Rating
Agency rating or proposed to rate the Securities, as may be required by Lender
and/or such Rating Agency. Borrower's failure to deliver the opinions required
hereby shall constitute an Event of Default hereunder.
Article - COSTS
Section. Performance at Borrower's Expense. Borrower acknowledges and
confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, provided, however, no commitment fee shall be imposed in
connection with the substitution of collateral, (c) obtaining certain consents,
waivers and approvals with respect to the Property, or (d) the review of any
Lease or proposed Lease or the preparation or review of any subordination,
non-disturbance agreement (the occurrence of any of the above shall be called an
"Event"). Borrower further acknowledges and confirms that it shall be
responsible for the payment of all costs of reappraisal of the Property or any
part thereof, whether required by law, regulation, Lender or any governmental or
quasi-governmental authority. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any Event or otherwise. Wherever it is provided for herein that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, all legal fees and disbursements of Lender (whether of retained firms, the
reimbursement for the expenses of in-house staff or otherwise) and all costs and
expenses of Lender, if any.
Section. Attorney's Fees for Enforcement. (a) Borrower shall pay all
legal fees incurred by Lender in connection with (i) the preparation of the
Note, this Security Instrument and the Other Security Documents; and (ii) the
items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender on
demand any and all expenses, including
<PAGE>
legal expenses and attorneys' fees, incurred or paid by Lender in protecting its
interest in the Property or the Collateral or in collecting any amount payable
hereunder or in enforcing its rights hereunder with respect to the Property or
the Collateral, whether or not any legal proceeding is commenced hereunder or
thereunder and whether or not any default or Event of Default shall have
occurred and is continuing, together with interest thereon at the Default Rate
from the date paid or incurred by Lender until such expenses are paid by
Borrower.
Article - DEFINITIONS
Section. General Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Security Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any subsequent owner or
owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender and any subsequent holder of the Note," the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, limited liability company, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word
"Property" shall include any portion of the Property and any interest therein,
and the phrases "attorneys' fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights under this Security Instrument.
Section. Headings, Etc. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section. No Oral Change. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower, or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section. Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section. Duplicate Originals; Counterparts. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of
<PAGE>
which counterparts shall be deemed an original instrument and all of which
together shall constitute a single Security Instrument.
Section. Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section. Subrogation. If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower's obligations hereunder, under the Note and the Other Security
Documents and the performance and discharge of the Other Obligations.
Section. Entire Agreement. The Note, this Security Instrument and the
Other Security Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Security Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Security Documents.
[The remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower as of the date first above written.
BORROWER:
GP STONES LIMITED PARTNERSHIP
By: PR Cobblestone LLC, its general partner
By: PREIT Associates, L.P., its sole member
By: Pennsylvania Real Estate Investment Trust,
its general partner
By: /s/ Jeffrey A. Linn
------------------------------------
Name: Jeffrey A. Linn
Title: Senior Vice President
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this 13th day of
April, 1999, by Jeffrey A. Linn, Authorized Signatory of PREIT Associates, L.P.,
a Delaware limited partnership, general partner of PR Cobblestone LLC, general
partner of and on behalf of GP Stones Limited Partnership.
/s/ Illegible
------------------------------
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings
and improvements thereon, situate, lying and being
<PAGE>
Exhibit 10.9
PROMISSORY NOTE
$22,600,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PR BOCA PALMS LLC, a Delaware limited liability company ("Borrower"), promises
to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation ("Lender"), at Lender's office located at 650 Dresher Road, P.O. Box
809, Horsham, Pennsylvania 19044-0809, Attn: Servicing - Accounting Manager, or
at such other place as Lender may designate to Borrower in writing from time to
time, the principal sum of TWENTY-TWO MILLION SIX HUNDRED THOUSAND AND 00/100
DOLLARS ($22,600,000.00), or so much thereof as is outstanding and unpaid,
together with interest thereon at the rate of 6.773% per annum ("Interest
Rate"), in lawful money of the United States of America, which, at the time of
payment, shall be legal tender in payment of all debts and dues, public and
private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay principal
and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments of
principal and interest in the amount of $148,449.76 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note or the other Loan
Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a date
other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days
<PAGE>
from and including the date of this Note to and including the ninth day of such
month (or if the date of this Note is after the ninth day of the month, then the
next following month) (b) by a daily rate based on the Interest Rate calculated
for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall be
applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05, or as
required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days
prior written notice to Lender specifying a date ("Defeasance Date") which shall
be a Payment Date, on which the amount required to defease the Loan ("Defeasance
Deposit") is to be made and on which the Defeasance is to occur, as well as the
anticipated outstanding principal amount of this Note as of the Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the outstanding principal balance of this Note to but not including
the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments, then due under this Note,
the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the Defeasance
Date.
(v) Borrower shall pay to Lender the required
Defeasance Deposit for the Defeasance, or at Borrower's option, Borrower shall
deliver to Lender U.S. Government Securities which provide payments on or prior
to, but as close as possible to, all successive Payment Dates after the
Defeasance Date (including the outstanding principal balance of this Note due on
the Maturity Date), and in amounts equal to the full amounts due on each Payment
Date under this Note.
(vi) Borrower shall execute and deliver one or more
security agreements in form and substance satisfactory to Lender (collectively,
"Security Agreement"), creating a first priority lien on, and security interest
in, the Defeasance Deposit and the U.S. Government Securities purchased with
Defeasance Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies,
Borrower also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification
from Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and
expenses of Lender incurred in connection with the Defeasance, including any
costs and expenses associated with the Release Instruments (as defined in
Section 2.05(f) hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a confirmation, in
form and substance satisfactory to Lender, by a "Big Five" independent certified
public accounting firm, that Defeasance Deposit is sufficient to pay all
Scheduled Defeasance Payments and other amounts required to be paid by Borrower
hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation, in
form and substance satisfactory to Lender, that all conditions to Defeasance
have been met from any applicable Rating Agency that has required as a condition
to Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with
the Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee. The
<PAGE>
Successor Borrower shall assume in writing the obligations under this Note, the
Security Agreement and the other Loan Documents, by agreements in form and
substance satisfactory to Lender, whereupon Borrower shall, pursuant to the
express terms of such agreement, be relieved of its obligations thereunder.
Borrower shall pay $10 to any such Successor Borrower as consideration for
assuming Borrower's obligations under the Note and the Security Agreement.
Notwithstanding anything in this Note or the Security Instrument to the
contrary, no other assumption fee shall be payable upon a transfer of this Note
in accordance with this Section 2.05(d), but Borrower shall pay all
out-of-pocket costs and expenses incurred by Lender, including Lender's
reasonable attorneys fees and expenses, incurred in connection therewith.
(e) Repayment Upon Default. If all or any part of the
principal amount of this Note is prepaid upon acceleration of this Note
following the occurrence of an Event of Default prior to the Optional Defeasance
Date, then, in addition to such principal payment, Borrower shall be required to
make such payments ("Yield Maintenance Payments") in an amount equal to the
greater of (i) one percent (1%), or (ii) the excess, if any, of (A) the
aggregate respective present values of all scheduled interest and principal
payments payable on each Payment Date in respect of this Note for the period
from the date of such prepayment upon acceleration to the Maturity Date,
discounted monthly at a rate equal to the Treasury Constant Maturity Yield Index
(defined below) and based on a 360-day year of twelve 30-day months over (B) the
then current outstanding principal amount of this Note. For purposes hereof,
"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) ("FRB Release") published during the second full week
preceding the Prepayment Date for instruments having a maturity coterminous with
the remaining term of this Note. In the event the FRB Release is no longer
published, Lender shall select a comparable publication to determine the
Treasury Constant Maturity Yield Index. If there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with the
remaining term of this Note, then 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 shall be used, 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). The Yield
Maintenance Payments to be paid in connection with any prepayment under this
Section 2.05(e) shall be determined by Lender and shall be conclusive and
binding on Borrower (absent manifest error). For purposes of this Section
2.05(e), the unpaid principal amount due on this Note on the date of prepayment
shall be determined after giving effect to any payment of scheduled amortization
made on such date.
(f) Release of the Mortgaged Property. No repayment,
prepayment or Defeasance of all or any portion of this Note shall cause, give
rise to a right to require, or otherwise result in, the release of the real or
personal property subject to the lien or mortgage created by the Security
Instrument (referred to in this Section 2.05(f) as "Mortgaged Property"), except
as follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Mortgaged Property
shall be released from the lien and mortgage created by the Security Instrument,
whereupon the U.S. Government Securities pledged pursuant to the Security
Agreement shall be the sole source of Borrower's collateral securing this Note.
Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the
Security Instrument shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release of the
Mortgaged Property (and related Loan Documents approved by Lender) for execution
by Lender which shall be in a form appropriate in the applicable state and
otherwise satisfactory to Lender in its reasonable discretion, along with all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following
shall constitute an event of default ("Event of Default") under this Note: (a)
if any payment of principal and interest or any other payment required under
this Note is not received by Lender on or before the date such payment is due;
or (b) if any default should occur under any of the other Loan Documents which
is not fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
4.02 Late Charges. If any payment is not received by Lender on
or before the date on which such payment originally was due, then, in addition
to any default interest
<PAGE>
payments due hereunder, Borrower also shall pay to Lender a late charge in an
amount equal to five percent (5.0%) of the amount of such overdue payment to
defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of the
delinquent payment. Such late charge shall be immediately due and payable,
without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full
on or before the Maturity Date or the date on which the due date of the
indebtedness has been accelerated pursuant to the provisions hereof, the unpaid
principal and accrued interest and other amounts then due shall bear interest at
a rate per annum ("Default Interest Rate") equal to the lesser of (a) five
percent (5.0%) in excess of the Interest Rate or (b) the maximum rate of
interest, if any, which may be charged or collected from Borrower under
applicable law. In addition, Lender shall have the right, without acceleration
of the indebtedness, to collect interest at the Default Interest Rate on any
payment due hereunder (including without limitation late charges and fees for
legal counsel) which is not received by Lender on or before the date on which
such payment originally was due. Interest at the Default Interest Rate shall be
immediately due and payable from the due date specified herein and shall accrue
until all Events of Default have been fully cured or full payment is received,
as applicable.
4.04 Interest on Judgments. Interest shall accrue on any
judgment obtained by Lender in connection with the enforcement or collection of
this Note from the date any such judgment becomes due until such judgment amount
is paid in full at a rate equal to the greater of (a) the Default Interest Rate
or (b) the legal rate applicable to judgments within such jurisdiction;
provided, however, that interest shall not accrue at a rate in excess of the
maximum rate of interest, if any, which may be charged or collected from
Borrower under applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of
Lender in this Note and in the other Loan Documents, or at law or in equity,
shall be cumulative and concurrent, and may be pursued singly, successively or
together in Lender's sole discretion and as often as occasion therefor shall
arise. If Borrower's obligations under this Note or any of the other Loan
Documents are enforced by Lender through an attorney-at-law, or any payment due
under this Note or the other Loan Documents is collected by or through an
attorney-at-law or collection agency, Borrower agrees to pay all costs incurred
by Lender in connection therewith, including, but not limited to, reasonable
fees and disbursements of legal counsel (whether with respect to a retained firm
or Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
<PAGE>
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others who may
become liable for payment of all or any part of the indebtedness evidenced by
this Note, hereby waives
<PAGE>
presentment for payment, demand, protest, and notice of dishonor, protest,
nonpayment, demand, intent to accelerate, and acceleration. Borrower, for itself
and all others who may become liable for payment of all or any part of the
indebtedness evidenced by this Note, 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 party and property (real and personal), against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note, absent this paragraph,
may not otherwise qualify as a negotiable instrument under applicable law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
<PAGE>
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this
Note or under the other Loan Documents are to be in writing, addressed to the
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
Borrower: PR Boca Palms LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together
with the other Loan Documents and Lender's commitment letter to Borrower,
contain the entire agreements between Borrower and Lender relating to the
subject matter hereof and thereof, and supersede all prior discussions and
agreements (oral or written) relative hereto and thereto which are not contained
herein or therein. Borrower represents and warrants that it is not relying on
any promises, covenants, representations or agreements in connection with this
Note or the other Loan Documents, other than as expressly set forth herein or
therein. In the event of any conflict between the terms of the Loan Documents,
the following order of priority shall be used to resolve such conflict: The Note
shall control over the Security Instrument and the Security Instrument shall
control over all other Loan Documents. Time is of the essence with respect to
all provisions of this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party
<PAGE>
against whom enforcement thereof is sought and then only to the extent expressly
set forth in such writing. No person other than a duly authorized officer or
agent of Lender shall be deemed an agent of Lender nor have any authority to
waive, modify, supplement or terminate in any manner whatsoever any of the terms
of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms
and provisions of this Note and the other Loan Documents shall be binding upon
and inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or
the other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this
Note nor any uncertainty or ambiguity herein shall be construed or resolved
against Lender by virtue of the fact that such document has originated with
Lender as drafter. Borrower acknowledges that it has reviewed this Note and has
had the opportunity to consult with counsel on same. This Note, therefore, shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of the parties hereto.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other
words of similar import refer to this Note as a whole and not to any particular
section, paragraph or other subdivision; "Section" refers to the entire section
and not to any particular subsection, paragraph of other subdivision. Reference
to days for performance shall mean calendar days unless Business Days are
expressly indicated.
8.07 Governing Law. This Note and the other Loan Documents
shall be interpreted, construed and enforced according to the laws of the state
in which the real property encumbered by the Security Instrument is located
(without giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its
acceptance of this Note, agree and consent to the exclusive jurisdiction and
venue of any state or federal court sitting in the county and state where the
real property encumbered by the Security Instrument
<PAGE>
is located with respect to any legal action, proceeding, or controversy between
them and hereby expressly waive any and all rights under applicable law or in
equity to object to the jurisdiction and venue of said courts. Borrower further
irrevocably consents to service of process by certified mail, return receipt
requested, to Borrower at the address for Borrower last provided to Lender in
accordance with the notice provision of this Note and agrees that such service
shall be effective ten (10) days after mailing. Nothing herein shall, however,
preclude or prevent Lender from bringing any one or more actions against
Borrower in any other jurisdiction as may be necessary to enforce or realize
upon the Security or other collateral provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN
ANY LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PR BOCA PALMS LLC,
a Delaware limited liability company
By: PR Boca Palms Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
<PAGE>
Exhibit 10.10
================================================================================
PR BOCA PALMS LLC, as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 9860 S.W. 3rd Avenue
Boca Raton, FL
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Single Purpose Entity. 17
Section 4.4 Restoration After Casualty/Condemnation. 19
Article 5 - REPRESENTATIONS AND WARRANTIES 24
Section 5.1 Warranty of Title. 24
Section 5.2 Authority. 24
Section 5.3 Legal Status and Authority. 24
Section 5.4 Validity of Documents. 24
<PAGE>
Section 5.5 Litigation. 25
Section 5.6 Status of Property. 25
Section 5.7 No Foreign Person. 26
Section 5.8 Separate Tax Lot. 26
Section 5.9 ERISA Compliance. 26
Section 5.10 Leases. 27
Section 5.11 Financial Condition. 27
Section 5.12 Business Purposes. 28
Section 5.13 Taxes. 28
Section 5.14 Mailing Address. 28
Section 5.15 No Change in Facts or Circumstances. 28
Section 5.16 Disclosure. 28
Section 5.17 Third Party Representations. 28
Section 5.18 Illegal Activity. 28
Section 5.19 FUNB Line of Credit. 28
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 29
Section 6.1 Relationship of Borrower and Lender. 29
Section 6.2 Servicing of the Loan. 29
Article 7 - FURTHER ASSURANCES 29
Section 7.1 Recording of Security Instrument, Etc. 29
Section 7.2 Further Acts, Etc. 29
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws. 30
Section 7.4 Estoppel Certificates. 30
Section 7.5 Flood Insurance. 31
Section 7.6 Splitting of Security Instrument. 31
Section 7.7 Replacement Documents. 31
Section 7.8 Amended Financing Statements. 32
Article 8 - DUE ON SALE/ENCUMBRANCE 32
Section 8.1 No Sale/Encumbrance. 32
Section 8.2 Sale/Encumbrance Defined. 32
Section 8.3 Lender's Rights. 33
Section 8.4 Right To Substitute Property 34
Article 9 - PREPAYMENT 34
Section 9.1 Prepayment Only in Accordance with Note. 34
Article 10 - DEFAULT 34
Section 10.1 Events of Default. 34
Article 11 - RIGHTS AND REMEDIES 36
Section 11.1 Remedies. 36
<PAGE>
Section 11.2 Application of Proceeds. 39
Section 11.3 Right to Cure Defaults. 39
Section 11.4 Actions and Proceedings. 39
Section 11.5 Recovery of Sums Required To Be Paid. 39
Section 11.6 Examination of Books and Records. 39
Section 11.7 Other Rights, Etc. 40
Section 11.8 Right to Release Any Portion of the Property. 40
Section 11.9 Violation of Laws. 41
Section 11.10 Right of Entry. 41
Article 12 - ENVIRONMENTAL HAZARDS 41
Section 12.1 Environmental Representations and Warranties. 41
Section 12.2 Environmental Covenants. 42
Section 12.3 Lender's Rights. 43
Article 13 - INDEMNIFICATION 44
Section 13.1 General Indemnification. 44
Section 13.2 Mortgage and/or Intangible TAX. 45
Section 13.3 ERISA Indemnification. 45
Section 13.4 Environmental Indemnification. 45
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. 46
Article 14 - WAIVERS 47
Section 14.1 Waiver of Counterclaim. 47
Section 14.2 Marshalling and Other Matters. 47
Section 14.3 Waiver of Notice. 47
Section 14.4 Waiver of Statute of Limitations. 47
Section 14.5 Sole Discretion of Lender. 47
Section 14.6 Survival. 47
Section 14.7 Waiver of Trial By Jury. 48
Article 15 - EXCULPATION 48
Section 15.1 Exculpation. 48
Section 15.2 Reservation of Certain Rights. 49
Section 15.3 Exceptions to Exculpation. 49
Section 15.4 Recourse. 49
Section 15.5 Bankruptcy Claims. 50
Article 16 - NOTICES 50
Section 16.1 Notices. 50
Article 17 - APPLICABLE LAW 51
Section 17.1 Choice of Law. 51
Section 17.2 Usury Laws. 51
<PAGE>
Section 17.3 Provisions Subject to Applicable Law. 52
Section 17.4 Inapplicable Provision. 52
Article 18 - SECONDARY MARKET 52
Section 18.1 Dissemination of Information. 52
Article 19 - COSTS 53
Section 19.1 Performance at Borrower's Expense. 53
Section 19.2 Attorney's Fees for Enforcement. 53
Article 20 - DEFINITIONS 54
Section 20.1 General Definitions. 54
Section 20.2 Headings, Etc. 54
Article 21 - MISCELLANEOUS PROVISIONS 54
Section 21.1 No Oral Change. 54
Section 21.2 Liability. 54
Section 21.3 Duplicate Originals; Counterparts. 54
Section 21.4 Number and Gender. 55
Section 21.5 Subrogation. 55
Section 21.6 Entire Agreement. 55
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
o ADA: Subsection 3.10(a);
o Applicable Law: Subsection 3.10(a);
o Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
o Bankruptcy Code: Subsection 1.1(f);
o Borrower: Preamble;
o Business Day: Section 16.1;
o Casualty Consultant: Subsection 4.4(b)(iii);
o Casualty Retainage: Subsection 4.4(b)(iii);
o Collateral: Section 1.3;
o Debt: Section 2.1;
o Default Rate: Section 10.3;
o Environmental Indemnity: Subsection 10.1(c);
o Environmental Law: Section 12.1;
o Environmental Liens: Section 12.2;
o Environmental Report: Section 12.1;
o ERISA: Subsection 4.2(a);
o Escrow Fund: Section 3.5;
o Event: Section 19.1;
o Event of Default: Section 10.1;
o Exculpated Parties: Section 15.1;
o Force Majeure: Subsection 4.4(b);
o Guarantor: Section 5.5;
o Hazardous Substances: Section 12.1;
o Improvements: Subsection 1.1(c);
o Indemnified Parties: Section 13.1;
o Indemnitor: Subsection 10.1(c);
o Independent Director: Subsection 4.3(c);
o Insurance Premiums: Subsection 3.3(b);
o Investor: Section 18.1;
o Land: Subsection 1.1(a);
o Lease Guaranty: Subsection 3.7(a);
o Leases: Subsection 1.1(f);
o Lender: Preamble;
o Loan Application: Section 5.15;
o Losses: Section 13.1;
<PAGE>
o Net Proceeds: Subsection 4.4(b);
o Net Proceeds Deficiency: Subsection 4.4(b)(v);
o Note: Recitals;
o Obligations: Section 2.3;
o Other Charges: Subsection 3.4(a);
o Other Obligations: Section 2.2;
o Other Security Documents: Section 3.2;
o Participations: 18.1;
o Permitted Exceptions: Section 5.1;
o Person: Section 20.1;
o Personal Property: Subsection 1.1(e);
o Policies/Policy: Subsection 3.3(b), 3.3(b);
o Property: Section 1.1;
o Qualified Insurer: Subsection 3.3(b);
o Rating Agency: Subsection 3.3(b);
o Registrar: Section 18.2;
o Release: Section 12.1;
o Remediation: Section 12.1;
o Rents: Subsection 1.1(f);
o Restoration: Subsection 3.3(d);
o Securities: Section 18.1;
bd Securitization: Section 18.1;
o Security Instrument: Preamble;
o Servicer: Section 6.2;
o SPE Member: Subsection 4.3(b);
o Taxes: Subsection 3.4(a); and
o Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument") is
made as of the 13th day of April, 1999, by PR BOCA PALMS LLC, a Delaware limited
liability company, having its principal place of business at The Bellevue, Suite
300, 200 South Broad Street, Philadelphia, Pennsylvania 19102, as mortgagor
("Borrower"), to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation,
having an address at 650 Dresher Road, Horsham, Pennsylvania 19044-8015, as
mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of $22,600,000 in lawful money of the
United States of America (the note together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.
Borrower desires to secure the payment of the Debt (as defined in
Article 2) and the performance of all of its obligations under the Note and the
Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section. Property Mortgaged. Borrower does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Lender and to its successors and assigns with power of sale in accordance with
the terms and conditions hereof, for the use and benefit of Lender, and (ii)
grant a security interest to Lender and to its successors and assigns with power
of sale, in accordance with the terms and conditions hereof, for the use and
benefit of Lender, in, the following property, rights, interests and estates now
owned, or hereafter acquired by Borrower (collectively, the "Property"):
() Land. The real property described in Exhibit A attached hereto and
made a part hereof (the "Land");
() Additional Land. All additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the Land
and the development of the Land that may, from time to time, by
supplemental mortgage or otherwise be expressly made subject to the lien of
this Security Instrument;
() Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and
improvements now or hereafter erected or located on the Land (the
"Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and
all estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any
way now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders,
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and demand
whatsoever, both at law and in equity, of Borrower of, in and to the Land
and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment, fixtures
(including, but not limited to all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every
kind and nature whatsoever owned by Borrower, or in which Borrower has or
shall have an interest, now or hereafter located upon the Land or the
Improvements, or appurtenant thereto, and used in connection with the
present or future operation and occupancy of the Land and the Improvements
and all building equipment, materials and supplies of any nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now
or hereafter located upon the Land and the Improvements, or appurtenant
thereto, or used in connection with the present or future operation and
occupancy of the Land and the Improvements (collectively, the "Personal
Property"), and the right, title and interest of Borrower in and to any of
the Personal Property which may be subject to any security interests, as
defined in the Uniform Commercial Code, as adopted and enacted by the state
or states where any of the Property is located (the "Uniform Commercial
Code"), superior in lien to the lien of this Security Instrument and all
proceeds and products of the above;
() Leases and Rents. All leases and other agreements affecting the use,
enjoyment or occupancy of all or any part of the Land or the Improvements
heretofore or hereafter entered into whether before or after the filing by
or against Borrower of any petition for relief under 11 U.S.C. ss. 101 et
seq. (the "Bankruptcy Code"), as the same may be amended from time to time
(the "Leases") and all right, title and interest of Borrower, its
successors and assigns therein and thereunder, including, without
limitation, all guarantees, letters of credit and any other credit support
given by any guarantor in connection therewith, cash or securities
deposited under the Leases to secure the performance by the lessees of
their obligations thereunder and all rents, additional rents, revenues,
issues and profits (including all oil and gas or other mineral royalties
and bonuses) from the Land and the Improvements whether paid or accruing
before or after the filing by or against Borrower of any petition for
relief under the Bankruptcy Code (the "Rents") and all proceeds from the
sale or other disposition of the Leases and the right to receive and apply
the Rents to the payment of the Debt;
<PAGE>
() Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain
(including, but not limited to any transfer made in lieu of or in
anticipation of the exercise of the right), or for a change of grade, or
for any other injury to or decrease in the value of the Property;
() Insurance Proceeds. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation,
the right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
() Tax Certiorari. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property
as a result of tax certiorari or any applications or proceedings for
reduction;
() Rights. The right, in the name and on behalf of Borrower, to
commence any action or proceeding to protect the interest of Lender in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with
respect to the Property;
() Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents,
now or hereafter entered into, and all rights therein and thereto,
respecting or pertaining to the use, occupation, construction, management
or operation of the Land and any part thereof and any Improvements or
respecting any business or activity conducted on the Land and any part
thereof and all right, title and interest of Borrower therein and
thereunder, including, without limitation, the right, while an Event of
Default remains uncured, to receive and collect any sums payable to
Borrower thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims, deposits,
trade names, trademarks, servicemarks, logos, copyrights, goodwill, books
and records and all other general intangibles specific to or used in
connection with the operation of the Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation,
proceeds of insurance and condemnation awards, into cash or liquidation
claims;
() Other Rights. Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (m) above.
<PAGE>
Section. Assignment of Leases and Rents. Borrower hereby absolutely and
unconditionally assigns to Lender Borrower's right, title and interest in and to
all current and future Leases and Rents; it being intended by Borrower that this
assignment constitutes a present, absolute assignment and not an assignment for
additional security only. Nevertheless, subject to the terms of this Section 1.2
and Section 3.7, Lender grants to Borrower a revocable license to collect and
receive the Rents. Borrower shall hold the Rents, or a portion thereof,
sufficient to discharge all current sums due on the Debt, for use in the payment
of such sums.
Section. Security Agreement. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code, the "Collateral").
Section. Pledge of Monies Held. Borrower hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, any sums deposited in the Escrow
Fund (defined in Section 3.5) and the Net Proceeds (defined in Section 4.4), as
additional security for the Obligations until expended or applied as provided in
this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto the
Lender and its successors and assigns, with power of sale in accordance with the
terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section. Debt. This Security Instrument and the grants, assignments and
transfers made in Article 1 are given for the purpose of securing the following,
in such order of priority as Lender may determine in its sole discretion (the
"Debt"):
<PAGE>
() the payment of the indebtedness evidenced by the Note in lawful
money of the United States of America;
() the payment of interest, default interest, late charges and other
sums, as provided in the Note, this Security Instrument or the Other
Security Documents (defined in Section 3.2);
() the payment of any prepayment consideration, defeasance payment,
exit fee or similar fees provided in the Note;
() the payment of all other monies agreed or provided to be paid by
Borrower in the Note, this Security Instrument or the Other Security
Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the
security interest created hereby; and
() the payment of all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal,
extension, modification, consolidation, change, substitution, replacement,
restatement or increase of the Debt or any part thereof, or the acquisition
or perfection of the security therefor, whether made or incurred at the
request of Borrower or Lender.
Section. Other Obligations. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower contained
herein;
() the performance of each obligation of Borrower contained in the Note
in addition to the payment of the Debt and of Borrower and of any Guarantor
(defined in Section 5.5) contained in the Other Security Documents; and
() the performance of each obligation of Borrower and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part
of the Note, this Security Instrument or the Other Security Documents.
Section. Debt and Other Obligations. Borrower's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
Section. Payments. Unless payments are made in the required amount in
immediately available funds at the place where the Note is payable, remittances
in payment of all or any part of the Debt shall not, regardless of any receipt
or credit issued therefor,
<PAGE>
constitute payment until the required amount is actually received by Lender in
funds immediately available at the place where the Note is payable (or any other
place as Lender, in Lender's sole discretion, may have established by delivery
of written notice thereof to Borrower) and shall be made and accepted subject to
the condition that any check or draft may be handled for collection in
accordance with the practice of the collecting bank or banks. Acceptance by
Lender of any payment in an amount less than the amount then due shall be deemed
an acceptance on account only, and the failure to pay the entire amount then due
shall be and continue to be an Event of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section. Payment of Debt. Borrower will pay the Debt at the time and in
the manner provided in the Note and in this Security Instrument.
Section. Incorporation by Reference. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note or the other Obligations (the "Other Security
Documents"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
Section. Insurance.
() Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
() Property Insurance. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the classification
"All Risks of Physical Loss" in amounts at all times sufficient to prevent
Lender from becoming a co-insurer within the terms of the applicable policies
and under applicable law, but in any event such insurance shall be maintained in
an amount equal to the full insurable value of the Improvements and building
equipment, the term "full insurable value" to mean the actual replacement cost
of the Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a recognized
independent insurance broker or an independent appraiser selected and paid by
Borrower and in no event less than the coverage required pursuant to the terms
of any Lease. Absent such annual adjustment, each policy shall contain inflation
guard coverage insuring that the policy limit will be increased over time to
reflect the effect of inflation. Borrower shall also maintain insurance against
loss or damage to such furniture, furnishings, fixtures, equipment and other
items (whether personalty or fixtures) included in the Property and owned by
<PAGE>
Borrower from time to time, to the extent applicable, in the amount of the cost
of replacing the same, in each case, with inflation guard coverage to reflect
the effect of inflation, or annual valuation. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any co-insurance provisions) or a waiver of any
co-insurance provisions, all subject to Lender's approval. The maximum
deductible shall be $10,000.00;
() Liability Insurance. Comprehensive general liability insurance,
including personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to the
extent insurable and imposed upon Lender and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession, use, leasing,
operation, maintenance or condition of the Property in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to the Property but
in no event for a combined single limit of less than $5,000,000. During any
construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers' compensation
insurance with respect to any work on or about the Property covering all persons
subject to the workers' compensation laws of the state in which the Property is
located;
() Business Interruption. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance penalty and
to provide proceeds which will cover a period of not less than one (1) year from
the date of casualty or loss with a six month extended period of indemnity, the
term "rental income" to mean the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.
() Boiler and Machinery Insurance. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000 or such other amount reasonably determined
by Lender. If one or more large HVAC units is in operation
<PAGE>
at the Property, "System Breakdowns" coverage shall be required, as determined
by Lender. Minimum liability coverage per accident must equal the value of such
unit(s);
() Flood Insurance. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum amount
required, under the terms of coverage, to compensate for any damage or loss on a
replacement basis (or the unpaid balance of the indebtedness secured hereby if
replacement cost coverage is not available for the type of building insured); or
(B) the maximum insurance available under the appropriate National Flood
Insurance Administration program. The deductible may not exceed $25,000.
() During the period of any construction, renovation or alteration of
the Improvements, the cost of which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Lender's request, a completed value, "All
Risk" Builder's Risk form, or "Course of Construction" insurance policy in
non-reporting form for any Improvements under construction, renovation or
alteration in an amount approved by Lender may be required. During the period of
any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto as may from
time to time be required by Lender against other insurable hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated, including, without limitation, sinkhole, mine subsidence, earthquake
and environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
() All insurance provided for in Subsection 3.3(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25 million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Lender (a "Rating Agency"), (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall
name Lender as an additional named insured and the Policy referred to in
Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds
be payable to Lender as set forth in Section 4.4 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omission
of Lender. All Policies described in Subsection 3.3(a) above shall contain (i) a
provision that such Policies shall not
<PAGE>
be canceled or terminated, nor shall they expire, without at least thirty (30)
days' prior written notice to Lender in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any mortgage, loss payees, additional insureds and named insureds
(other than Borrower). In the event that the Property or the Improvements
constitutes a legal non-conforming use under applicable building, zoning or land
use laws or ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with
a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. Certificates of insurance with respect to all renewal
and replacement Policies shall be delivered to Lender not less than thirty (30)
days prior to the expiration date of any of the Policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums (the "Insurance Premiums"). Originals or certificates of
such replacement Policies shall be delivered to Lender promptly after Borrower's
receipt thereof but in any case within thirty (30) days after the effective date
thereof. If Borrower fails to maintain and deliver to Lender copies of the
Policies or certificates of insurance required by this Security Instrument, upon
ten (10) days' prior notice to Borrower, Lender may procure such insurance at
Borrower's sole cost and expense.
() Borrower shall comply with all insurance requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Borrower shall give prompt notice of such damage to
Lender and provided that Borrower shall have received the Net Proceeds, Borrower
shall promptly commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with such
alterations as may be approved by Lender (the "Restoration") and otherwise in
accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may be effected
under a blanket policy or policies covering the Property and other properties
and assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property, and any sublimit in such blanket policy applicable to the
Property, and shall in any case comply in all other respects with the
requirements of this Section 3.3.
() The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and Excess
Liability Policies, but in no event will the Commercial General Liability policy
be written for an
<PAGE>
amount less than $1,000,000 per occurrences and $2,000,000 aggregate for bodily
injury and property damage liability.
() The delivery to Lender of the insurance policies or the certificates
of insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by Borrower to Lender
as further security for the indebtedness secured hereby. In the event of
foreclosure of this Security Instrument, 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 Borrower 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 Lender or other transferee in the event of
such other transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance.
() Lender 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 Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance. Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance complies with all of the applicable requirements set forth
herein.
Section. Payment of Taxes, Etc. () Subject to the terms and conditions
of Section 3.5 hereof, Borrower shall pay by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have been deposited with Lender in accordance with the terms of
this Security Instrument, Borrower shall furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall become
delinquent.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any of the Taxes, provided that (i) no Event of Default has
occurred and is continuing under the
<PAGE>
Note, this Security Instrument or any of the Other Security Documents, (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property, (iii) such proceeding
shall suspend the collection of the Taxes from Borrower and from the Property or
Borrower shall have paid all of the Taxes under protest, (iv) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
default thereunder, (v) neither the Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, canceled or
lost, (vi) Borrower shall have set aside adequate reserves for the payment of
the Taxes, together with all interest and penalties thereon, unless Borrower has
paid all of the Taxes under protest, and (vii) Borrower shall have furnished the
security as may be required in the proceeding, or as may be reasonably requested
by Lender to insure the payment of any contested Taxes, together with all
interest and penalties thereon, taking into consideration the amount in the
Escrow Fund available for payment of Taxes.
Section. Escrow Fund. At the option of Lender, Lender may require
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of Insurance Premiums and Taxes pursuant to Sections
3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance Premiums shall be
made by Borrower to Lender in amounts determined by Lender in its discretion on
the date hereof to be held by Lender in escrow. Additionally, Borrower shall pay
to Lender on the tenth (10th) day of each calendar month (a) one-twelfth of an
amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, upon the due dates established by the appropriate taxing
authority during the next ensuing twelve (12) months and (b) one-twelfth of an
amount which would be sufficient to pay the Insurance Premiums due for the
renewal of the coverage afforded by the Policies upon the expiration thereof
(the initial deposits together with the amounts in (a) and (b) above shall be
called the "Escrow Fund"). Borrower agrees to notify Lender immediately of any
changes to the amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has obtained knowledge and authorizes Lender or
its agent to obtain the bills for Taxes and Other Charges directly from the
appropriate tax authority. Monthly payments to the Escrow Fund as required
hereunder and the monthly payments of interest or principal or both, payable
pursuant to the Note, shall be added together and shall be paid as an aggregate
sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 3.3 and
3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above, Borrower shall promptly pay to Lender, upon demand,
an amount which Lender shall reasonably estimate as sufficient to
<PAGE>
make up the deficiency. The Escrow Fund shall not constitute a trust fund and
may be commingled with other monies held by Lender.
Section. Condemnation. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, Borrower shall deliver
to Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Borrower shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the award by the condemning authority but shall
be entitled to receive out of the award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by the
power of eminent domain, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of in accordance with Section 4.4 of this Security Instrument. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the award or payment, Lender shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive the award or payment, or a portion thereof sufficient to pay the Debt.
Section. Leases and Rents. () Except as otherwise consented to by
Lender, all Leases shall be written on a standard form of lease which shall have
been approved by Lender. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior written consent of Lender,
which consent shall not be unreasonably withheld or delayed. All proposed leases
shall be subject to the prior approval of Lender except that all proposed leases
which (i) are on the same form of lease which has been approved by Lender, (ii)
are the result of an arms-length transaction, (iii) which provide for rental
rates comparable to existing market rates, (iv) where space to be leased does
not exceed more than ten percent (10%) of total rentable space of the Property,
(v) where the proposed tenant is an independent third party not affiliated with
the Borrower, and (vi) do not contain any terms which would materially affect
Lender's rights under this Security Instrument, the Note or the Other Security
Documents, shall not be subject to the prior approval of Lender. Notwithstanding
subsections (ii), (iii) and (v) above, Borrower may lease units to employees
<PAGE>
of Borrower, but the aggregate number of units leased to such employees shall
not exceed 1.5% of the total number of units at the Property. Borrower (i) shall
observe and perform all the obligations imposed upon the lessor under the Leases
if the failure to perform or observe the same would materially and adversely
affect the value of the Property taken as a whole and shall not do or permit to
be done anything to impair the value of the Leases as security for the Debt;
(ii) shall promptly send copies to Lender of all notices of default which
Borrower shall send or receive thereunder; (iii) shall enforce in a commercially
reasonable manner all of the terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or performed;
provided, however, with respect to multifamily residential property, a
residential Lease may be terminated in the event of a default by the tenant
thereunder; (iv) shall not collect any of the Rents more than one (1) month in
advance (provided that a security deposit shall not be deemed rent collected in
advance); (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (vi) shall not (A) materially alter, modify or change
the terms of the Leases without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed if the alteration,
modification or change does not materially and adversely affect the value of the
Property taken as a whole and provided further that such Lease, as altered,
modified or changed, is otherwise in compliance with the requirements of this
Security Instrument, or (B) cancel or terminate any Lease (except for defaults
thereunder) of more than ten (10%) percent of the rentable space of the Property
or accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (vii) shall not alter, modify or change the
terms of any guaranty, letter of credit or other credit support with respect to
the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty
without the prior written consent of Lender; and (viii) shall not consent to any
assignment of or subletting under the Leases not in accordance with their terms,
without the prior written consent of Lender. Notwithstanding the foregoing,
subdivisions (ii), (vi), (vii) and (viii) shall not apply to residential Leases
for space in a multifamily residential property.
Section. Maintenance of Property. Borrower shall cause the Property to
be maintained in a good and safe condition and repair. The Improvements and the
Personal Property shall not be removed, demolished or altered if the costs of
same would exceed $500,000 (except for normal replacement of the Personal
Property) without the consent of Lender. Subject to Section 4.4(c) hereof,
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
Section 3.6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Borrower shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof. If
under applicable zoning provisions the use of all or any portion of the Property
is or shall become a nonconforming use, Borrower will not cause or permit the
nonconforming use or Improvement to be discontinued or abandoned without the
express written consent of Lender.
<PAGE>
Section. Waste. Borrower shall not commit or suffer any waste of the
Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section. Compliance With Laws. () Borrower shall promptly comply with
all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof including, but not limited to, the Americans with Disabilities
Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request, provide
Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, Borrower shall not
alter the Property in any manner which would materially increase Borrower's
responsibilities for compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans, specifications, or working
drawings for alterations of the Property shall create no responsibility or
liability on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of compliance with
Applicable Laws from an independent architect, engineer, or other person
acceptable to Lender.
() Borrower shall give prompt notice to Lender of the receipt by
Borrower of any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the Applicable Laws affecting the Property,
provided that (i) no Event of Default has occurred and is continuing under the
Note, this Security Instrument or any of the Other Security Documents; (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property; (iii) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
<PAGE>
default thereunder; (iv) neither the Property nor any part thereof or interest
therein nor any of the tenants or occupants thereof shall be affected in any
material adverse way as a result of such proceeding; and (v) Borrower shall have
furnished to Lender all other items reasonably requested by Lender.
Section. Books and Records. () Borrower and any Guarantors and
Indemnitors shall keep adequate books and records of account in accordance with
the methods utilized by them as of the date hereof, consistently applied and
furnish to Lender:
() quarterly certified rent rolls signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing the total
revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of Borrower,
any Guarantors and any Indemnitors, in the form required by Lender, prepared and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly basis
consistent with the quarterly certified rent rolls described above within ninety
(90) days after the close of each fiscal year;
() an annual operating budget presented on a monthly basis consistent
with the annual operating statement described above for the Property and all
proposed capital replacements and improvements at least thirty (30) days prior
to the start of each calendar year; and
() such other financial statements, including monthly operating
statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its affiliates
shall furnish to Lender:
() a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and
<PAGE>
deposits received from tenants and any other information requested by Lender, in
reasonable detail and certified by Borrower under penalty of perjury to be true
and complete, but no more frequently than quarterly; and
() an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and Indemnitor shall
furnish Lender with such other additional financial or management information as
may, from time to time, be reasonably required by Lender in form and substance
satisfactory to Lender.
Section. Payment For Labor and Materials. Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in
respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section. Performance of Other Agreements. Borrower shall observe and
perform each and every term to be observed or performed by Borrower pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Property.
Section. Change of Name, Identity or Structure. Borrower will not
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days prior
to the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of the Lender.
Section. Existence. Borrower will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names.
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section. Property Use. The Property shall be used only for multifamily
<PAGE>
apartments, and for no other use without the prior written consent of Lender,
which consent may be withheld in Lender's discretion.
Section. ERISA. () It shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Security Instrument and the
Other Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Security Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(32) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities, within
the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests in
Borrower are held by "benefit plan investors" within the meaning of 29
C.F.R. ss. 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. ss. 2510.3-101(c) or
(e) or an investment company registered under The Investment Company
Act of 1940.
Section. Single Purpose Entity. () It has not and shall not:
() engage in any business or activity other than the ownership,
operation and maintenance of the Property, and activities incidental thereto;
() acquire or own any material assets other than (A) the Property, and
(B) such incidental Personal Property as may be necessary for the operation of
the Property;
() merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent;
() fail to preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the jurisdiction
of its organization or formation, or without the prior written consent of
Lender, amend, modify,
<PAGE>
terminate or fail to comply with the provisions of Borrower's Partnership
Agreement, Articles or Certificate of Incorporation, Operating Agreement or
similar organizational documents, as the case may be, as same may be further
amended or supplemented, if such amendment, modification, termination or failure
to comply would adversely affect the ability of Borrower to perform its
obligations hereunder, under the Note or under the Other Security Documents;
() own any subsidiary or make any investment in, any person or entity
without the consent of Lender;
() commingle its assets with the assets of any of its general partners,
members, shareholders, affiliates, principals or of any other person or entity;
() incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
incurred in the ordinary course of business, provided same are paid when due;
() fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, members, shareholders,
principals and affiliates of Borrower, the affiliates of a general partner or
member, or shareholder of Borrower, and any other person or entity;
() enter into any contract or agreement with any general partner,
member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms- length basis with third
parties other than any general partner, member, shareholder, principal or
affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof;
() seek the dissolution or winding up in whole, or in part, of
Borrower;
() maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, member, shareholder, principal or affiliate of Borrower,
or any general partner, member, shareholder, principal or affiliate thereof or
any other person;
() hold itself out to be responsible for the debts of another person;
() make any loans or advances to any third party, including any general
partner, member, shareholder, principal or affiliate of Borrower, or any general
partner, principal or affiliate thereof;
<PAGE>
() fail to file its own tax returns;
() agree to, enter into or consummate any transaction which would
render Borrower unable to furnish the certification or other evidence referred
to in Section 4.2(b) hereof;
() fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business
solely in its own name in order not (A) to mislead others as to the identity
with which such other party is transacting business, or (B) to suggest that
Borrower is responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner, principal
or affiliate thereof);
() fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; or
() file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
() If Borrower is a limited partnership or a limited liability company,
each general partner or at least one member (the "SPE Member") of Borrower, as
applicable, is a corporation or limited liability company whose sole asset is
its interest in Borrower and each general partner or the SPE Member of Borrower,
as applicable, will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(a) as if
such representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a manager under
the law where the Borrower is organized.
() Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors (an "Independent Director") of each
general partner of Borrower (or of the SPE Member of Borrower) reasonably
satisfactory to Lender who shall not have been at the time of such individual's
initial appointment, and may not have been at any time during the preceding five
years, and shall not be at any time while serving as a director of the general
partner (or SPE Member) either (i) a shareholder of, or an officer, director
(other than an Independent Director), partner or employee of, Borrower or any of
its shareholders, partners, members, subsidiaries or affiliates, (ii) a customer
of, or supplier to, Borrower or any of its shareholders, partners, members,
subsidiaries or affiliates, (iii) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, member, employee, supplier or
customer. As used herein, the term "control": means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policy of a person or entity, whether through ownership of voting securities, by
contract or otherwise.
<PAGE>
() Borrower shall not cause or permit the board of directors of the
general partner of Borrower (or of the SPE Member of Borrower) to take any
action which, under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a vote of the
board of directors of the general partner of Borrower (or the SPE Member of
Borrower) unless at the time of such action there shall be at least one member
of the board of directors who is an Independent Director.
Section. Restoration After Casualty/Condemnation. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed $500,000
("Casualty Amount"); (ii) the costs of completing the Restoration as reasonably
estimated by Borrower shall be less than or equal to the Casualty Amount; (iii)
no Event of Default shall have occurred and be continuing under the Note, this
Security Instrument or any of the Other Security Documents; (iv) the Property
and the use thereof after the Restoration will be in compliance with, and
permitted under, all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental Laws (defined in
Section 12.1); and (v) such fire or other casualty or taking, as applicable,
does not materially impair access to the Property or the Improvements, then the
Net Proceeds will be disbursed directly to Borrower and Borrower shall commence
and diligently prosecute to completion, subject to Force Majeure (defined
herein), the Restoration of the Property to as nearly as possible the condition
it was in immediately prior to such fire or other casualty or to such taking.
Except upon the occurrence and continuance of an Event of Default, Borrower
shall settle any insurance claims with respect to the Net Proceeds which in the
aggregate are less than or equal to the Casualty Amount. Lender shall have the
right to participate in and reasonably approve any settlement for insurance
claims with respect to the Net Proceeds which in the aggregate are equal to or
greater than the Casualty Amount. If an Event of Default shall have occurred and
be continuing, Borrower hereby irrevocably empowers Lender, in the name of
Borrower as its true and lawful attorney-in-fact, to file and prosecute such
claim and to collect and to make receipt for any such payment. If the Net
Proceeds are received by Borrower, such Net Proceeds shall, until the completion
of the related work, be held in trust for Lender and shall be segregated from
other funds of Borrower to be used to pay for the cost of the Restoration in
accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount, such Net
Proceeds shall, subject to the provisions of the Leases that are superior to the
lien of this Security Instrument or with respect to which subordination,
non-disturbance agreements binding upon Lender have entered into concerning the
deposits of Net Proceeds, be forthwith paid to Lender to be held by Lender in a
segregated account to be made available to Borrower for the Restoration in
accordance with the provisions of this Subsection 4.4(b). Subject to Section
4.4(c) hereof, Borrower shall commence and diligently prosecute to
<PAGE>
completion, subject to Force Majeure (defined below), the Restoration (in the
case of a taking, to the extent the Property is capable of being restored). The
term "Net Proceeds" for purposes of this Section 4.4 shall mean: (i) the net
amount of all insurance proceeds received by Lender under the Policies carried
pursuant to Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security
Instrument as a result of such damage or destruction, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any, in collecting the same, or (ii) the net amount of all awards and
payments received by Lender with respect to a taking referenced in Section 3.6
of this Security Instrument, after deduction of its reasonable costs and
expenses (including, but not limited to reasonable counsel fees), if any, in
collecting the same, whichever the case may be. The term "Force Majeure" for the
purpose of this Section 4.4 shall have the following meaning: Borrower shall be
excused for the period of any delay in the performance of any obligations
hereunder when prevented from so doing by cause or causes beyond Borrower's
control such as, without limitation, all labor disputes, civil commotion, war,
war-like operations, invasion, rebellion, hostilities, military or usurped
power, sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, and acts of God.
() If the Net Proceeds are greater than the Casualty Amount, the Net
Proceeds shall be made available to Borrower for payment of, or reimbursement of
Borrower's expenses in connection with, the Restoration, subject to the
following conditions:
(A) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security
Documents;
(B) Lender shall, within a reasonable period of time prior to request
for initial disbursement, be furnished with an estimate of the
cost of the Restoration accompanied by an independent architect's
certification as to such costs and appropriate plans and
specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by Borrower with Lender, are sufficient to cover the
cost of the Restoration as such costs are certified by the
independent architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds,
less than fifty percent (50%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered unusable
as a result of such fire or other casualty; or (2) in the event
that the Net Proceeds are condemnation awards, less than fifty
percent (50%) of the Land constituting the Property is taken,
such Land that is taken is located along the perimeter or
periphery of the Property and no portion of the Improvements is
located in such Lands;
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note
which will be incurred with respect to the Property as a result
of the occurrence of any such fire or other
<PAGE>
casualty or taking, whichever the case may be, will be covered
out of (1) the Net Proceeds, or (2) other funds of Borrower;
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash
flow of the Property will be restored to a level sufficient to
cover all carrying costs and operating expenses of the Property,
including, without limitation, debt service on the Note at a
coverage ratio (on a "normalized" basis, i.e., after deducting
replacement reserve requirements and reserves for tenant
improvements and leasing commissions from net operating income,
whether or not such sums are escrowed with Lender) of at least
1.30 : 1.0 (assuming an interest rate equal to 9.0% per annum),
or, if lower, the coverage ratio which existed as of the date
immediately preceding such casualty or taking as the case may be;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity
Date (as defined in the Note), (2) the earliest date required for
such completion under the terms of any Lease and (3) such time as
may be required under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the Property to as
nearly as possible the condition it was in immediately prior to
such fire or other casualty or to such taking, as applicable;
(H) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws,
ordinances, rules and regulations (including, without limitation,
all applicable Environmental Laws (defined in Section 12.1)); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net Proceeds
shall be held by Lender and, until disbursed in accordance with the provisions
of this Subsection 4.4(b), shall constitute additional security for the
Obligations. The Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
<PAGE>
() If the Net Proceeds exceed the Casualty Amount, Lender shall have
the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. If the Net Proceeds
exceed the Casualty Amount, the identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and an independent consulting engineer selected by Lender (the "Casualty
Consultant"), such acceptance not to be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration including, without limitation, reasonable counsel
fees and disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There shall be
no Casualty Retainage with respect to costs actually incurred by Borrower for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
<PAGE>
() If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit the
deficiency (the "Net Proceeds Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Subsection 4.4(b) shall constitute additional security for the
Obligations.
() The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section. Warranty of Title. Borrower has good and marketable title to
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
<PAGE>
Section. Authority. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's part
to be performed.
Section. Legal Status and Authority. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section. Validity of Documents. (a) The execution, delivery and
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section. Litigation. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of Borrower's knowledge, threatened or contemplated
against Borrower, any person guaranteeing the payment of the Debt or any portion
thereof or performance by Borrower of any terms of this Security Instrument (a
"Guarantor"), if any, an Indemnitor (defined in Subsection 10.1(c)), if any, or
against or affecting the Property that (a) has not been disclosed to Lender, and
has a material, adverse effect on the Property or Borrower's, any Guarantor's or
any Indemnitor's ability to perform its obligations under the Note, this
<PAGE>
Security Instrument or the Other Security Documents, or (b) is not adequately
covered by insurance, each as determined by Lender in its sole and absolute
discretion.
Section. Status of Property. () No portion of the Improvements is
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be
amended, or any successor law, or, if any portion of the Improvements is now or
at any time in the future located within any such area, Borrower has obtained
and will maintain the insurance prescribed in Section 3.3 hereof.
() Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Property and the conduct of its business and all required zoning, building code,
land use, environmental and other similar permits or approvals, all of which are
in full force and effect as of the date hereof and, to the best of Borrower's
knowledge, not subject to revocation, suspension, forfeiture or modification.
() To the best of Borrower's knowledge, and except as expressly set
forth in that certain Property Condition Survey of the Property, dated March 31,
1999, by Environmental Management Group, and that certain Phase I Environmental
Site Assessment of the Property dated March 31, 1999, prepared by Environmental
Management Group, the Property and the present and contemplated use and
occupancy thereof are in full compliance with all Applicable Laws, including,
without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited to,
the ADA) and other similar laws.
() The Property is served by all utilities required for the current or
contemplated use thereof. All utility service is provided by public utilities
and the Property has accepted or is equipped to accept such utility service.
() To the best of Borrower's knowledge, all public roads and streets
necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other casualty.
() All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
() Borrower has paid in full for, and is the owner of, all furnishings,
<PAGE>
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby.
() To the best of Borrower's knowledge, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a good and
safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on the
certified rent roll delivered to Lender have been collected by Borrower except
as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the Property.
Section. No Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.
Section. Separate Tax Lot. The Property is assessed for real estate tax
purposes as one or more wholly independent tax lot or lots, separate from any
adjoining land or improvements not constituting a part of such lot or lots, and
no other land or improvements is assessed and taxed together with the Property
or any portion thereof.
Section. ERISA Compliance. () As of the date hereof and throughout the
term of this Security Instrument, (i) Borrower is not and will not be an
"employee benefit plan" as defined in Section 3(32) of ERISA, which is subject
to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this Security
Instrument, (i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA, and (ii) transactions by or with Borrower are
not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Section. Leases. Except as disclosed in the certified rent roll for the
Property delivered to and approved by Lender, or as otherwise set forth on
Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's interest
in the Leases; (b) the Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to the Leases are reflected in the
certified rent roll delivered to and approved by Lender; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
<PAGE>
(except to Lender); (e) none of the Rents have been collected for more than one
(1) month in advance (provided that a security deposit shall not be deemed rent
collected in advance); (f) the premises demised under the Leases have been
completed and the tenants under the Leases have accepted the same and have taken
possession of the same on a rent-paying basis; (g) to the best of Borrower's
knowledge, there exist no offsets or defenses to the payment of any portion of
the Rents; (h) Borrower has received no notice from any tenant challenging the
validity or enforceability of any Lease; (i) all payments due under the Leases
are current and are consistent with the certified rent roll for the Property
delivered to and approved by Lender; (j) to the best of Borrower's knowledge, no
tenant under any Lease is in default thereunder, or is a debtor in any
bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the tenants under the Leases other than
expressly set forth in each Lease; (l) the Leases are valid and enforceable
against Borrower and, to the best of Borrower's knowledge, the tenants set forth
therein; (m) no Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (n) to the best of Borrower's
knowledge, no person or entity has any possessory interest in, or right to
occupy, the Property except under and pursuant to a Lease; (o) each Lease (other
than a residential Lease) is subordinate to this Security Instrument, either
pursuant to its terms or a recorded subordination agreement; and (p) to the best
of Borrower's knowledge, no brokerage commissions or finders fees are due and
payable regarding any Lease.
Section. Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section. Business Purposes. The loan evidenced by the Note is solely
for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section. Taxes. Borrower, any Guarantor and any Indemnitor have filed
all federal, state, county, municipal, and city income and other tax returns
required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section. Mailing Address. Borrower's mailing address, as set forth in
the opening paragraph hereof or as changed in accordance with Article 16, is
true and correct.
Section. No Change in Facts or Circumstances. All information in the
application for the loan submitted to Lender (the "Loan Application") and in all
financing statements, rent rolls, reports, certificates and other documents
submitted in connection with
<PAGE>
the Loan Application or in satisfaction of the terms thereof, are accurate,
complete and correct in all material respects. There has been no adverse change
in any condition, fact, circumstance or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
Section. Disclosure. To the best of Borrower's knowledge, Borrower has
disclosed to Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty made herein to be
materially misleading.
Section. Third Party Representations. To the best of Borrower's
knowledge, each of the representations and the warranties made by each Guarantor
and Indemnitor herein or in any Other Security Document(s) is true and correct
in all material respects.
Section. Illegal Activity. To the best of Borrower's knowledge, no
portion of the Property has been or will be purchased, improved, fixtured,
equipped or furnished with proceeds of any criminal or other illegal activity
and to the best of Borrower's knowledge, there are no illegal activities or
activities relating to controlled substance at the Property.
Section. FUNB Line of Credit. No more than five (5) Business Days after
the expiration or earlier termination of, or concurrently with the giving of
notice by PREIT Associates, L.P. to the public that an event of default has
occurred under, that certain Revolving Credit Loan Agreement between PREIT
Associates, L.P. and Corestates Bank, N.A., as agent (predecessor-in-interest to
First Union National Bank, as agent), and First Trust Savings Bank, Fleet Bank,
N.A. and PNC Bank, as lenders, dated September 30, 1997, Borrower shall notify
Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section. Relationship of Borrower and Lender. The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or condition
of any of the Note, this Security Instrument and the Other Security Documents
shall be construed so as to deem the relationship between Borrower and Lender to
be other than that of debtor and creditor.
Section. Servicing of the Loan. At the option of Lender, the loan
secured hereby may be serviced by a servicer/trustee (the "Servicer") selected
by Lender and Lender may delegate all or any portion of its responsibilities
under the Note, this Security Instrument, and the Other Security Documents to
the Servicer.
<PAGE>
Article - FURTHER ASSURANCES
Section. Recording of Security Instrument, Etc. Borrower forthwith upon
the execution and delivery of this Security Instrument and thereafter, from time
to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, this Security Instrument, the Other Security
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Security Instrument,
any mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section. Further Acts, Etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Lender, the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument, or
for complying with all Applicable Laws. Borrower, on demand, will execute and
deliver and hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, one
or more financing statements, chattel mortgages or other instruments, to
evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section. Changes in Tax, Debt Credit and Documentary Stamp Laws. () If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.
<PAGE>
() Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
() If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the Other Security
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.
Section. Estoppel Certificates. () After request by Lender, Borrower,
within twenty (20) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the terms of payment and
maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by Section 18.1
hereof, at Lender's request, Borrower, any Guarantors and any Indemnitors shall
provide an estoppel certificate to the Investor (defined in Section 18.1) or any
prospective Investor confirming the accuracy of information provided by such
person to Lender under or in respect of this Security Instrument.
() After written request by Borrower not more than twice annually,
Lender shall furnish Borrower a statement setting forth (i) the amount of the
original
<PAGE>
principal amount of the Note, (ii) the unpaid principal amount of the Note,
(iii) the rate of interest of the Note, (iv) the balance of the sums in the
Escrow Fund, if any, and (v) to the best of Lender's knowledge, whether Borrower
is currently in default.
Section. Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).
Section. Splitting of Security Instrument. This Security Instrument and
the Note shall, at any time until the same shall be fully paid and satisfied, at
the sole election of Lender, be split or divided into two or more notes and two
or more security instruments, each of which shall cover all or a portion of the
Property to be more particularly described therein. To that end, Borrower, upon
written request of Lender, shall execute, acknowledge and deliver to Lender
and/or its designee or designees substitute notes and security instruments in
such principal amounts, aggregating not more than the then unpaid principal
amount secured by this Security Instrument, and containing terms, provisions and
clauses no less favorable to Borrower than those contained herein and in the
Note, and such other documents and instruments as may be required by Lender to
effect the splitting of the Note and this Security Instrument.
Section. Replacement Documents. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any Other Security Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or Other
Security Document, Borrower will issue, in lieu thereof, a replacement Note or
Other Security Document, dated the date of such lost, stolen, destroyed or
mutilated Note or Other Security Document in the same principal amount thereof
and otherwise of like tenor. Borrower shall not be responsible to Lender for
Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section. Amended Financing Statements. Borrower will execute and
deliver to the Lender, prior to or contemporaneously with the effective date of
any such change, any financing statement or financing statement change required
by the Lender to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Lender, Borrower
shall execute a certificate in form satisfactory to the Lender listing the trade
names under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect to
the Property.
<PAGE>
Article - DUE ON SALE/ENCUMBRANCE
Section. No Sale/Encumbrance. Borrower agrees that Borrower shall not,
without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign, or otherwise transfer the Property or any
part thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred. Notwithstanding the foregoing, the Property may be transferred with
the prior written consent of Lender which consent shall not be unreasonably
withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, provided that (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one quarter of one percent (.25%) of
the outstanding principal balance of the Note shall be paid by Borrower to
Lender upon notice being given to Borrower of approval of the proposed transfer
(unless the proposed transferee is an affiliate of Borrower, in which event no
transfer fee shall be due and payable), (iv) no transfer shall be permitted
hereunder if an Event of Default, or an event which with the giving of notice or
lapse of time or both could become an Event of Default, has occurred and is
continuing, and (v) such transferee shall be a single purpose bankruptcy remote
entity and Borrower shall cause to be delivered to Lender a non-consolidation
opinion or an update of the same, in form and substance reasonably acceptable to
Lender, upon Lender's request to do so. Borrower agrees that Borrower shall not
incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Debt and trade payables incurred in
the ordinary course of business in connection with the operation of the
Property, provided same are paid when due.
Section. Sale/Encumbrance Defined. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 8 shall be deemed to include, but not be limited to
(a) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower or any general partner or
managing member (or if no managing member, any member) of Borrower is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation's stock; (d) if Borrower or any general
partner or managing member (or if no managing member, any member) of Borrower is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest or the transfer or pledge of any partnership interest of
any limited partner or any profits or proceeds relating to any such partnership
<PAGE>
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged; and (e) if Borrower or any general
partner or member of Borrower is a limited liability company, the change,
removal or resignation of a managing member or the transfer of the membership
interest of a managing member or any profits or proceeds relating to such
membership interest or the transfer or pledge of any membership interest of any
other member or any profits or proceeds relating to any such membership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged. Notwithstanding the foregoing, the
following transfers shall not be deemed to be a sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment or transfer within the meaning
of this Article 8: (a) transfer by devise or descent or by operation of law upon
the death of a member, general partner or stockholder of Borrower, any Guarantor
or Indemnitor or any member or general partner thereof, and (b) a sale, transfer
or hypothecation of a membership, partnership or shareholder interest in
Borrower, whichever the case may be, by a current member, general partner or
shareholder, as applicable, to an immediate family member (i.e., parents,
spouses, siblings, children or grandchildren) of such member, general partner or
shareholder, or to a trust for the benefit of an immediate family member of such
member, general partner or shareholder, and (c) a change in the form of
organizational structure or name of Borrower, provided that there is no transfer
or change in the ownership interests in Borrower, and provided further that
Borrower shall remain in full compliance with Section 4.3 of this Security
Instrument, provided that, as to each of clauses (a), (b) and (c) of this
sentence, with respect to any such sale, transfer, hypothecation or change in
organizational structure, Borrower shall deliver a non-consolidation opinion or
an update of the same, in form and substance reasonably satisfactory to Lender,
upon Lender's request to do so.
Section. Lender's Rights. Lender reserves the right to condition the
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section. Right To Substitute Property. The terms and conditions of this
Article 8 shall be subject to Borrower's rights pursuant to that certain letter
dated the date hereof from Lender to Borrower regarding Borrower's rights to
substitute security for the
<PAGE>
Debt. Inquiries regarding the aforementioned letter shall be made to Borrower at
the address set forth in Article 16 below.
Article - PREPAYMENT
Section. Prepayment Only in Accordance with Note. The Debt may be
prepaid only in strict accordance with the express terms and conditions of the
Note including, without limitation, payment of the Prepayment Consideration if
applicable.
Article - DEFAULT
Section. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for purposes of
this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the provisions
of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE Member of
Borrower violates or does not comply with any of the provisions of Section 4.3;
() if any representation or warranty of Borrower, Indemnitor (as
defined in that certain Environmental Indemnity Agreement dated as of the date
hereof (the "Environmental Indemnity") or any Guarantor, or any member, general
partner, principal or beneficial owner of any of the foregoing, made herein or
in the Environmental Indemnity or in any guaranty, or in any certificate,
report, financial statement or other instrument or document furnished to Lender
shall have been false or misleading in any material respect when made;
() if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
() except for the specific defaults set forth in this Section 10.1, any
other default hereunder or any of the Other Security Documents by Borrower,
which default is not cured (i) in the case of any default which can be cured by
the payment of a sum of money, within five (5) days after written notice from
Lender to Borrower, or (ii) in the case of any other default, within thirty (30)
days after written notice from Lender to Borrower; provided that if such default
cannot reasonably be cured within such thirty (30) day period and Borrower shall
have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to
<PAGE>
cure such default, it being agreed that no such extension shall be for a period
in excess of one hundred twenty (120) days, unless, only in the case of cures
that require construction or remedial work, such cure cannot with diligence be
completed within such one hundred twenty (120) day period, in which case such
period shall be extended for an additional one hundred twenty (120) days;
() if Borrower or any Guarantor or Indemnitor shall make an assignment
for the benefit of creditors or if Borrower shall generally not be paying its
debts as they become due; or
() if the Policies are not kept in full force and effect, or Borrower
has not delivered evidence of the renewal of the Policies ten (10) days prior to
their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any Guarantor or Indemnitor shall make a general
assignment for the benefit of its creditors'; or (ii) there shall be commenced
against Borrower or any Guarantor or Indemnitor any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety (90) days;
or (iii) there shall be commenced against the Borrower or any Guarantor or
Indemnitor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within ninety (90) days from the entry thereof; or (iv) the
Borrower or any Guarantor or Indemnitor shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
Article - RIGHTS AND REMEDIES
Section. Remedies. () Upon the occurrence of any Event of Default,
Borrower agrees that Lender, may take such action, without notice or demand, as
it deems advisable to protect and enforce the rights of Lender against Borrower
and in and to the Property, including, but not limited to the following actions,
each of which may be pursued
<PAGE>
concurrently or otherwise, at such time and in such order as Lender may
determine, in its sole discretion, without impairing or otherwise affecting the
other rights and remedies of Lender:
() declare the entire unpaid Debt to be immediately due and payable;
() institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
() with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;
() sell for cash or upon credit the Property or any part thereof and
all estate, claim, demand, right, title and interest of Borrower therein and
rights of redemption thereof, pursuant to power of sale or otherwise, at one or
more sales, as an entity or in parcels, at such time and place, upon such terms
and after such notice thereof as may be required or permitted by law;
() subject to the provisions of Article 15, institute an action, suit
or proceeding in equity for the specific performance of any covenant, condition
or agreement contained herein, in the Note or in the Other Security Documents;
() subject to the provisions of Article 15, recover judgment on the
Note either before, during or after any proceedings for the enforcement of this
Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnitor or of any person, firm or other entity liable for the
payment of the Debt;
() subject to any applicable law, the license granted to Borrower under
Section 1.2 shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or servants
wholly therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the Property and
of such books, records and accounts to Lender upon demand, and thereupon Lender
may (A) use, operate, manage, control, insure, maintain, repair, restore and
<PAGE>
otherwise deal with all and every part of the Property and conduct the business
thereat; (B) complete any construction on the Property in such manner and form
as Lender deems advisable; (C) make alterations, additions, renewals,
replacements and improvements to or on the Property; (D) exercise all rights and
powers of Borrower with respect to the Property, whether in the name of Borrower
or otherwise, including, without limitation, the right to make, cancel, enforce
or modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents of the Property and every part thereof; (E) require Borrower
to pay monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Borrower; (F) require Borrower to
vacate and surrender possession of the Property to Lender or to such receiver
and, in default thereof, Borrower may be evicted by summary proceedings or
otherwise; and (G) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Lender shall deem appropriate
in its sole discretion after deducting therefrom all expenses (including
reasonable attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the Taxes, Other Charges, insurance and other
expenses in connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and employees;
() exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (A) the right to take possession of the Collateral
or any part thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the Collateral, and (B)
request Borrower at its expense to assemble the Collateral and make it available
to Lender at a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the Collateral
sent to Borrower in accordance with the provisions hereof at least five (5) days
prior to such action, shall constitute commercially reasonable notice to
Borrower;
() apply any sums then deposited in the Escrow Fund and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the Note; and
all other sums payable pursuant to the Note, this Security
Instrument and the Other Security Documents, including, without
limitation, advances made by Lender pursuant to the terms of
this Security Instrument;
<PAGE>
() surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit on the
Debt in such priority and proportion as Lender in its discretion shall deem
proper, and in connection therewith, Borrower hereby appoints Lender as agent
and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any Net
Proceeds Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or through
Borrower from making use of or withdrawing any sums from any lockbox or similar
account, if any;
() pursue such other remedies as Lender may have under applicable law.
() In the event of a sale, by foreclosure, power of sale, or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property unimpaired
and without loss of priority. Notwithstanding the provisions of this Section
11.1 to the contrary, if any Event of Default as described in Subsection 10.1
(h)(i) or (ii) shall occur, the entire unpaid Debt shall be automatically due
and payable, without any further notice, demand or other action by Lender.
() Lender may adjourn from time to time any sale by it to be made under
or by virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without further
notice or publication, may make such sale at the time and place to which the
same shall be so adjourned.
() Upon any sale made under or by virtue of this Section 11.1, whether
made under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire the
Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Debt the net sales price
after deducting therefrom the expenses of the sale and costs of the action and
any other sums which Lender is authorized to deduct under this Security
Instrument.
Section. Application of Proceeds. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by
<PAGE>
Lender pursuant to the Note, this Security Instrument or the Other Security
Documents, may be applied by Lender to the payment of the Debt in such priority
and proportions as Lender in its discretion shall deem proper.
Section. Right to Cure Defaults. Upon the occurrence of any Event of
Default, Lender may, but without any obligation to do so and without notice to
or demand on Borrower and without releasing Borrower from any obligation
hereunder, cure the same in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Lender is authorized to enter upon the
Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law), with interest as
provided in this Section 11.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or in appearing in, defending, or
bringing any such action or proceeding shall bear interest at the Default Rate
(as defined in the Note), for the period after notice from Lender that such cost
or expense was incurred to the date of payment to Lender. All such costs and
expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the Other Security Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section. Actions and Proceedings. After the occurrence and during the
continuance of an Event of Default, Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its discretion, decides should be brought to protect its interest in the
Property.
Section. Recovery of Sums Required To Be Paid. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
Section. Examination of Books and Records. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining
<PAGE>
to the income, expenses and operation of the Property during reasonable business
hours at any office of Borrower, its affiliates or any Guarantor or Indemnitor
where the books and records are located.
Section. Other Rights, Etc. () The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this Security Instrument. Borrower shall not be relieved of Borrower's
obligations hereunder by reason of (i) the failure of Lender to comply with any
request of Borrower, any Guarantor or any Indemnitor to take any action to
foreclose this Security Instrument or otherwise enforce any of the provisions
hereof or of the Note or the Other Security Documents, (ii) the release,
regardless of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (iii) any agreement or
stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Security Instrument or the Other
Security Documents.
() It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property or
collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other security
held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Security Instrument. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
Section. Right to Release Any Portion of the Property. Lender, may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
<PAGE>
Section. Violation of Laws. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
Section. Right of Entry. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less than five (5) Business Days' notice (except in the case of
emergencies when no notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section. Environmental Representations and Warranties. Borrower
represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger to human health or the environment.
"Environmental Law" includes, but is not limited to, the following statutes, as
amended, any successor thereto, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations and the
like
<PAGE>
addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community
Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource
Conservation and Recovery Act (including, but not limited to Subtitle I relating
to underground storage tanks); the Solid Waste Disposal Act; the Clean Water
Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking
Water Act; the Occupational Safety and Health Act; the Federal Water Pollution
Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the
Endangered Species Act; the National Environmental Policy Act; and the River and
Harbors Appropriation Act. "Environmental Law" also includes, but is not limited
to, any present, and for the purposes of Sections 12.2, 12.3 and 13.4 only,
future, federal, state and local laws, statutes, ordinances, rules, regulations
and the like, as well as common law: conditioning transfer of property upon a
negative declaration or other approval of a governmental authority of the
environmental condition of the property; requiring notification or disclosure of
Releases of Hazardous Substances or other environmental condition of the
Property to any governmental authority or other person or entity, whether or not
in connection with transfer of title to or interest in property. "Hazardous
Substances" include but are not limited to any and all substances (whether
solid, liquid or gas) (i) defined, listed, or otherwise classified as
pollutants, hazardous wastes, hazardous substances, hazardous materials,
extremely hazardous wastes, or words of similar meaning or regulatory effect
under any present, or for the purposes of Sections 12.2. 12.3 and 13.4 only,
future, Environmental Laws or (ii) that may have a negative impact on human
health or the environment, including, but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives. "Release" of any
Hazardous Substance includes, but is not limited to any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping or disposing of Hazardous Substances.
"Remediation" includes, but is not limited to any response, remedial removal, or
corrective action, any activity to cleanup, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance, any actions to prevent, cure or
mitigate any Release of any Hazardous Substance, any action to comply with any
Environmental Laws or with any permits issued pursuant thereto, any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous
Substances.
Section. Environmental Covenants. Borrower covenants and agrees that so
long as the Borrower owns, manages, is in possession of, or otherwise controls
the operation of the Property: (a) all uses and operations on or of the
Property, whether by Borrower or any other person or entity, shall be in
compliance with all Environmental Laws and permits issued pursuant thereto; (b)
there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d)
Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
<PAGE>
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender after Lender has reason to
believe this Section 12.2 has been violated (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas), and share with Lender
the reports and other results thereof, and Lender and other Indemnified Parties
(defined in Section 13.1) shall be entitled to rely on such reports and other
results thereof; (g) Borrower shall, at its sole cost and expense, comply with
all reasonable written requests of Lender to (i) reasonably effectuate
Remediation of any condition (including, but not limited to a Release of a
Hazardous Substance) in, on, under or from the Property, (ii) comply with any
Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) Borrower shall not do or
allow any tenant or other user of the Property to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Property), impairs
or may impair the value of the Property, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) Borrower shall immediately notify Lender in writing promptly
after it has become aware of (A) any presence or Releases or threatened Releases
of Hazardous Substances in, on, under, from or migrating towards the Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting the Property, (C)
any required Remediation of environmental conditions relating to the Property,
and (D) any written or oral notice or other communication of which Borrower
becomes aware from any source whatsoever (including, but not limited to a
governmental entity) relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or threatened administrative or judicial proceedings in
connection with anything referred to in this Article 12.
Section. Lender's Rights. Lender, its environmental consultant, and any
other person or entity designated by Lender, including, but not limited to any
receiver and any representative of a governmental entity, shall have the right,
but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Substance or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to Borrower, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, but not limited to conducting any environmental assessment
or audit of the Property or portions thereof to confirm Borrower's compliance
with the provisions of this Article 12, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Such audit shall
be performed in a manner so as to minimize
<PAGE>
interference with the conduct of business at the Property. If such audit
discloses that a violation of or a liability under any Environmental Law exists
or if such audit was required or prescribed by law, regulation or governmental
or quasi-governmental authority, Borrower shall pay all costs and expenses
incurred in connection with such audit; otherwise, the costs and expenses of
such audit shall, notwithstanding anything to the contrary set forth in this
Section, be paid by Lender.
Article - INDEMNIFICATION
Section. General Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, or
punitive damages, of whatever kind or nature (including, but not limited to
attorneys' fees and other costs of defense) (the "Losses") imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws;
(j) the enforcement by any Indemnified Party of the provisions of this Article
13; (k) any and all claims and demands whatsoever which may be asserted against
Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants, or agreements
<PAGE>
contained in any Lease; (l) the payment of any commission, charge or brokerage
fee to anyone which may be payable in connection with the funding of the loan
evidenced by the Note and secured by this Security Instrument; or (m) any
misrepresentation made by Borrower in this Security Instrument, the Other
Security Documents, or any documents or information provided pursuant to Section
18.1 hereof. Any amounts payable to Lender by reason of the application of this
Section 13.1 shall become immediately due and payable and shall bear interest at
the Default Rate from the date loss or damage is sustained by Lender until paid.
For purposes of this Article 13, the term "Indemnified Parties" means Lender and
any person or entity who is or will have been involved in the origination of
this loan, any person or entity who is or will have been involved in the
servicing of this loan, any person or entity in whose name the encumbrance
created by this Security Instrument is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest in
this loan (including, but not limited to Investors or prospective Investors in
the Securities, as well as custodians, trustees and other fiduciaries who hold
or have held a full or partial interest in this loan for the benefit of third
parties) as well as the respective directors, officers, shareholders, members,
partners, employees, agents, servants, representatives, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including, but not limited to any other person or entity who holds or
acquires or will have held a participation or other full or partial interest in
this loan or the Property, whether during the term of this loan or as a part of
or following a foreclosure of this loan and including, but not limited to any
successors by merger, consolidation or acquisition of all or a substantial
portion of Lender's assets and business).
Section. Mortgage and/or Intangible TAX. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any TAX on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents or
in connection with a transfer of all or a portion of the Property pursuant to a
foreclosure, deed in lieu of foreclosure or otherwise.
Section. ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
attorneys' fees and costs incurred in the investigation, defense, and settlement
of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion) that
Lender may incur, directly or indirectly, as a result of a default under
Sections 4.2 or 5.9.
Section. Environmental Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), reasonable engineers' fees, reasonable
environmental consultants' fees, and costs
<PAGE>
of investigation (including, but not limited to sampling, testing and analysis
of soil, water, air, building materials and other materials and substances
whether solid, liquid or gas) imposed upon or incurred by or asserted against
any Indemnified Parties, and arising out of or in any way relating to any one or
more of the following, unless caused by the gross negligence or willful
misconduct of any Indemnified Party: (a) any presence of any Hazardous
Substances in, on, above or under the Property; (b) any past, present or
threatened Release of Hazardous Substances in, on, above, under or from the
Property; (c) any activity by Borrower, any person or entity affiliated with
Borrower or tenant or other users of the Property in connection with any actual,
proposed or threatened use, treatment, storage, holding, existence, disposition
or other Release, generation, production, manufacturing, processing, refining,
control, management, abatement, removal, handling, transfer or transportation to
or from the Property of any Hazardous Substances at any time located in, under,
on or above the Property; (d) any activity by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property in connection
with any actual or proposed Remediation of any Hazardous Substances at any time
located in, under, on or above the Property, whether or not such Remediation is
voluntary or pursuant to court or administrative order, including, but not
limited to any removal, remedial or corrective action; (e) any past, present or
threatened violations of any Environmental Laws (or permits issued pursuant to
any Environmental Law) in connection with the Property or operations thereon,
including, but not limited to any failure by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property to comply with
any order of any governmental authority in connection with Environmental Laws;
(f) the imposition, recording or filing of any Environmental Lien encumbering
the Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section. Duty to Defend; Attorneys' Fees and Other Fees and Expenses.
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified
<PAGE>
Party (if requested by any Indemnified Party, in the name of the Indemnified
Party) by attorneys and other professionals approved by the Indemnified Parties.
Notwithstanding the foregoing, any Indemnified Parties may, in their sole and
absolute discretion, engage their own attorneys and other professionals to
defend or assist them, and, at the option of Indemnified Parties, their
attorneys shall control the resolution of claim or proceeding. Upon demand,
Borrower shall pay or, in the sole and absolute discretion of the Indemnified
Parties, reimburse, the Indemnified Parties for the payment of reasonable fees
and disbursements of attorneys, engineers, environmental consultants,
laboratories and other professionals in connection therewith.
<PAGE>
Article - WAIVERS
Section. Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section. Marshalling and Other Matters. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by Applicable Law.
Section. Waiver of Notice. To the extent permitted by Applicable Law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument
specifically and expressly provides for the giving of notice by Lender to
Borrower and except with respect to matters for which Lender is required by
Applicable Law to give notice, and Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Security Instrument does not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section. Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section. Sole Discretion of Lender. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section. Survival. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 12 shall in no way be impaired by: any satisfaction or other
termination of this Security Instrument,
<PAGE>
any assignment or other transfer of all or any portion of this Security
Instrument or Lender's interest in the Property (but, in such case, shall
benefit both Indemnified Parties and any assignee or transferee), any exercise
of Lender's rights and remedies pursuant hereto including, but not limited to
foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any
rights and remedies pursuant to the Note or any of the Other Security Documents,
any transfer of all or any portion of the Property (whether by Borrower or by
Lender, following foreclosure or acceptance of a deed in lieu of foreclosure or
at any other time), any amendment to this Security Instrument, the Note or the
Other Security Documents, and any act or omission that might otherwise be
construed as a release or discharge of Borrower from the obligations pursuant
hereto. All obligations and liabilities of Borrower under Article 12 shall cease
and terminate on the first (1st) anniversary of the date of payment to Lender in
cash of the entire Debt, provided that contemporaneously with or subsequent to
such payment, Borrower, at its sole cost and expense, delivers to Lender an
environmental audit of the Property in form and substance, and prepared by a
qualified environmental consultant, reasonably satisfactory in all respects to
Lender and indicating the Property is in full compliance with all applicable
Environmental Laws.
Section. Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH
Article - EXCULPATION .
Section. Exculpation. Notwithstanding anything to the contrary
contained in this Security Instrument or in any Other Security Document (but
subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note or this Security Instrument by any action or
proceeding to collect damages or wherein a money judgment or any deficiency
judgment or order or any judgment establishing any personal obligation or
liability shall be sought against Borrower or any principal director, officer,
employee, beneficiary, shareholder, partner, member, trustee, agent or affiliate
of Borrower or any person owning, directly or indirectly, any legal or
beneficial interest in Borrower, or any successors or assigns of any of the
foregoing (collectively, the "Exculpated Parties"). Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon this Security
Instrument, the Other Security Documents, and the interest in the Property, the
Rents and any other collateral given to Lender created by this Security
Instrument and the Other Security Documents; provided, however, subject to the
provisions of Sections 15.2, 15.3, 15.4 and
<PAGE>
15.5, that any judgment in any action or proceeding shall be enforceable against
Borrower only to the extent of Borrower's interest in the Property, in the Rents
and in any other collateral given to Lender in connection with the Note. Lender,
by accepting the Note and this Security Instrument, agrees that it shall not,
except as otherwise provided below, sue for or demand any deficiency judgment
against Borrower or any of the Exculpated Parties in any action or proceeding,
under or by reason of or under or in connection with the Note, the Other
Security Documents or this Security Instrument.
Section. Reservation of Certain Rights. The provisions of Section 15.1
shall not (a) constitute a waiver, release or impairment of the Obligations; (b)
impair the right of Lender to name Borrower as a party defendant in any action
or suit for judicial foreclosure and sale under this Security Instrument; (c)
affect the validity or enforceability of any indemnity, guaranty, master lease
or similar instrument made in connection with the Note, this Security
Instrument, or the Other Security Documents; (d) impair the ability of Lender to
obtain the appointment of a receiver; or (e) impair the enforcement of the
Assignment of Leases and Rents executed in connection herewith.
Section. Exceptions to Exculpation. Notwithstanding the provisions of
Article 15.1 to the contrary, Borrower and Indemnitor shall be personally liable
to Lender on a joint and several basis for the Losses Lender incurs due to: (a)
fraud or intentional misrepresentation by Borrower or any other person or entity
in connection with the execution and the delivery of the Note, this Security
Instrument or the Other Security Documents; (b) Borrower's misapplication or
misappropriation of Rents received by Borrower after the occurrence and during
the continuance of an Event of Default; (c) Borrower's misapplication or
misappropriation of tenant security deposits or Rents collected in advance; (d)
the misapplication or misappropriation of insurance proceeds or condemnation
awards after the occurrence and during the continuance of an Event of Default;
(e) any fees or commissions paid by Borrower after the occurrence and during the
continuance of an Event of Default to any principal, affiliate or general
partner of Borrower, Indemnitor or Guarantor in violation of the terms of the
Note, this Security Instrument or the Other Security Documents; (f) gross
negligence or criminal acts perpetrated by it resulting in forfeiture, seizure
or loss of any portion of the security; (g) any failure by Borrower or
Indemnitor to comply with the terms and provisions of Section 13.4 hereof or of
the Environmental Indemnity; (h) any failure by Borrower or any general partner
or the SPE Member of Borrower to comply with the terms and provisions of Section
4.3 hereof; or (i) any sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment or transfer of the Property or any part thereof, within the
meaning of Article 8 hereof, without the prior written consent of Lender.
Section. Recourse. Notwithstanding the foregoing, the agreement of
Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect in the event
(i) Borrower fails to comply with the terms and conditions of Section 4.3, 8.1,
8.2 or 8.3, (ii) the Property or any part thereof shall become an asset in (A) a
voluntary bankruptcy or insolvency proceeding, or (B) an involuntary bankruptcy
or insolvency proceeding commenced by any Person (other than Lender) and
Borrower fails to use its best efforts to obtain a dismissal of such
proceedings, or (iii) Borrower or any Guarantor or Indemnitor fails to comply
with the terms
<PAGE>
and provisions of Section 3.11 hereof within thirty (30) days after written
notice from Lender to Borrower (which notice shall be a second notice given
after the expiration of any notice given pursuant to Section 10.1(e)); provided,
however, so long as PREIT Associates, L.P., a Delaware limited partnership,
maintains that certain line of credit with First Union National Bank, as agent,
pursuant to that certain Revolving Credit Loan Agreement with Corestates Bank,
N.A. (predecessor-in-interest to First Union National Bank), as agent, and First
Trust Savings Bank, Fleet Bank, N.A. and PNC Bank, as lenders, dated September
30, 1997 (or another credit arrangement containing market standard financial
covenants for net worth, leverage and liquidity), the occurrence of any of the
events referred to in subsections (i)-(iii) above shall not create recourse
liability against Borrower or any Guarantor or Indemnitor.
Section. Bankruptcy Claims. Nothing herein shall be deemed to be a
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
Article - NOTICES
Section. Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (a) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof, (b) one (1) Business Day (defined below) after having been deposited
for overnight delivery with any reputable overnight courier service, or (c)
three (3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Borrower: PR Boca Palms LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Facsimile No. (215) 546-0240
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
<PAGE>
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in the
State of New York.
Article - APPLICABLE LAW
Section. Choice of Law. THIS SECURITY INSTRUMENT SHALL BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE
THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section. Usury Laws. This Security Instrument and the Note are subject
to the express condition that at no time shall Borrower be obligated or required
to pay interest on the Debt at a rate which could subject the holder of the Note
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is permitted by applicable law to contract
or agree to pay. If by the terms of this Security
<PAGE>
Instrument or the Note, Borrower is at any time required or obligated to pay
interest on the Debt at a rate in excess of such maximum rate, the rate of
interest under the Security Instrument and the Note shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate of interest from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding.
Section. Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section. Inapplicable Provision. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
Article - SECONDARY MARKET
Section. Dissemination of Information. If Lender determines at any time
to sell, transfer or assign the Note, this Security Instrument and the Other
Security Documents, and any or all servicing rights with respect thereto, or to
grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities (such sale and/or issuance, the
"Securitization") evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "Securities"), Lender may forward to each
purchaser, transferee, assignee, servicer, participant, investor, or their
respective successors in such Participations and/or Securities (collectively,
the "Investor") or any Rating Agency rating such Securities and each prospective
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the Debt and to Borrower, any Guarantor, any Indemnitors and
the Property (including, without limitation, all financial statements), which
shall have been furnished by Borrower, any Guarantor or any Indemnitors, as
Lender determines necessary or desirable. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section, including, without
limitation, the delivery of an estoppel certificate required in accordance with
Subsection 7.4(c) hereof and such other documents as may be reasonably requested
by Lender and, upon Lender's reasonable request, meeting with any Rating Agency
for due diligence purposes. Borrower shall also furnish and
<PAGE>
Borrower, any Guarantor and any Indemnitor consent to Lender furnishing to such
Investors or such prospective Investors or any Rating Agency any and all
information concerning the Property, the Leases, the financial condition of
Borrower, any Guarantor and any Indemnitor as may be requested by Lender, any
Investor or any prospective Investor or Rating Agency in connection with any
sale, transfer or Participation, provided, however, PREIT Associates, L.P. and
Pennsylvania Real Estate Investment Trust shall only be required under this
Section 18.1 to disclose information that is deemed to be "public" information.
Borrower shall not be responsible for Lender's fees and expenses incurred in
connection with the transactions contemplated by this Section 18.1. Lender shall
reimburse Borrower for the reasonable actual out-of-pocket third party costs
incurred by Borrower in excess of $1,500.00 in connection with the transactions
contemplated by this Section 18.1. Borrower shall deliver on the date hereof, at
Borrower's sole cost and expense, a nonconsolidation opinion , and within ten
(10) Business Days after demand of Lender, an update of same (which update
Borrower will not be required to provide more than once), each in form and
substance and delivered by counsel acceptable to Lender and the Rating Agency
rating or proposed to rate the Securities, as may be required by Lender and/or
such Rating Agency. Borrower's failure to deliver the opinions required hereby
shall constitute an Event of Default hereunder.
Article - COSTS
Section. Performance at Borrower's Expense. Borrower acknowledges and
confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, provided, however, no commitment fee shall be imposed in
connection with the substitution of collateral, (c) obtaining certain consents,
waivers and approvals with respect to the Property, or (d) the review of any
Lease or proposed Lease or the preparation or review of any subordination,
non-disturbance agreement (the occurrence of any of the above shall be called an
"Event"). Borrower further acknowledges and confirms that it shall be
responsible for the payment of all costs of reappraisal of the Property or any
part thereof, whether required by law, regulation, Lender or any governmental or
quasi-governmental authority. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any Event or otherwise. Wherever it is provided for herein that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, all legal fees and disbursements of Lender (whether of retained firms, the
reimbursement for the expenses of in-house staff or otherwise) and all costs and
expenses of Lender, if any.
Section. Attorney's Fees for Enforcement. (a) Borrower shall pay all
legal fees incurred by Lender in connection with (i) the preparation of the
Note, this Security Instrument and the Other Security Documents; and (ii) the
items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender on
demand any and all expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender in protecting its interest in the
<PAGE>
Property or the Collateral or in collecting any amount payable hereunder or in
enforcing its rights hereunder with respect to the Property or the Collateral,
whether or not any legal proceeding is commenced hereunder or thereunder and
whether or not any default or Event of Default shall have occurred and is
continuing, together with interest thereon at the Default Rate from the date
paid or incurred by Lender until such expenses are paid by Borrower.
Article - DEFINITIONS
Section. General Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Security Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any subsequent owner or
owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender and any subsequent holder of the Note," the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, limited liability company, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word
"Property" shall include any portion of the Property and any interest therein,
and the phrases "attorneys' fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights under this Security Instrument.
Section. Headings, Etc. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section. No Oral Change. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower, or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section. Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section. Duplicate Originals; Counterparts. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed
<PAGE>
to be an original. This Security Instrument may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Security Instrument.
Section. Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section. Subrogation. If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower's obligations hereunder, under the Note and the Other Security
Documents and the performance and discharge of the Other Obligations.
Section. Entire Agreement. The Note, this Security Instrument and the
Other Security Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Security Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Security Documents.
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower as of the date first above written.
BORROWER:
PR BOCA PALMS LLC,
a Delaware limited liability company
By: PR Boca Palms Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
------------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this 13th day of
April, 1999, by Jeffrey A. Linn, the Authorized Signatory of PR Boca Palms
Manager LLC, manager of PR BOCA PALMS LLC, a Delaware limited liability company,
manager on behalf of said company.
/s/ Illegible
- -----------------------------
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings
and improvements thereon, situate, lying and being
<PAGE>
Exhibit 10.11
PROMISSORY NOTE
$16,600,000 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PR PEMBROKE LLC, a Delaware limited liability company ("Borrower"), promises to
pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation ("Lender"), at Lender's office located at 650 Dresher Road, P.O. Box
809, Horsham, Pennsylvania 19044-0809, Attn: Servicing - Accounting Manager, or
at such other place as Lender may designate to Borrower in writing from time to
time, the principal sum of SIXTEEN MILLION SIX HUNDRED THOUSAND AND 00/100
DOLLARS ($16,600,000.00), or so much thereof as is outstanding and unpaid,
together with interest thereon at the rate of 6.773% per annum ("Interest
Rate"), in lawful money of the United States of America, which, at the time of
payment, shall be legal tender in payment of all debts and dues, public and
private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay principal
and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments of
principal and interest in the amount of $109,038.32 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note or the other Loan
Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a date
other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days from and including the date of
this Note to and including the ninth day of such month (or if the
<PAGE>
date of this Note is after the ninth day of the month, then the next following
month) (b) by a daily rate based on the Interest Rate calculated for a 360 day
year.
2.03 Method of Payment. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall be
applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05, or as
required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days prior
written notice to Lender specifying a date ("Defeasance Date") which shall be a
Payment Date, on which the amount required to defease the Loan ("Defeasance
Deposit") is to be made and on which the Defeasance is to occur, as well as the
anticipated outstanding principal amount of this Note as of the Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the outstanding principal balance of this Note to but not including
the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments, then due under this Note,
the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the Defeasance Date.
(v) Borrower shall pay to Lender the required Defeasance
Deposit for the Defeasance, or at Borrower's option, Borrower shall deliver to
Lender U.S. Government Securities which provide payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date
(including the outstanding principal balance of this Note due on the Maturity
Date), and in amounts equal to the full amounts due on each Payment Date under
this Note.
(vi) Borrower shall execute and deliver one or more security
agreements in form and substance satisfactory to Lender (collectively, "Security
Agreement"), creating a first priority lien on, and security interest in, the
Defeasance Deposit and the U.S. Government Securities purchased with Defeasance
Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of Borrower's
counsel, which opinion shall be in form and substance satisfactory to Lender in
its reasonable discretion, stating, among other things, that Lender has a
perfected first priority security interest in the U.S. Government Securities
purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies, Borrower
also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification from
Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates, documents
or instruments as Lender may reasonably request, all of which shall be in form
and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any costs and
expenses associated with the Release Instruments (as defined in Section 2.05(f)
hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a confirmation, in form
and substance satisfactory to Lender, by a "Big Five" independent certified
public accounting firm, that Defeasance Deposit is sufficient to pay all
Scheduled Defeasance Payments and other amounts required to be paid by Borrower
hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation, in form
and substance satisfactory to Lender, that all conditions to Defeasance have
been met from any applicable Rating Agency that has required as a condition to
Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with the
Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee.
<PAGE>
The Successor Borrower shall assume in writing the obligations under this Note,
the Security Agreement and the other Loan Documents, by agreements in form and
substance satisfactory to Lender, whereupon Borrower shall, pursuant to the
express terms of such agreement, be relieved of its obligations thereunder.
Borrower shall pay $10 to any such Successor Borrower as consideration for
assuming Borrower's obligations under the Note and the Security Agreement.
Notwithstanding anything in this Note or the Security Instrument to the
contrary, no other assumption fee shall be payable upon a transfer of this Note
in accordance with this Section 2.05(d), but Borrower shall pay all
out-of-pocket costs and expenses incurred by Lender, including Lender's
reasonable attorneys fees and expenses, incurred in connection therewith.
(e) Repayment Upon Default. If all or any part of the principal
amount of this Note is prepaid upon acceleration of this Note following the
occurrence of an Event of Default prior to the Optional Defeasance Date, then,
in addition to such principal payment, Borrower shall be required to make such
payments ("Yield Maintenance Payments") in an amount equal to the greater of (i)
one percent (1%), or (ii) the excess, if any, of (A) the aggregate respective
present values of all scheduled interest and principal payments payable on each
Payment Date in respect of this Note for the period from the date of such
prepayment upon acceleration to the Maturity Date, discounted monthly at a rate
equal to the Treasury Constant Maturity Yield Index (defined below) and based on
a 360-day year of twelve 30-day months over (B) the then current outstanding
principal amount of this Note. For purposes hereof, "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) ("FRB
Release") published during the second full week preceding the Prepayment Date
for instruments having a maturity coterminous with the remaining term of this
Note. In the event the FRB Release is no longer published, Lender shall select a
comparable publication to determine the Treasury Constant Maturity Yield Index.
If there is no Treasury Constant Maturity Yield Index for instruments having a
maturity coterminous with the remaining term of this Note, then 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
shall be used, 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). The Yield Maintenance Payments to be paid in connection with
any prepayment under this Section 2.05(e) shall be determined by Lender and
shall be conclusive and binding on Borrower (absent manifest error). For
purposes of this Section 2.05(e), the unpaid principal amount due on this Note
on the date of prepayment shall be determined after giving effect to any payment
of scheduled amortization made on such date.
(f) Release of the Mortgaged Property. No repayment, prepayment or
Defeasance of all or any portion of this Note shall cause, give rise to a right
to require, or otherwise result in, the release of the real or personal property
subject to the lien or mortgage created by the Security Instrument (referred to
in this Section 2.05(f) as "Mortgaged Property"), except as follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Mortgaged Property
shall be released from the lien and mortgage created by the Security Instrument,
whereupon the U.S. Government Securities pledged pursuant to the Security
Agreement shall be the sole source of Borrower's collateral securing this Note.
Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the
Security Instrument shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release of the
Mortgaged Property (and related Loan Documents approved by Lender) for execution
by Lender which shall be in a form appropriate in the applicable state and
otherwise satisfactory to Lender in its reasonable discretion, along with all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Note: (a) if any
payment of principal and interest or any other payment required under this Note
is not received by Lender on or before the date such payment is due; or (b) if
any default should occur under any of the other Loan Documents which is not
fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
4.02 Late Charges. If any payment is not received by Lender on or
before the date on which such payment originally was due, then, in addition to
any default interest
<PAGE>
payments due hereunder, Borrower also shall pay to Lender a late charge in an
amount equal to five percent (5.0%) of the amount of such overdue payment to
defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of the
delinquent payment. Such late charge shall be immediately due and payable,
without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full on or
before the Maturity Date or the date on which the due date of the indebtedness
has been accelerated pursuant to the provisions hereof, the unpaid principal and
accrued interest and other amounts then due shall bear interest at a rate per
annum ("Default Interest Rate") equal to the lesser of (a) five percent (5.0%)
in excess of the Interest Rate or (b) the maximum rate of interest, if any,
which may be charged or collected from Borrower under applicable law. In
addition, Lender shall have the right, without acceleration of the indebtedness,
to collect interest at the Default Interest Rate on any payment due hereunder
(including without limitation late charges and fees for legal counsel) which is
not received by Lender on or before the date on which such payment originally
was due. Interest at the Default Interest Rate shall be immediately due and
payable from the due date specified herein and shall accrue until all Events of
Default have been fully cured or full payment is received, as applicable.
4.04 Interest on Judgments. Interest shall accrue on any judgment
obtained by Lender in connection with the enforcement or collection of this Note
from the date any such judgment becomes due until such judgment amount is paid
in full at a rate equal to the greater of (a) the Default Interest Rate or (b)
the legal rate applicable to judgments within such jurisdiction; provided,
however, that interest shall not accrue at a rate in excess of the maximum rate
of interest, if any, which may be charged or collected from Borrower under
applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of Lender in
this Note and in the other Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's sole discretion and as often as occasion therefor shall arise. If
Borrower's obligations under this Note or any of the other Loan Documents are
enforced by Lender through an attorney-at-law, or any payment due under this
Note or the other Loan Documents is collected by or through an attorney-at-law
or collection agency, Borrower agrees to pay all costs incurred by Lender in
connection therewith, including, but not limited to, reasonable fees and
disbursements of legal counsel (whether with respect to a retained firm or
Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
<PAGE>
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others who may
become liable for payment of all or any part of the indebtedness evidenced by
this Note, hereby waives
<PAGE>
presentment for payment, demand, protest, and notice of dishonor, protest,
nonpayment, demand, intent to accelerate, and acceleration. Borrower, for itself
and all others who may become liable for payment of all or any part of the
indebtedness evidenced by this Note, 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 party and property (real and personal), against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note, absent this paragraph,
may not otherwise qualify as a negotiable instrument under applicable law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this Note
or under the other Loan Documents are to be in writing, addressed to the
<PAGE>
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
Borrower: PR Pembroke LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together with the
other Loan Documents and Lender's commitment letter to Borrower, contain the
entire agreements between Borrower and Lender relating to the subject matter
hereof and thereof, and supersede all prior discussions and agreements (oral or
written) relative hereto and thereto which are not contained herein or therein.
Borrower represents and warrants that it is not relying on any promises,
covenants, representations or agreements in connection with this Note or the
other Loan Documents, other than as expressly set forth herein or therein. In
the event of any conflict between the terms of the Loan Documents, the following
order of priority shall be used to resolve such conflict: The Note shall control
over the Security Instrument and the Security Instrument shall control over all
other Loan Documents. Time is of the essence with respect to all provisions of
this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party
<PAGE>
against whom enforcement thereof is sought and then only to the extent expressly
set forth in such writing. No person other than a duly authorized officer or
agent of Lender shall be deemed an agent of Lender nor have any authority to
waive, modify, supplement or terminate in any manner whatsoever any of the terms
of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms and
provisions of this Note and the other Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or the
other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this Note
nor any uncertainty or ambiguity herein shall be construed or resolved against
Lender by virtue of the fact that such document has originated with Lender as
drafter. Borrower acknowledges that it has reviewed this Note and has had the
opportunity to consult with counsel on same. This Note, therefore, shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto. All
personal pronouns used herein, whether used in the masculine, feminine or neuter
gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other words of similar
import refer to this Note as a whole and not to any particular section,
paragraph or other subdivision; "Section" refers to the entire section and not
to any particular subsection, paragraph of other subdivision. Reference to days
for performance shall mean calendar days unless Business Days are expressly
indicated.
8.07 Governing Law. This Note and the other Loan Documents shall be
interpreted, construed and enforced according to the laws of the state in which
the real property encumbered by the Security Instrument is located (without
giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its acceptance
of this Note, agree and consent to the exclusive jurisdiction and venue of any
state or federal court sitting in the county and state where the real property
encumbered by the Security Instrument
<PAGE>
is located with respect to any legal action, proceeding, or controversy between
them and hereby expressly waive any and all rights under applicable law or in
equity to object to the jurisdiction and venue of said courts. Borrower further
irrevocably consents to service of process by certified mail, return receipt
requested, to Borrower at the address for Borrower last provided to Lender in
accordance with the notice provision of this Note and agrees that such service
shall be effective ten (10) days after mailing. Nothing herein shall, however,
preclude or prevent Lender from bringing any one or more actions against
Borrower in any other jurisdiction as may be necessary to enforce or realize
upon the Security or other collateral provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PR PEMBROKE LLC,
a Delaware limited liability company
By: PR Pembroke Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
<PAGE>
Exhibit 10.12
================================================================================
PR PEMBROKE LLC, as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 9450 Palm Circle North
Pembroke Pines, FL
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Single Purpose Entity. 17
Section 4.4 Restoration After Casualty/Condemnation. 19
Article 5 - REPRESENTATIONS AND WARRANTIES 24
Section 5.1 Warranty of Title. 24
Section 5.2 Authority. 24
Section 5.3 Legal Status and Authority. 24
Section 5.4 Validity of Documents. 24
<PAGE>
Page
----
Section 5.5 Litigation. 25
Section 5.6 Status of Property. 25
Section 5.7 No Foreign Person. 26
Section 5.8 Separate Tax Lot. 26
Section 5.9 ERISA Compliance. 26
Section 5.10 Leases. 27
Section 5.11 Financial Condition. 27
Section 5.12 Business Purposes. 28
Section 5.13 Taxes. 28
Section 5.14 Mailing Address. 28
Section 5.15 No Change in Facts or Circumstances. 28
Section 5.16 Disclosure. 28
Section 5.17 Third Party Representations. 28
Section 5.18 Illegal Activity. 28
Section 5.19 FUNB Line of Credit. 28
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 29
Section 6.1 Relationship of Borrower and Lender. 29
Section 6.2 Servicing of the Loan. 29
Article 7 - FURTHER ASSURANCES 29
Section 7.1 Recording of Security Instrument, Etc. 29
Section 7.2 Further Acts, Etc. 29
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws. 30
Section 7.4 Estoppel Certificates. 30
Section 7.5 Flood Insurance. 31
Section 7.6 Splitting of Security Instrument. 31
Section 7.7 Replacement Documents. 31
Section 7.8 Amended Financing Statements. 32
Article 8 - DUE ON SALE/ENCUMBRANCE 32
Section 8.1 No Sale/Encumbrance. 32
Section 8.2 Sale/Encumbrance Defined. 32
Section 8.3 Lender's Rights. 33
Section 8.4 Right to Substitute Property 34
Article 9 - PREPAYMENT 34
Section 9.1 Prepayment Only in Accordance with Note. 34
Article 10 - DEFAULT 34
Section 10.1 Events of Default. 34
Article 11 - RIGHTS AND REMEDIES 35
Section 11.1 Remedies. 36
<PAGE>
Page
----
Section 11.2 Application of Proceeds. 38
Section 11.3 Right to Cure Defaults. 39
Section 11.4 Actions and Proceedings. 39
Section 11.5 Recovery of Sums Required To Be Paid. 39
Section 11.6 Examination of Books and Records. 39
Section 11.7 Other Rights, Etc. 40
Section 11.8 Right to Release Any Portion of the Property. 40
Section 11.9 Violation of Laws. 40
Section 11.10 Right of Entry. 41
Article 12 - ENVIRONMENTAL HAZARDS 41
Section 12.1 Environmental Representations and Warranties. 41
Section 12.2 Environmental Covenants. 42
Section 12.3 Lender's Rights. 43
Article 13 - INDEMNIFICATION 44
Section 13.1 General Indemnification. 44
Section 13.2 Mortgage and/or Intangible Tax. 45
Section 13.3 ERISA Indemnification. 45
Section 13.4 Environmental Indemnification. 45
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. 46
Article 14 - WAIVERS 47
Section 14.1 Waiver of Counterclaim. 47
Section 14.2 Marshalling and Other Matters. 47
Section 14.3 Waiver of Notice. 47
Section 14.4 Waiver of Statute of Limitations. 47
Section 14.5 Sole Discretion of Lender. 47
Section 14.6 Survival. 47
Section 14.7 Waiver of Trial By Jury. 48
Article 15 - EXCULPATION 48
Section 15.1 Exculpation. 48
Section 15.2 Reservation of Certain Rights. 49
Section 15.3 Exceptions to Exculpation. 49
Section 15.4 Recourse. 49
Section 15.5 Bankruptcy Claims. 50
Article 16 - NOTICES 50
Section 16.1 Notices. 50
Article 17 - APPLICABLE LAW 51
Section 17.1 Choice of Law. 51
Section 17.2 Usury Laws. 51
<PAGE>
Page
----
Section 17.3 Provisions Subject to Applicable Law. 52
Section 17.4 Inapplicable Provision. 52
Article 18 - SECONDARY MARKET 52
Section 18.1 Dissemination of Information. 52
Article 19 - COSTS 53
Section 19.1 Performance at Borrower's Expense. 53
Section 19.2 Attorney's Fees for Enforcement. 53
Article 20 - DEFINITIONS 54
Section 20.1 General Definitions. 54
Section 20.2 Headings, Etc. 54
Article 21 - MISCELLANEOUS PROVISIONS 54
Section 21.1 No Oral Change. 54
Section 21.2 Liability. 54
Section 21.3 Duplicate Originals; Counterparts. 54
Section 21.4 Number and Gender. 55
Section 21.5 Subrogation. 55
Section 21.6 Entire Agreement. 55
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
. ADA: Subsection 3.10(a);
. Applicable Law: Subsection 3.10(a);
. Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
. Bankruptcy Code: Subsection 1.1(f);
. Borrower: Preamble;
. Business Day: Section 16.1;
. Casualty Consultant: Subsection 4.4(b)(iii);
. Casualty Retainage: Subsection 4.4(b)(iii);
. Collateral: Section 1.3;
. Debt: Section 2.1;
. Default Rate: Section 10.3;
. Environmental Indemnity: Subsection 10.1(c);
. Environmental Law: Section 12.1;
. Environmental Liens: Section 12.2;
. Environmental Report: Section 12.1;
. ERISA: Subsection 4.2(a);
. Escrow Fund: Section 3.5;
. Event: Section 19.1;
. Event of Default: Section 10.1;
. Exculpated Parties: Section 15.1;
. Force Majeure: Subsection 4.4(b);
. Guarantor: Section 5.5;
. Hazardous Substances: Section 12.1;
. Improvements: Subsection 1.1(c);
. Indemnified Parties: Section 13.1;
. Indemnitor: Subsection 10.1(c);
. Independent Director: Subsection 4.3(c);
. Insurance Premiums: Subsection 3.3(b);
. Investor: Section 18.1;
. Land: Subsection 1.1(a);
. Lease Guaranty: Subsection 3.7(a);
. Leases: Subsection 1.1(f);
. Lender: Preamble;
. Loan Application: Section 5.15;
. Losses: Section 13.1;
. Net Proceeds: Subsection 4.4(b);
<PAGE>
. Net Proceeds Deficiency: Subsection 4.4(b)(v);
. Note: Recitals;
. Obligations: Section 2.3;
. Other Charges: Subsection 3.4(a);
. Other Obligations: Section 2.2;
. Other Security Documents: Section 3.2;
. Participations: 18.1;
. Permitted Exceptions: Section 5.1;
. Person: Section 20.1;
. Personal Property: Subsection 1.1(e);
. Policies/Policy: Subsection 3.3(b), 3.3(b);
. Property: Section 1.1;
. Qualified Insurer: Subsection 3.3(b);
. Rating Agency: Subsection 3.3(b);
. Registrar: Section 18.2;
. Release: Section 12.1;
. Remediation: Section 12.1;
. Rents: Subsection 1.1(f);
. Restoration: Subsection 3.3(d);
. Securities: Section 18.1;
bd Securitization: Section 18.1;
. Security Instrument: Preamble;
. Servicer: Section 6.2;
. SPE Member: Subsection 4.3(b);
. Taxes: Subsection 3.4(a); and
. Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument") is
made as of the 13th day of April, 1999, by PR PEMBROKE LLC, a Delaware limited
liability company, having its principal place of business at The Bellevue, Suite
300, 200 South Broad Street, Philadelphia, Pennsylvania 19102, as mortgagor
("Borrower"), to GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation,
having an address at 650 Dresher Road, Horsham, Pennsylvania 19044-8015, as
mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of $16,600,000 in lawful money of the
United States of America (the note together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.
Borrower desires to secure the payment of the Debt (as defined in
Article 2) and the performance of all of its obligations under the Note and the
Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section . Property Mortgaged. Borrower does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Lender and to its successors and assigns with power of sale in accordance with
the terms and conditions hereof, for the use and benefit of Lender, and (ii)
grant a security interest to Lender and to its successors and assigns with power
of sale, in accordance with the terms and conditions hereof, for the use and
benefit of Lender, in, the following property, rights, interests and estates now
owned, or hereafter acquired by Borrower (collectively, the "Property"):
() Land. The real property described in Exhibit A attached hereto and
made a part hereof (the "Land");
() Additional Land. All additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the Land and
the development of the Land that may, from time to time, by supplemental
mortgage or otherwise be expressly made subject to the lien of this Security
Instrument;
() Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (the "Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment, fixtures
(including, but not limited to all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Borrower, or in which Borrower has or shall have
an interest, now or hereafter located upon the Land or the Improvements, or
appurtenant thereto, and used in connection with the present or future operation
and occupancy of the Land and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located upon the Land
and the Improvements, or appurtenant thereto, or used in connection with the
present or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or states where any of the Property is located (the
"Uniform Commercial Code"), superior in lien to the lien of this Security
Instrument and all proceeds and products of the above;
() Leases and Rents. All leases and other agreements affecting the use,
enjoyment or occupancy of all or any part of the Land or the Improvements
heretofore or hereafter entered into whether before or after the filing by or
against Borrower of any petition for relief under 11 U.S.C. ss. 101 et seq. (the
"Bankruptcy Code"), as the same may be amended from time to time (the "Leases")
and all right, title and interest of Borrower, its successors and assigns
therein and thereunder, including, without limitation, all guarantees, letters
of credit and any other credit support given by any guarantor in connection
therewith, cash or securities deposited under the Leases to secure the
performance by the lessees of their obligations thereunder and all rents,
additional rents, revenues, issues and profits (including all oil and gas or
other mineral royalties and bonuses) from the Land and the Improvements whether
paid or accruing before or after the filing by or against Borrower of any
petition for relief under the Bankruptcy Code (the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;
<PAGE>
() Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain (including,
but not limited to any transfer made in lieu of or in anticipation of the
exercise of the right), or for a change of grade, or for any other injury to or
decrease in the value of the Property;
() Insurance Proceeds. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation, the
right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
() Tax Certiorari. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction;
() Rights. The right, in the name and on behalf of Borrower, to
commence any action or proceeding to protect the interest of Lender in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with respect
to the Property;
() Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right, title and
interest of Borrower therein and thereunder, including, without limitation, the
right, while an Event of Default remains uncured, to receive and collect any
sums payable to Borrower thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims, deposits,
trade names, trademarks, servicemarks, logos, copyrights, goodwill, books and
records and all other general intangibles specific to or used in connection with
the operation of the Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, proceeds of
insurance and condemnation awards, into cash or liquidation claims;
() Other Rights. Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (m) above.
<PAGE>
Section . Assignment of Leases and Rents. Borrower hereby absolutely
and unconditionally assigns to Lender Borrower's right, title and interest in
and to all current and future Leases and Rents; it being intended by Borrower
that this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Nevertheless, subject to the terms of
this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable license
to collect and receive the Rents. Borrower shall hold the Rents, or a portion
thereof, sufficient to discharge all current sums due on the Debt, for use in
the payment of such sums.
Section . Security Agreement. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code, the "Collateral").
Section . Pledge of Monies Held. Borrower hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, any sums deposited in the Escrow
Fund (defined in Section 3.5) and the Net Proceeds (defined in Section 4.4), as
additional security for the Obligations until expended or applied as provided in
this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
unto the Lender and its successors and assigns, with power of sale in accordance
with the terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section . Debt. This Security Instrument and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Lender may determine in its sole
discretion (the "Debt"):
() the payment of the indebtedness evidenced by the Note in lawful
money of the United States of America;
() the payment of interest, default interest, late charges and other
sums, as provided in the Note, this Security Instrument or the Other Security
Documents (defined in Section 3.2);
() the payment of any prepayment consideration, defeasance payment,
exit fee or similar fees provided in the Note;
() the payment of all other monies agreed or provided to be paid by
Borrower in the Note, this Security Instrument or the Other Security Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the security
interest created hereby; and
() the payment of all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal, extension,
modification, consolidation, change, substitution, replacement, restatement or
increase of the Debt or any part thereof, or the acquisition or perfection of
the security therefor, whether made or incurred at the request of Borrower or
Lender.
<PAGE>
Section . Other Obligations. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower contained
herein;
() the performance of each obligation of Borrower contained in the Note
in addition to the payment of the Debt and of Borrower and of any Guarantor
(defined in Section 5.5) contained in the Other Security Documents; and
() the performance of each obligation of Borrower and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part of the
Note, this Security Instrument or the Other Security Documents.
Section . Debt and Other Obligations. Borrower's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
<PAGE>
Section . Payments. Unless payments are made in the required amount in
immediately available funds at the place where the Note is payable, remittances
in payment of all or any part of the Debt shall not, regardless of any receipt
or credit issued therefor, constitute payment until the required amount is
actually received by Lender in funds immediately available at the place where
the Note is payable (or any other place as Lender, in Lender's sole discretion,
may have established by delivery of written notice thereof to Borrower) and
shall be made and accepted subject to the condition that any check or draft may
be handled for collection in accordance with the practice of the collecting bank
or banks. Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only, and the failure to pay
the entire amount then due shall be and continue to be an Event of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section . Payment of Debt. Borrower will pay the Debt at the time and
in the manner provided in the Note and in this Security Instrument.
Section . Incorporation by Reference. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note or the other Obligations (the "Other Security
Documents"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
Section . Insurance.
() Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
() Property Insurance. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the classification
"All Risks of Physical Loss" in amounts at all times sufficient to prevent
Lender from becoming a co-insurer within the terms of the applicable policies
and under applicable law, but in any event such insurance shall be maintained in
an amount equal to the full insurable value of the Improvements and building
equipment, the term "full insurable value" to mean the actual replacement cost
of the Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a recognized
independent insurance broker or an independent appraiser selected and paid by
Borrower and in no event less than the coverage required pursuant to the terms
of any Lease. Absent such annual adjustment, each policy shall contain inflation
guard coverage insuring that the policy limit will be increased over time to
reflect the effect of inflation. Borrower shall also maintain insurance against
loss or damage to such furniture, furnishings, fixtures, equipment and other
items (whether personalty or fixtures) included in the Property and owned by
Borrower from time to time, to the extent applicable, in the amount of the cost
of replacing the same, in each case, with inflation guard coverage to reflect
the effect of inflation, or annual valuation. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any co-insurance provisions) or a waiver of any
co-insurance provisions, all subject to Lender's approval. The maximum
deductible shall be $10,000.00;
<PAGE>
() Liability Insurance. Comprehensive general liability insurance,
including personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to the
extent insurable and imposed upon Lender and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession, use, leasing,
operation, maintenance or condition of the Property in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to the Property but
in no event for a combined single limit of less than $5,000,000. During any
construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers' compensation
insurance with respect to any work on or about the Property covering all persons
subject to the workers' compensation laws of the state in which the Property is
located;
() Business Interruption. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance penalty and
to provide proceeds which will cover a period of not less than one (1) year from
the date of casualty or loss with a six month extended period of indemnity, the
term "rental income" to mean the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.
() Boiler and Machinery Insurance. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000 or such other amount reasonably determined
by Lender. If one or more large HVAC units is in operation at the Property,
"System Breakdowns" coverage shall be required, as determined by Lender. Minimum
liability coverage per accident must equal the value of such unit(s);
<PAGE>
() Flood Insurance. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum amount
required, under the terms of coverage, to compensate for any damage or loss on a
replacement basis (or the unpaid balance of the indebtedness secured hereby if
replacement cost coverage is not available for the type of building insured); or
(B) the maximum insurance available under the appropriate National Flood
Insurance Administration program. The deductible may not exceed $25,000.
() During the period of any construction, renovation or alteration of
the Improvements, the cost of which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Lender's request, a completed value, "All
Risk" Builder's Risk form, or "Course of Construction" insurance policy in
non-reporting form for any Improvements under construction, renovation or
alteration in an amount approved by Lender may be required. During the period of
any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto as may from
time to time be required by Lender against other insurable hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated, including, without limitation, sinkhole, mine subsidence, earthquake
and environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
() All insurance provided for in Subsection 3.3(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25 million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Lender (a "Rating Agency"), (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall
name Lender as an additional named insured and the Policy referred to in
Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds
be payable to Lender as set forth in Section 4.4 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omission
of Lender. All Policies described in Subsection 3.3(a) above shall contain (i) a
provision that such Policies shall not be canceled or terminated, nor shall they
expire, without at least thirty (30) days' prior
<PAGE>
written notice to Lender in each instance; and (ii) include effective waivers by
the insurer of all claims for Insurance Premiums (defined below) against any
mortgage, loss payees, additional insureds and named insureds (other than
Borrower). In the event that the Property or the Improvements constitutes a
legal non-conforming use under applicable building, zoning or land use laws or
ordinances, the policy shall include an ordinance or law coverage endorsement
which will contain Coverage A: "Loss Due to Operation of Law" (with a minimum
liability limit equal to Replacement Cost With Agreed Value Endorsement),
Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of Construction"
coverages. Certificates of insurance with respect to all renewal and replacement
Policies shall be delivered to Lender not less than thirty (30) days prior to
the expiration date of any of the Policies required to be maintained hereunder
which certificates shall bear notations evidencing payment of applicable
premiums (the "Insurance Premiums"). Originals or certificates of such
replacement Policies shall be delivered to Lender promptly after Borrower's
receipt thereof but in any case within thirty (30) days after the effective date
thereof. If Borrower fails to maintain and deliver to Lender copies of the
Policies or certificates of insurance required by this Security Instrument, upon
ten (10) days' prior notice to Borrower, Lender may procure such insurance at
Borrower's sole cost and expense.
() Borrower shall comply with all insurance requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Borrower shall give prompt notice of such damage to
Lender and provided that Borrower shall have received the Net Proceeds, Borrower
shall promptly commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with such
alterations as may be approved by Lender (the "Restoration") and otherwise in
accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may be effected
under a blanket policy or policies covering the Property and other properties
and assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property, and any sublimit in such blanket policy applicable to the
Property, and shall in any case comply in all other respects with the
requirements of this Section 3.3.
() The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and Excess
Liability Policies, but in no event will the Commercial General Liability policy
be written for an amount less than $1,000,000 per occurrences and $2,000,000
aggregate for bodily injury and property damage liability.
<PAGE>
() The delivery to Lender of the insurance policies or the certificates
of insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by Borrower to Lender
as further security for the indebtedness secured hereby. In the event of
foreclosure of this Security Instrument, 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 Borrower 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 Lender or other transferee in the event of
such other transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance.
() Lender 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 Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance. Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance complies with all of the applicable requirements set forth
herein.
Section . Payment of Taxes, Etc. () Subject to the terms and conditions
of Section 3.5 hereof, Borrower shall pay by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have been deposited with Lender in accordance with the terms of
this Security Instrument, Borrower shall furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall become
delinquent.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any of the Taxes, provided that (i) no Event of Default has
occurred and is continuing under the Note, this Security Instrument or any of
the Other Security Documents, (ii) Borrower is
<PAGE>
permitted to do so under the provisions of any other mortgage, deed of trust or
deed to secure debt affecting the Property, (iii) such proceeding shall suspend
the collection of the Taxes from Borrower and from the Property or Borrower
shall have paid all of the Taxes under protest, (iv) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default
thereunder, (v) neither the Property nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, canceled or lost, (vi)
Borrower shall have set aside adequate reserves for the payment of the Taxes,
together with all interest and penalties thereon, unless Borrower has paid all
of the Taxes under protest, and (vii) Borrower shall have furnished the security
as may be required in the proceeding, or as may be reasonably requested by
Lender to insure the payment of any contested Taxes, together with all interest
and penalties thereon, taking into consideration the amount in the Escrow Fund
available for payment of Taxes.
Section . Escrow Fund. At the option of Lender, Lender may require
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of Insurance Premiums and Taxes pursuant to Sections
3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance Premiums shall be
made by Borrower to Lender in amounts determined by Lender in its discretion on
the date hereof to be held by Lender in escrow. Additionally, Borrower shall pay
to Lender on the tenth (10th) day of each calendar month (a) one-twelfth of an
amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, upon the due dates established by the appropriate taxing
authority during the next ensuing twelve (12) months and (b) one-twelfth of an
amount which would be sufficient to pay the Insurance Premiums due for the
renewal of the coverage afforded by the Policies upon the expiration thereof
(the initial deposits together with the amounts in (a) and (b) above shall be
called the "Escrow Fund"). Borrower agrees to notify Lender immediately of any
changes to the amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has obtained knowledge and authorizes Lender or
its agent to obtain the bills for Taxes and Other Charges directly from the
appropriate tax authority. Monthly payments to the Escrow Fund as required
hereunder and the monthly payments of interest or principal or both, payable
pursuant to the Note, shall be added together and shall be paid as an aggregate
sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 3.3 and
3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above, Borrower shall promptly pay to Lender, upon demand,
an amount which Lender shall reasonably estimate as sufficient to make up the
deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by Lender.
<PAGE>
Section . Condemnation. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, Borrower shall deliver
to Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Borrower shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the award by the condemning authority but shall
be entitled to receive out of the award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by the
power of eminent domain, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of in accordance with Section 4.4 of this Security Instrument. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the award or payment, Lender shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive the award or payment, or a portion thereof sufficient to pay the Debt.
Section . Leases and Rents. () Except as otherwise consented to by
Lender, all Leases shall be written on a standard form of lease which shall have
been approved by Lender. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior written consent of Lender,
which consent shall not be unreasonably withheld or delayed. All proposed leases
shall be subject to the prior approval of Lender except that all proposed leases
which (i) are on the same form of lease which has been approved by Lender, (ii)
are the result of an arms-length transaction, (iii) which provide for rental
rates comparable to existing market rates, (iv) where space to be leased does
not exceed more than ten percent (10%) of total rentable space of the Property,
(v) where the proposed tenant is an independent third party not affiliated with
the Borrower, and (vi) do not contain any terms which would materially affect
Lender's rights under this Security Instrument, the Note or the Other Security
Documents, shall not be subject to the prior approval of Lender. Notwithstanding
subsections (ii), (iii) and (v) above, Borrower may lease units to employees of
Borrower, but the aggregate number of units leased to such employees shall not
exceed
<PAGE>
1.5% of the total number of units at the Property. Borrower (i) shall
observe and perform all the obligations imposed upon the lessor under the Leases
if the failure to perform or observe the same would materially and adversely
affect the value of the Property taken as a whole and shall not do or permit to
be done anything to impair the value of the Leases as security for the Debt;
(ii) shall promptly send copies to Lender of all notices of default which
Borrower shall send or receive thereunder; (iii) shall enforce in a commercially
reasonable manner all of the terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or performed;
provided, however, with respect to multifamily residential property, a
residential Lease may be terminated in the event of a default by the tenant
thereunder; (iv) shall not collect any of the Rents more than one (1) month in
advance (provided that a security deposit shall not be deemed rent collected in
advance); (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (vi) shall not (A) materially alter, modify or change
the terms of the Leases without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed if the alteration,
modification or change does not materially and adversely affect the value of the
Property taken as a whole and provided further that such Lease, as altered,
modified or changed, is otherwise in compliance with the requirements of this
Security Instrument, or (B) cancel or terminate any Lease (except for defaults
thereunder) of more than ten (10%) percent of the rentable space of the Property
or accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (vii) shall not alter, modify or change the
terms of any guaranty, letter of credit or other credit support with respect to
the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty
without the prior written consent of Lender; and (viii) shall not consent to any
assignment of or subletting under the Leases not in accordance with their terms,
without the prior written consent of Lender. Notwithstanding the foregoing,
subdivisions (ii), (vi), (vii) and (viii) shall not apply to residential Leases
for space in a multifamily residential property.
Section . Maintenance of Property. Borrower shall cause the Property to
be maintained in a good and safe condition and repair. The Improvements and the
Personal Property shall not be removed, demolished or altered if the costs of
same would exceed $500,000 (except for normal replacement of the Personal
Property) without the consent of Lender. Subject to Section 4.4(c) hereof,
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
Section 3.6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Borrower shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof. If
under applicable zoning provisions the use of all or any portion of the Property
is or shall become a nonconforming use, Borrower will not cause or permit the
nonconforming use or Improvement to be discontinued or abandoned without the
express written consent of Lender.
<PAGE>
Section . Waste. Borrower shall not commit or suffer any waste of the
Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section . Compliance With Laws. () Borrower shall promptly comply with
all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof including, but not limited to, the Americans with Disabilities
Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request, provide
Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, Borrower shall not
alter the Property in any manner which would materially increase Borrower's
responsibilities for compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans, specifications, or working
drawings for alterations of the Property shall create no responsibility or
liability on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of compliance with
Applicable Laws from an independent architect, engineer, or other person
acceptable to Lender.
() Borrower shall give prompt notice to Lender of the receipt by
Borrower of any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the Applicable Laws affecting the Property,
provided that (i) no Event of Default has occurred and is continuing under the
Note, this Security Instrument or any of the Other Security Documents; (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property; (iii) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
default thereunder; (iv) neither the Property nor any part thereof or interest
therein nor any of the tenants or occupants thereof shall be affected in any
material adverse way as a result of such proceeding; and (v) Borrower shall have
furnished to Lender all other items reasonably requested by Lender.
<PAGE>
Section . Books and Records. () Borrower and any Guarantors and
Indemnitors shall keep adequate books and records of account in accordance with
the methods utilized by them as of the date hereof, consistently applied and
furnish to Lender:
() quarterly certified rent rolls signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing the total
revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of Borrower,
any Guarantors and any Indemnitors, in the form required by Lender, prepared and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly basis
consistent with the quarterly certified rent rolls described above within ninety
(90) days after the close of each fiscal year;
() an annual operating budget presented on a monthly basis consistent
with the annual operating statement described above for the Property and all
proposed capital replacements and improvements at least thirty (30) days prior
to the start of each calendar year; and
() such other financial statements, including monthly operating
statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its affiliates
shall furnish to Lender:
<PAGE>
() a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and deposits received from tenants and any other information requested
by Lender, in reasonable detail and certified by Borrower under penalty of
perjury to be true and complete, but no more frequently than quarterly; and
() an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and Indemnitor shall
furnish Lender with such other additional financial or management information as
may, from time to time, be reasonably required by Lender in form and substance
satisfactory to Lender.
Section . Payment For Labor and Materials. Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in
respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section . Performance of Other Agreements. Borrower shall observe and
perform each and every term to be observed or performed by Borrower pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Property.
Section . Change of Name, Identity or Structure. Borrower will not
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days prior
to the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of the Lender.
Section . Existence. Borrower will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names.
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section . Property Use. The Property shall be used only for multifamily
apartments, and for no other use without the prior written consent of Lender,
which consent may be withheld in Lender's discretion.
<PAGE>
Section . ERISA. () It shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Security Instrument and the
Other Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Security Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(32) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests
in Borrower are held by "benefit plan investors" within the meaning
of 29 C.F.R.ss.2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R.ss.2510.3-101(c)
or (e) or an investment company registered under The Investment
Company Act of 1940.
Section . Single Purpose Entity. () It has not and shall not:
() engage in any business or activity other than the ownership,
operation and maintenance of the Property, and activities incidental thereto;
() acquire or own any material assets other than (A) the Property, and
(B) such incidental Personal Property as may be necessary for the operation of
the Property;
() merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent;
<PAGE>
() fail to preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the jurisdiction
of its organization or formation, or without the prior written consent of
Lender, amend, modify, terminate or fail to comply with the provisions of
Borrower's Partnership Agreement, Articles or Certificate of Incorporation,
Operating Agreement or similar organizational documents, as the case may be, as
same may be further amended or supplemented, if such amendment, modification,
termination or failure to comply would adversely affect the ability of Borrower
to perform its obligations hereunder, under the Note or under the Other Security
Documents;
() own any subsidiary or make any investment in, any person or entity
without the consent of Lender;
() commingle its assets with the assets of any of its general partners,
members, shareholders, affiliates, principals or of any other person or entity;
() incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
incurred in the ordinary course of business, provided same are paid when due;
() fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, members, shareholders,
principals and affiliates of Borrower, the affiliates of a general partner or
member, or shareholder of Borrower, and any other person or entity;
() enter into any contract or agreement with any general partner,
member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms- length basis with third
parties other than any general partner, member, shareholder, principal or
affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof;
() seek the dissolution or winding up in whole, or in part, of
Borrower;
() maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, member, shareholder, principal or affiliate of Borrower,
or any general partner, member, shareholder, principal or affiliate thereof or
any other person;
() hold itself out to be responsible for the debts of another person;
() make any loans or advances to any third party, including any general
partner, member, shareholder, principal or affiliate of Borrower, or any general
partner, principal or affiliate thereof;
<PAGE>
() fail to file its own tax returns;
() agree to, enter into or consummate any transaction which would
render Borrower unable to furnish the certification or other evidence referred
to in Section 4.2(b) hereof;
() fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business
solely in its own name in order not (A) to mislead others as to the identity
with which such other party is transacting business, or (B) to suggest that
Borrower is responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner, principal
or affiliate thereof);
() fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; or
() file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
() If Borrower is a limited partnership or a limited liability company,
each general partner or at least one member (the "SPE Member") of Borrower, as
applicable, is a corporation or limited liability company whose sole asset is
its interest in Borrower and each general partner or the SPE Member of Borrower,
as applicable, will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(a) as if
such representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a manager under
the law where the Borrower is organized.
() Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors (an "Independent Director") of each
general partner of Borrower (or of the SPE Member of Borrower) reasonably
satisfactory to Lender who shall not have been at the time of such individual's
initial appointment, and may not have been at any time during the preceding five
years, and shall not be at any time while serving as a director of the general
partner (or SPE Member) either (i) a shareholder of, or an officer, director
(other than an Independent Director), partner or employee of, Borrower or any of
its shareholders, partners, members, subsidiaries or affiliates, (ii) a customer
of, or supplier to, Borrower or any of its shareholders, partners, members,
subsidiaries or affiliates, (iii) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, member, employee, supplier or
customer. As used herein, the term "control": means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policy of a person or entity, whether through ownership of voting securities, by
contract or otherwise.
<PAGE>
() Borrower shall not cause or permit the board of directors of the
general partner of Borrower (or of the SPE Member of Borrower) to take any
action which, under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a vote of the
board of directors of the general partner of Borrower (or the SPE Member of
Borrower) unless at the time of such action there shall be at least one member
of the board of directors who is an Independent Director.
Section . Restoration After Casualty/Condemnation. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed $500,000
("Casualty Amount"); (ii) the costs of completing the Restoration as reasonably
estimated by Borrower shall be less than or equal to the Casualty Amount; (iii)
no Event of Default shall have occurred and be continuing under the Note, this
Security Instrument or any of the Other Security Documents; (iv) the Property
and the use thereof after the Restoration will be in compliance with, and
permitted under, all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental Laws (defined in
Section 12.1); and (v) such fire or other casualty or taking, as applicable,
does not materially impair access to the Property or the Improvements, then the
Net Proceeds will be disbursed directly to Borrower and Borrower shall commence
and diligently prosecute to completion, subject to Force Majeure (defined
herein), the Restoration of the Property to as nearly as possible the condition
it was in immediately prior to such fire or other casualty or to such taking.
Except upon the occurrence and continuance of an Event of Default, Borrower
shall settle any insurance claims with respect to the Net Proceeds which in the
aggregate are less than or equal to the Casualty Amount. Lender shall have the
right to participate in and reasonably approve any settlement for insurance
claims with respect to the Net Proceeds which in the aggregate are equal to or
greater than the Casualty Amount. If an Event of Default shall have occurred and
be continuing, Borrower hereby irrevocably empowers Lender, in the name of
Borrower as its true and lawful attorney-in-fact, to file and prosecute such
claim and to collect and to make receipt for any such payment. If the Net
Proceeds are received by Borrower, such Net Proceeds shall, until the completion
of the related work, be held in trust for Lender and shall be segregated from
other funds of Borrower to be used to pay for the cost of the Restoration in
accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount, such Net
Proceeds shall, subject to the provisions of the Leases that are superior to the
lien of this Security Instrument or with respect to which subordination,
non-disturbance agreements binding upon Lender have entered into concerning the
deposits of Net Proceeds, be forthwith paid to Lender to be held by Lender in a
segregated account to be made available to Borrower for the Restoration in
accordance with the provisions of this Subsection 4.4(b). Subject to Section
4.4(c) hereof, Borrower shall commence and diligently prosecute to
<PAGE>
completion, subject to Force Majeure (defined below), the Restoration (in the
case of a taking, to the extent the Property is capable of being restored). The
term "Net Proceeds" for purposes of this Section 4.4 shall mean: (i) the net
amount of all insurance proceeds received by Lender under the Policies carried
pursuant to Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security
Instrument as a result of such damage or destruction, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any, in collecting the same, or (ii) the net amount of all awards and
payments received by Lender with respect to a taking referenced in Section 3.6
of this Security Instrument, after deduction of its reasonable costs and
expenses (including, but not limited to reasonable counsel fees), if any, in
collecting the same, whichever the case may be. The term "Force Majeure" for the
purpose of this Section 4.4 shall have the following meaning: Borrower shall be
excused for the period of any delay in the performance of any obligations
hereunder when prevented from so doing by cause or causes beyond Borrower's
control such as, without limitation, all labor disputes, civil commotion, war,
war-like operations, invasion, rebellion, hostilities, military or usurped
power, sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, and acts of God.
() If the Net Proceeds are greater than the Casualty Amount, the Net
Proceeds shall be made available to Borrower for payment of, or reimbursement of
Borrower's expenses in connection with, the Restoration, subject to the
following conditions:
(A) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security
Documents;
(B) Lender shall, within a reasonable period of time prior to
request for initial disbursement, be furnished with an estimate
of the cost of the Restoration accompanied by an independent
architect's certification as to such costs and appropriate
plans and specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by Borrower with Lender, are sufficient to cover the
cost of the Restoration as such costs are certified by the
independent architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds,
less than fifty percent (50%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered
unusable as a result of such fire or other casualty; or (2) in
the event that the Net Proceeds are condemnation awards, less
than fifty percent (50%) of the Land constituting the Property
is taken, such Land that is taken is located along the
perimeter or periphery of the Property and no portion of the
Improvements is located in such Lands;
(E) Lender shall be satisfied that any operating deficits,
including all scheduled payments of principal and interest
under the Note which will be incurred with respect to the
Property as a result of the occurrence of any such fire or
other casualty or taking, whichever the case may be, will be
covered out of (1) the Net Proceeds, or (2) other funds of
Borrower;
<PAGE>
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash
flow of the Property will be restored to a level sufficient to
cover all carrying costs and operating expenses of the
Property, including, without limitation, debt service on the
Note at a coverage ratio (on a "normalized" basis, i.e., after
deducting replacement reserve requirements and reserves for
tenant improvements and leasing commissions from net operating
income, whether or not such sums are escrowed with Lender) of
at least 1.30 : 1.0 (assuming an interest rate equal to 9.0%
per annum), or, if lower, the coverage ratio which existed as
of the date immediately preceding such casualty or taking as
the case may be;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity
Date (as defined in the Note), (2) the earliest date required
for such completion under the terms of any Lease and (3) such
time as may be required under applicable zoning law, ordinance,
rule or regulation in order to repair and restore the Property
to as nearly as possible the condition it was in immediately
prior to such fire or other casualty or to such taking, as
applicable;
(H) the Property and the use thereof after the Restoration will be
in compliance with, and permitted under, all applicable zoning
laws, ordinances, rules and regulations (including, without
limitation, all applicable Environmental Laws (defined in
Section 12.1)); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net Proceeds
shall be held by Lender and, until disbursed in accordance with the provisions
of this Subsection 4.4(b), shall constitute additional security for the
Obligations. The Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
<PAGE>
() If the Net Proceeds exceed the Casualty Amount, Lender shall have
the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. If the Net Proceeds
exceed the Casualty Amount, the identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and an independent consulting engineer selected by Lender (the "Casualty
Consultant"), such acceptance not to be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration including, without limitation, reasonable counsel
fees and disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There shall be
no Casualty Retainage with respect to costs actually incurred by Borrower for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
<PAGE>
() If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit the
deficiency (the "Net Proceeds Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Subsection 4.4(b) shall constitute additional security for the
Obligations.
() The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section . Warranty of Title. Borrower has good and marketable title to
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
<PAGE>
Section . Authority. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's part
to be performed.
Section . Legal Status and Authority. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section . Validity of Documents. (a) The execution, delivery and
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section . Litigation. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of Borrower's knowledge, threatened or contemplated
against Borrower, any person guaranteeing the payment of the Debt or any portion
thereof or performance by Borrower of any terms of this Security Instrument (a
"Guarantor"), if any, an Indemnitor (defined in Subsection 10.1(c)), if any, or
against or affecting the Property that (a) has not been disclosed to Lender, and
has a material, adverse effect on the Property or Borrower's, any Guarantor's or
any Indemnitor's ability to perform its obligations under the Note, this
Security Instrument or the Other Security Documents, or (b) is not adequately
covered by insurance, each as determined by Lender in its sole and absolute
discretion.
<PAGE>
Section . Status of Property. () No portion of the Improvements is
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be
amended, or any successor law, or, if any portion of the Improvements is now or
at any time in the future located within any such area, Borrower has obtained
and will maintain the insurance prescribed in Section 3.3 hereof.
() Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Property and the conduct of its business and all required zoning, building code,
land use, environmental and other similar permits or approvals, all of which are
in full force and effect as of the date hereof and, to the best of Borrower's
knowledge, not subject to revocation, suspension, forfeiture or modification.
() To the best of Borrower's knowledge, and except as expressly set
forth in that certain Property Condition Survey of the Property, dated April 1,
1999, by Environmental Management Group, and that certain Phase I Environmental
Site Assessment of the Property dated March 31, 1999, prepared by Environmental
Management Group, the Property and the present and contemplated use and
occupancy thereof are in full compliance with all Applicable Laws, including,
without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited to,
the ADA) and other similar laws.
() The Property is served by all utilities required for the current or
contemplated use thereof. All utility service is provided by public utilities
and the Property has accepted or is equipped to accept such utility service.
() To the best of Borrower's knowledge, all public roads and streets
necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other casualty.
() All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
<PAGE>
() Borrower has paid in full for, and is the owner of, all furnishings,
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby.
() To the best of Borrower's knowledge, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a good and
safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on the
certified rent roll delivered to Lender have been collected by Borrower except
as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the Property.
Section . No Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.
Section . Separate Tax Lot. The Property is assessed for real estate
tax purposes as one or more wholly independent tax lot or lots, separate from
any adjoining land or improvements not constituting a part of such lot or lots,
and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section . ERISA Compliance. () As of the date hereof and throughout the
term of this Security Instrument, (i) Borrower is not and will not be an
"employee benefit plan" as defined in Section 3(32) of ERISA, which is subject
to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this Security
Instrument, (i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA, and (ii) transactions by or with Borrower are
not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Section . Leases. Except as disclosed in the certified rent roll for
the Property delivered to and approved by Lender, or as otherwise set forth on
Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's interest
in the Leases; (b) the Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to the Leases are reflected in the
certified rent roll delivered to and approved by Lender; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
<PAGE>
(except to Lender); (e) none of the Rents have been collected for more than one
(1) month in advance (provided that a security deposit shall not be deemed rent
collected in advance); (f) the premises demised under the Leases have been
completed and the tenants under the Leases have accepted the same and have taken
possession of the same on a rent-paying basis; (g) to the best of Borrower's
knowledge, there exist no offsets or defenses to the payment of any portion of
the Rents; (h) Borrower has received no notice from any tenant challenging the
validity or enforceability of any Lease; (i) all payments due under the Leases
are current and are consistent with the certified rent roll for the Property
delivered to and approved by Lender; (j) to the best of Borrower's knowledge, no
tenant under any Lease is in default thereunder, or is a debtor in any
bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the tenants under the Leases other than
expressly set forth in each Lease; (l) the Leases are valid and enforceable
against Borrower and, to the best of Borrower's knowledge, the tenants set forth
therein; (m) no Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (n) to the best of Borrower's
knowledge, no person or entity has any possessory interest in, or right to
occupy, the Property except under and pursuant to a Lease; (o) each Lease (other
than a residential Lease) is subordinate to this Security Instrument, either
pursuant to its terms or a recorded subordination agreement; and (p) to the best
of Borrower's knowledge, no brokerage commissions or finders fees are due and
payable regarding any Lease.
Section . Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section . Business Purposes. The loan evidenced by the Note is solely
for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section . Taxes. Borrower, any Guarantor and any Indemnitor have filed
all federal, state, county, municipal, and city income and other tax returns
required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section . Mailing Address. Borrower's mailing address, as set forth in
the opening paragraph hereof or as changed in accordance with Article 16, is
true and correct.
Section . No Change in Facts or Circumstances. All information in the
application for the loan submitted to Lender (the "Loan Application") and in all
financing statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application or in satisfaction of the
terms thereof, are accurate, complete and correct in all material respects.
There has been no adverse change in any condition, fact, circumstance or event
that would make any such information materially inaccurate, incomplete or
otherwise misleading.
<PAGE>
Section . Disclosure. To the best of Borrower's knowledge, Borrower has
disclosed to Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty made herein to be
materially misleading.
Section . Third Party Representations. To the best of Borrower's
knowledge, each of the representations and the warranties made by each Guarantor
and Indemnitor herein or in any Other Security Document(s) is true and correct
in all material respects.
Section . Illegal Activity. To the best of Borrower's knowledge, no
portion of the Property has been or will be purchased, improved, fixtured,
equipped or furnished with proceeds of any criminal or other illegal activity
and to the best of Borrower's knowledge, there are no illegal activities or
activities relating to controlled substance at the Property.
Section . FUNB Line of Credit. No more than five (5) Business Days
after the expiration or earlier termination of, or concurrently with the giving
of notice by PREIT Associates, L.P. to the public that an event of default has
occurred under, that certain Revolving Credit Loan Agreement between PREIT
Associates, L.P. and Corestates Bank, N.A., as agent (predecessor-in-interest to
First Union National Bank, as agent), and First Trust Savings Bank, Fleet Bank,
N.A. and PNC Bank, as lenders, dated September 30, 1997, Borrower shall notify
Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section . Relationship of Borrower and Lender. The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or condition
of any of the Note, this Security Instrument and the Other Security Documents
shall be construed so as to deem the relationship between Borrower and Lender to
be other than that of debtor and creditor.
Section . Servicing of the Loan. At the option of Lender, the loan
secured hereby may be serviced by a servicer/trustee (the "Servicer") selected
by Lender and Lender may delegate all or any portion of its responsibilities
under the Note, this Security Instrument, and the Other Security Documents to
the Servicer.
<PAGE>
Article - FURTHER ASSURANCES
Section . Recording of Security Instrument, Etc. Borrower forthwith
upon the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, this Security Instrument, the Other Security
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Security Instrument,
any mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section . Further Acts, Etc. Borrower will, at the cost of Borrower,
and without expense to Lender, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Lender, the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument, or
for complying with all Applicable Laws. Borrower, on demand, will execute and
deliver and hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, one
or more financing statements, chattel mortgages or other instruments, to
evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section . Changes in Tax, Debt Credit and Documentary Stamp Laws. () If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.
<PAGE>
() Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
() If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the Other Security
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.
Section . Estoppel Certificates. () After request by Lender, Borrower,
within twenty (20) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the terms of payment and
maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by Section 18.1
hereof, at Lender's request, Borrower, any Guarantors and any Indemnitors shall
provide an estoppel certificate to the Investor (defined in Section 18.1) or any
prospective Investor confirming the accuracy of information provided by such
person to Lender under or in respect of this Security Instrument.
<PAGE>
() After written request by Borrower not more than twice annually,
Lender shall furnish Borrower a statement setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the balance of the sums in
the Escrow Fund, if any, and (v) to the best of Lender's knowledge, whether
Borrower is currently in default.
Section . Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).
Section . Splitting of Security Instrument. This Security Instrument
and the Note shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and deliver
to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount secured by this Security Instrument, and containing terms,
provisions and clauses no less favorable to Borrower than those contained herein
and in the Note, and such other documents and instruments as may be required by
Lender to effect the splitting of the Note and this Security Instrument.
Section . Replacement Documents. Upon receipt of an affidavit
of an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any Other Security Document which is not of public record, and, in the
case of any such mutilation, upon surrender and cancellation of such Note or
Other Security Document, Borrower will issue, in lieu thereof, a replacement
Note or Other Security Document, dated the date of such lost, stolen, destroyed
or mutilated Note or Other Security Document in the same principal amount
thereof and otherwise of like tenor. Borrower shall not be responsible to Lender
for Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section . Amended Financing Statements. Borrower will execute and
deliver to the Lender, prior to or contemporaneously with the effective date of
any such change, any financing statement or financing statement change required
by the Lender to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Lender, Borrower
shall execute a certificate in form satisfactory to the Lender listing the trade
names under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect to
the Property.
<PAGE>
Article - DUE ON SALE/ENCUMBRANCE
Section . No Sale/Encumbrance. Borrower agrees that Borrower
shall not, without the prior written consent of Lender, sell, convey, mortgage,
grant, bargain, encumber, pledge, assign, or otherwise transfer the Property or
any part thereof or permit the Property or any part thereof to be sold,
conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred. Notwithstanding the foregoing, the Property may be
transferred with the prior written consent of Lender which consent shall not be
unreasonably withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, provided that (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one quarter of one percent (.25%) of
the outstanding principal balance of the Note shall be paid by Borrower to
Lender upon notice being given to Borrower of approval of the proposed transfer
(unless the proposed transferee is an affiliate of Borrower, in which event no
transfer fee shall be due and payable), (iv) no transfer shall be permitted
hereunder if an Event of Default, or an event which with the giving of notice or
lapse of time or both could become an Event of Default, has occurred and is
continuing, and (v) such transferee shall be a single purpose bankruptcy remote
entity and Borrower shall cause to be delivered to Lender a non-consolidation
opinion or an update of the same, in form and substance reasonably acceptable to
Lender, upon Lender's request to do so. Borrower agrees that Borrower shall not
incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Debt and trade payables incurred in
the ordinary course of business in connection with the operation of the
Property, provided same are paid when due.
Section . Sale/Encumbrance Defined. A sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning
of this Article 8 shall be deemed to include, but not be limited to (a) an
installment sales agreement wherein Borrower agrees to sell the Property or any
part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower or any general partner or
managing member (or if no managing member, any member) of Borrower is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
of more than 49% of such corporation's stock; (d) if Borrower or any general
partner or managing member (or if no managing member, any member) of Borrower is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest or the transfer or pledge of any partnership
<PAGE>
interest of any limited partner or any profits or proceeds relating to any such
partnership interest, which, whether singly or in the aggregate, result in more
than 49% of the beneficial interests in Borrower, or the profits or proceeds
relating thereto, having been transferred or pledged; and (e) if Borrower or any
general partner or member of Borrower is a limited liability company, the
change, removal or resignation of a managing member or the transfer of the
membership interest of a managing member or any profits or proceeds relating to
such membership interest or the transfer or pledge of any membership interest of
any other member or any profits or proceeds relating to any such membership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged. Notwithstanding the foregoing, the
following transfers shall not be deemed to be a sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment or transfer within the meaning
of this Article 8: (a) transfer by devise or descent or by operation of law upon
the death of a member, general partner or stockholder of Borrower, any Guarantor
or Indemnitor or any member or general partner thereof, (b) a sale, transfer or
hypothecation of a membership, partnership or shareholder interest in Borrower,
whichever the case may be, by a current member, general partner or shareholder,
as applicable, to an immediate family member (i.e., parents, spouses, siblings,
children or grandchildren) of such member, general partner or shareholder, or to
a trust for the benefit of an immediate family member of such member, general
partner or shareholder, and (c) a change in the form of organizational structure
or name of Borrower, provided that there is no transfer or change in the
ownership interests in Borrower, and provided further that Borrower shall remain
in full compliance with Section 4.3 of this Security Instrument, provided that,
as to each of clauses (a), (b) and (c) of this sentence, with respect to any
such sale, transfer, hypothecation or change in organizational structure,
Borrower shall deliver a non-consolidation opinion or an update of the same, in
form and substance reasonably satisfactory to Lender, upon Lender's request to
do so.
Section . Lender's Rights. Lender reserves the right to condition the
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section . Right to Substitute Property. The terms and conditions of
this Article 8 shall be subject to Borrower's rights pursuant to that certain
letter dated the date hereof from Lender to Borrower regarding Borrower's rights
to substitute security for the Debt. Inquiries regarding the aforementioned
letter shall be made to Borrower at the address set forth in Article 16 below.
<PAGE>
Article - PREPAYMENT
Section . Prepayment Only in Accordance with Note. The Debt may be
prepaid only in strict accordance with the express terms and conditions of the
Note including, without limitation, payment of the Prepayment Consideration if
applicable.
Article - DEFAULT
Section . Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for purposes of
this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the provisions
of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE Member of
Borrower violates or does not comply with any of the provisions of Section 4.3;
() if any representation or warranty of Borrower, Indemnitor (as
defined in that certain Environmental Indemnity Agreement dated as of the date
hereof (the "Environmental Indemnity") or any Guarantor, or any member, general
partner, principal or beneficial owner of any of the foregoing, made herein or
in the Environmental Indemnity or in any guaranty, or in any certificate,
report, financial statement or other instrument or document furnished to Lender
shall have been false or misleading in any material respect when made;
() if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
() except for the specific defaults set forth in this Section 10.1, any
other default hereunder or any of the Other Security Documents by Borrower,
which default is not cured (i) in the case of any default which can be cured by
the payment of a sum of money, within five (5) days after written notice from
Lender to Borrower, or (ii) in the case of any other default, within thirty (30)
days after written notice from Lender to Borrower; provided that if such default
cannot reasonably be cured within such thirty (30) day period and Borrower shall
have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of one hundred twenty (120) days,
unless, only in the case of cures that require construction or remedial work,
such cure cannot with diligence be completed within such one hundred twenty
(120) day period, in which case such period shall be extended for an additional
one hundred twenty (120) days;
<PAGE>
() if Borrower or any Guarantor or Indemnitor shall make an assignment
for the benefit of creditors or if Borrower shall generally not be paying its
debts as they become due; or
() if the Policies are not kept in full force and effect, or Borrower
has not delivered evidence of the renewal of the Policies ten (10) days prior to
their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any Guarantor or Indemnitor shall make a general
assignment for the benefit of its creditors'; or (ii) there shall be commenced
against Borrower or any Guarantor or Indemnitor any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety (90) days;
or (iii) there shall be commenced against the Borrower or any Guarantor or
Indemnitor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within ninety (90) days from the entry thereof; or (iv) the
Borrower or any Guarantor or Indemnitor shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
Article - RIGHTS AND REMEDIES
Section . Remedies. () Upon the occurrence of any Event of Default,
Borrower agrees that Lender, may take such action, without notice or demand, as
it deems advisable to protect and enforce the rights of Lender against Borrower
and in and to the Property, including, but not limited to the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Lender:
<PAGE>
() declare the entire unpaid Debt to be immediately due and payable;
() institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
() with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;
() sell for cash or upon credit the Property or any part thereof and
all estate, claim, demand, right, title and interest of Borrower therein and
rights of redemption thereof, pursuant to power of sale or otherwise, at one or
more sales, as an entity or in parcels, at such time and place, upon such terms
and after such notice thereof as may be required or permitted by law;
() subject to the provisions of Article 15, institute an action, suit
or proceeding in equity for the specific performance of any covenant, condition
or agreement contained herein, in the Note or in the Other Security Documents;
() subject to the provisions of Article 15, recover judgment on the
Note either before, during or after any proceedings for the enforcement of this
Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnitor or of any person, firm or other entity liable for the
payment of the Debt;
() subject to any applicable law, the license granted to Borrower under
Section 1.2 shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or servants
wholly therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the Property and
of such books, records and accounts to Lender upon demand, and thereupon Lender
may (A) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (B) complete any construction on the Property in such manner and form
as Lender deems
<PAGE>
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Property; (D) exercise all rights and powers of
Borrower with respect to the Property, whether in the name of Borrower or
otherwise, including, without limitation, the right to make, cancel, enforce or
modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents of the Property and every part thereof; (E) require Borrower
to pay monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Borrower; (F) require Borrower to
vacate and surrender possession of the Property to Lender or to such receiver
and, in default thereof, Borrower may be evicted by summary proceedings or
otherwise; and (G) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Lender shall deem appropriate
in its sole discretion after deducting therefrom all expenses (including
reasonable attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the Taxes, Other Charges, insurance and other
expenses in connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and employees;
() exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (A) the right to take possession of the Collateral
or any part thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the Collateral, and (B)
request Borrower at its expense to assemble the Collateral and make it available
to Lender at a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the Collateral
sent to Borrower in accordance with the provisions hereof at least five (5) days
prior to such action, shall constitute commercially reasonable notice to
Borrower;
() apply any sums then deposited in the Escrow Fund and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the Note; and all
other sums payable pursuant to the Note, this Security Instrument
and the Other Security Documents, including, without limitation,
advances made by Lender pursuant to the terms of this Security
Instrument;
<PAGE>
() surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit on the
Debt in such priority and proportion as Lender in its discretion shall deem
proper, and in connection therewith, Borrower hereby appoints Lender as agent
and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any Net
Proceeds Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or through
Borrower from making use of or withdrawing any sums from any lockbox or similar
account, if any;
() pursue such other remedies as Lender may have under applicable law.
() In the event of a sale, by foreclosure, power of sale, or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property unimpaired
and without loss of priority. Notwithstanding the provisions of this Section
11.1 to the contrary, if any Event of Default as described in Subsection 10.1
(h)(i) or (ii) shall occur, the entire unpaid Debt shall be automatically due
and payable, without any further notice, demand or other action by Lender.
() Lender may adjourn from time to time any sale by it to be made under
or by virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without further
notice or publication, may make such sale at the time and place to which the
same shall be so adjourned.
() Upon any sale made under or by virtue of this Section 11.1, whether
made under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire the
Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Debt the net sales price
after deducting therefrom the expenses of the sale and costs of the action and
any other sums which Lender is authorized to deduct under this Security
Instrument.
Section . Application of Proceeds. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
<PAGE>
Section . Right to Cure Defaults. Upon the occurrence of any Event of
Default, Lender may, but without any obligation to do so and without notice to
or demand on Borrower and without releasing Borrower from any obligation
hereunder, cure the same in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Lender is authorized to enter upon the
Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law), with interest as
provided in this Section 11.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or in appearing in, defending, or
bringing any such action or proceeding shall bear interest at the Default Rate
(as defined in the Note), for the period after notice from Lender that such cost
or expense was incurred to the date of payment to Lender. All such costs and
expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the Other Security Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section . Actions and Proceedings. After the occurrence and during the
continuance of an Event of Default, Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its discretion, decides should be brought to protect its interest in the
Property.
Section . Recovery of Sums Required To Be Paid. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
Section . Examination of Books and Records. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during reasonable business hours at any office of Borrower, its affiliates or
any Guarantor or Indemnitor where the books and records are located.
<PAGE>
Section . Other Rights, Etc. () The failure of Lender to
insist upon strict performance of any term hereof shall not be deemed to be a
waiver of any term of this Security Instrument. Borrower shall not be relieved
of Borrower's obligations hereunder by reason of (i) the failure of Lender to
comply with any request of Borrower, any Guarantor or any Indemnitor to take any
action to foreclose this Security Instrument or otherwise enforce any of the
provisions hereof or of the Note or the Other Security Documents, (ii) the
release, regardless of consideration, of the whole or any part of the Property,
or of any person liable for the Debt or any portion thereof, or (iii) any
agreement or stipulation by Lender extending the time of payment or otherwise
modifying or supplementing the terms of the Note, this Security Instrument or
the Other Security Documents.
() It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property or
collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other security
held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Security Instrument. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
Section . Right to Release Any Portion of the Property. Lender, may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section . Violation of Laws. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
<PAGE>
Section . Right of Entry. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less than five (5) Business Days' notice (except in the case of
emergencies when no notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section . Environmental Representations and Warranties.
Borrower represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger to human health or the environment.
"Environmental Law" includes, but is not limited to, the following statutes, as
amended, any successor thereto, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations and the
like addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community
Right-to-Know Act; the Hazardous
<PAGE>
Substances Transportation Act; the Resource Conservation and Recovery Act
(including, but not limited to Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act.
"Environmental Law" also includes, but is not limited to, any present, and for
the purposes of Sections 12.2, 12.3 and 13.4 only, future, federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law: conditioning transfer of property upon a negative declaration or
other approval of a governmental authority of the environmental condition of the
property; requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of the Property to any governmental
authority or other person or entity, whether or not in connection with transfer
of title to or interest in property. "Hazardous Substances" include but are not
limited to any and all substances (whether solid, liquid or gas) (i) defined,
listed, or otherwise classified as pollutants, hazardous wastes, hazardous
substances, hazardous materials, extremely hazardous wastes, or words of similar
meaning or regulatory effect under any present, or for the purposes of Sections
12.2. 12.3 and 13.4 only, future, Environmental Laws or (ii) that may have a
negative impact on human health or the environment, including, but not limited
to petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives. "Release" of any Hazardous Substance includes, but is not limited to
any release, deposit, discharge, emission, leaking, spilling, seeping,
migrating, injecting, pumping, pouring, emptying, escaping, dumping or disposing
of Hazardous Substances. "Remediation" includes, but is not limited to any
response, remedial removal, or corrective action, any activity to cleanup,
detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance,
any actions to prevent, cure or mitigate any Release of any Hazardous Substance,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances.
Section . Environmental Covenants. Borrower covenants and agrees that
so long as the Borrower owns, manages, is in possession of, or otherwise
controls the operation of the Property: (a) all uses and operations on or of the
Property, whether by Borrower or any other person or entity, shall be in
compliance with all Environmental Laws and permits issued pursuant thereto; (b)
there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d)
Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for
<PAGE>
interviews; (f) Borrower shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of environmental conditions
in connection with the Property, pursuant to any reasonable written request of
Lender after Lender has reason to believe this Section 12.2 has been violated
(including, but not limited to sampling, testing and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas), and share with Lender the reports and other results thereof, and Lender
and other Indemnified Parties (defined in Section 13.1) shall be entitled to
rely on such reports and other results thereof; (g) Borrower shall, at its sole
cost and expense, comply with all reasonable written requests of Lender to (i)
reasonably effectuate Remediation of any condition (including, but not limited
to a Release of a Hazardous Substance) in, on, under or from the Property, (ii)
comply with any Environmental Law, (iii) comply with any directive from any
governmental authority, and (iv) take any other reasonable action necessary or
appropriate for protection of human health or the environment; (h) Borrower
shall not do or allow any tenant or other user of the Property to do any act
that materially increases the dangers to human health or the environment, poses
an unreasonable risk of harm to any person or entity (whether on or off the
Property), impairs or may impair the value of the Property, is contrary to any
requirement of any insurer, constitutes a public or private nuisance,
constitutes waste, or violates any covenant, condition, agreement or easement
applicable to the Property; and (i) Borrower shall immediately notify Lender in
writing promptly after it has become aware of (A) any presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or migrating
towards the Property which is required to be reported to a governmental
authority under any Environmental Law, (B) any actual Environmental Lien
affecting the Property, (C) any required Remediation of environmental conditions
relating to the Property, and (D) any written or oral notice or other
communication of which Borrower becomes aware from any source whatsoever
(including, but not limited to a governmental entity) relating in any way to
Hazardous Substances or Remediation thereof, possible liability of any person or
entity pursuant to any Environmental Law, other environmental conditions in
connection with the Property, or any actual or threatened administrative or
judicial proceedings in connection with anything referred to in this Article 12.
Section . Lender's Rights. Lender, its environmental consultant, and
any other person or entity designated by Lender, including, but not limited to
any receiver and any representative of a governmental entity, shall have the
right, but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Substance or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to Borrower, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, but not limited to conducting any environmental assessment
or audit of the Property or portions thereof to confirm Borrower's compliance
with the provisions of this Article 12, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Such audit shall
be performed in a manner so as to minimize interference with the conduct of
business at the Property. If such audit discloses that a violation of or a
liability under any Environmental Law exists or if such audit was required or
prescribed by law, regulation or governmental or quasi-governmental authority,
Borrower shall pay all costs and expenses incurred in connection with such
audit; otherwise, the costs and expenses of such audit shall, notwithstanding
anything to the contrary set forth in this Section, be paid by Lender.
<PAGE>
Article - INDEMNIFICATION
Section . General Indemnification. Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, or punitive damages, of whatever kind or nature (including, but not
limited to attorneys' fees and other costs of defense) (the "Losses") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws;
(j) the enforcement by any Indemnified Party of the provisions of this Article
13; (k) any and all claims and demands whatsoever which may be asserted against
Lender 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
Lease; (l) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the loan evidenced by the
<PAGE>
Note and secured by this Security Instrument; or (m) any misrepresentation made
by Borrower in this Security Instrument, the Other Security Documents, or any
documents or information provided pursuant to Section 18.1 hereof. Any amounts
payable to Lender by reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender and any person or entity
who is or will have been involved in the origination of this loan, any person or
entity who is or will have been involved in the servicing of this loan, any
person or entity in whose name the encumbrance created by this Security
Instrument is or will have been recorded, persons and entities who may hold or
acquire or will have held a full or partial interest in this loan (including,
but not limited to Investors or prospective Investors in the Securities, as well
as custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in this loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, members, partners, employees,
agents, servants, representatives, affiliates, subsidiaries, participants,
successors and assigns of any and all of the foregoing (including, but not
limited to any other person or entity who holds or acquires or will have held a
participation or other full or partial interest in this loan or the Property,
whether during the term of this loan or as a part of or following a foreclosure
of this loan and including, but not limited to any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
Section . Mortgage and/or Intangible Tax. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents or
in connection with a transfer of all or a portion of the Property pursuant to a
foreclosure, deed in lieu of foreclosure or otherwise.
Section . ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
attorneys' fees and costs incurred in the investigation, defense, and settlement
of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion) that
Lender may incur, directly or indirectly, as a result of a default under
Sections 4.2 or 5.9.
Section . Environmental Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), reasonable engineers' fees, reasonable
environmental consultants' fees, and costs of investigation (including, but not
limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
<PAGE>
imposed upon or incurred by or asserted against any Indemnified Parties, and
arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Borrower, any
person or entity affiliated with Borrower or tenant or other users of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any time located in, under, on or above the Property;
(d) any activity by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including, but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened violations of
any Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including, but not limited
to any failure by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property to comply with any order of any
governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section . Duty to Defend; Attorneys' Fees and Other Fees and Expenses.
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
<PAGE>
Article - WAIVERS
Section . Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section . Marshalling and Other Matters. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by Applicable Law.
Section . Waiver of Notice. To the extent permitted by Applicable Law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument
specifically and expressly provides for the giving of notice by Lender to
Borrower and except with respect to matters for which Lender is required by
Applicable Law to give notice, and Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Security Instrument does not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section . Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section . Sole Discretion of Lender. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
<PAGE>
Section . Survival. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 12 shall in no way be impaired by: any satisfaction or other
termination of this Security Instrument, any assignment or other transfer of all
or any portion of this Security Instrument or Lender's interest in the Property
(but, in such case, shall benefit both Indemnified Parties and any assignee or
transferee), any exercise of Lender's rights and remedies pursuant hereto
including, but not limited to foreclosure or acceptance of a deed in lieu of
foreclosure, any exercise of any rights and remedies pursuant to the Note or any
of the Other Security Documents, any transfer of all or any portion of the
Property (whether by Borrower or by Lender, following foreclosure or acceptance
of a deed in lieu of foreclosure or at any other time), any amendment to this
Security Instrument, the Note or the Other Security Documents, and any act or
omission that might otherwise be construed as a release or discharge of Borrower
from the obligations pursuant hereto. All obligations and liabilities of
Borrower under Article 12 shall cease and terminate on the first (1st)
anniversary of the date of payment to Lender in cash of the entire Debt,
provided that contemporaneously with or subsequent to such payment, Borrower, at
its sole cost and expense, delivers to Lender an environmental audit of the
Property in form and substance, and prepared by a qualified environmental
consultant, reasonably satisfactory in all respects to Lender and indicating the
Property is in full compliance with all applicable Environmental Laws.
Section . Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article - EXCULPATION
Section . Exculpation. Notwithstanding anything to the contrary
contained in this Security Instrument or in any Other Security Document (but
subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note or this Security Instrument by any action or
proceeding to collect damages or wherein a money judgment or any deficiency
judgment or order or any judgment establishing any personal obligation or
liability shall be sought against Borrower or any principal director, officer,
employee, beneficiary, shareholder, partner, member, trustee, agent or affiliate
of Borrower or any person owning, directly or indirectly, any legal or
beneficial interest in Borrower, or any successors or assigns of any of the
foregoing (collectively, the "Exculpated Parties"). Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon this Security
Instrument, the Other Security Documents, and the interest in the Property, the
Rents and any other collateral given to Lender created by this Security
Instrument and the Other Security Documents; provided, however, subject to the
provisions of Sections 15.2, 15.3, 15.4 and 15.5, that any judgment in any
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower's interest in the Property, in the Rents and in any other collateral
given to Lender in connection with the Note. Lender, by accepting the Note and
this Security Instrument, agrees that it shall not, except as otherwise provided
below, sue for or demand any deficiency judgment against Borrower or any of the
Exculpated Parties in any action or proceeding, under or by reason of or under
or in connection with the Note, the Other Security Documents or this Security
Instrument.
<PAGE>
Section . Reservation of Certain Rights. The provisions of Section 15.1
shall not (a) constitute a waiver, release or impairment of the Obligations; (b)
impair the right of Lender to name Borrower as a party defendant in any action
or suit for judicial foreclosure and sale under this Security Instrument; (c)
affect the validity or enforceability of any indemnity, guaranty, master lease
or similar instrument made in connection with the Note, this Security
Instrument, or the Other Security Documents; (d) impair the ability of Lender to
obtain the appointment of a receiver; or (e) impair the enforcement of the
Assignment of Leases and Rents executed in connection herewith.
Section . Exceptions to Exculpation. Notwithstanding the
provisions of Article 15.1 to the contrary, Borrower and Indemnitor shall be
personally liable to Lender on a joint and several basis for the Losses Lender
incurs due to: (a) fraud or intentional misrepresentation by Borrower or any
other person or entity in connection with the execution and the delivery of the
Note, this Security Instrument or the Other Security Documents; (b) Borrower's
misapplication or misappropriation of Rents received by Borrower after the
occurrence and during the continuance of an Event of Default; (c) Borrower's
misapplication or misappropriation of tenant security deposits or Rents
collected in advance; (d) the misapplication or misappropriation of insurance
proceeds or condemnation awards after the occurrence and during the continuance
of an Event of Default; (e) any fees or commissions paid by Borrower after the
occurrence and during the continuance of an Event of Default to any principal,
affiliate or general partner of Borrower, Indemnitor or Guarantor in violation
of the terms of the Note, this Security Instrument or the Other Security
Documents; (f) gross negligence or criminal acts perpetrated by it resulting in
forfeiture, seizure or loss of any portion of the security; (g) any failure by
Borrower or Indemnitor to comply with the terms and provisions of Section 13.4
hereof or of the Environmental Indemnity; (h) any failure by Borrower or any
general partner or the SPE Member of Borrower to comply with the terms and
provisions of Section 4.3 hereof; or (i) any sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer of the Property or any part
thereof, within the meaning of Article 8 hereof, without the prior written
consent of Lender.
Section . Recourse. Notwithstanding the foregoing, the
agreement of Lender not to pursue recourse liability as set forth in Section
15.1 above SHALL BECOME NULL AND VOID and shall be of no further force and
effect in the event (i) Borrower fails to comply with the terms and conditions
of Section 4.3, 8.1, 8.2 or 8.3, (ii) the Property or any part thereof shall
become an asset in (A) a voluntary bankruptcy or insolvency proceeding, or (B)
an involuntary bankruptcy or insolvency proceeding commenced by any Person
(other than Lender) and Borrower fails to use its best efforts to obtain a
dismissal of such proceedings, or (iii) Borrower or any Guarantor or Indemnitor
fails to comply with the terms and provisions of Section 3.11 hereof within
thirty (30) days after written notice from Lender to Borrower (which notice
shall be a second notice given after the expiration of any notice given pursuant
to Section 10.1(e)); provided, however, so long as PREIT Associates, L.P., a
Delaware limited partnership, maintains that certain line of credit with First
Union National Bank, as agent, pursuant to that certain Revolving Credit Loan
Agreement with Corestates Bank, N.A. (predecessor-in-interest to First Union
National Bank), as agent, and First Trust Savings Bank, Fleet Bank, N.A. and PNC
Bank, as lenders, dated September 30, 1997 (or another credit arrangement
containing market standard financial covenants for net worth, leverage and
liquidity), the occurrence of any of the events referred to in subsections
(i)-(iii) above shall not create recourse liability against Borrower or any
Guarantor or Indemnitor.
<PAGE>
Section . Bankruptcy Claims. Nothing herein shall be deemed to be a
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
Article - NOTICES
Section . Notices. All notices or other written
communications hereunder shall be deemed to have been properly given (a) upon
delivery, if delivered in person or by facsimile transmission with receipt
acknowledged by the recipient thereof, (b) one (1) Business Day (defined below)
after having been deposited for overnight delivery with any reputable overnight
courier service, or (c) three (3) Business Days after having been deposited in
any post office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Borrower: PR Pembroke LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Facsimile No. (215) 546-0240
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
<PAGE>
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in the
State of New York.
Article - APPLICABLE LAW
Section . Choice of Law. THIS SECURITY INSTRUMENT SHALL BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE
THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section . Usury Laws. This Security Instrument and the Note are subject
to the express condition that at no time shall Borrower be obligated or required
to pay interest on the Debt at a rate which could subject the holder of the Note
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is permitted by applicable law to contract
or agree to pay. If by the terms of this Security
<PAGE>
Instrument or the Note, Borrower is at any time required or obligated to pay
interest on the Debt at a rate in excess of such maximum rate, the rate of
interest under the Security Instrument and the Note shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate of interest from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding.
Section . Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section . Inapplicable Provision. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
Article - SECONDARY MARKET
Section . Dissemination of Information. If Lender determines
at any time to sell, transfer or assign the Note, this Security Instrument and
the Other Security Documents, and any or all servicing rights with respect
thereto, or to grant participations therein (the "Participations") or issue
mortgage pass-through certificates or other securities (such sale and/or
issuance, the "Securitization") evidencing a beneficial interest in a rated or
unrated public offering or private placement (the "Securities"), Lender may
forward to each purchaser, transferee, assignee, servicer, participant,
investor, or their respective successors in such Participations and/or
Securities (collectively, the "Investor") or any Rating Agency rating such
Securities and each prospective Investor, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower,
any Guarantor, any Indemnitors and the Property (including, without limitation,
all financial statements), which shall have been furnished by Borrower, any
Guarantor or any Indemnitors, as Lender determines necessary or desirable.
Borrower, any Guarantor and any Indemnitor agree to cooperate with Lender in
connection with any transfer made or any Securities created pursuant to this
Section, including, without limitation, the delivery of an estoppel certificate
required in accordance with Subsection 7.4(c) hereof and such other documents as
may be reasonably requested by Lender and, upon Lender's reasonable request,
meeting with any Rating Agency for due diligence purposes. Borrower shall also
furnish and
<PAGE>
Borrower, any Guarantor and any Indemnitor consent to Lender furnishing to such
Investors or such prospective Investors or any Rating Agency any and all
information concerning the Property, the Leases, the financial condition of
Borrower, any Guarantor and any Indemnitor as may be requested by Lender, any
Investor or any prospective Investor or Rating Agency in connection with any
sale, transfer or Participation, provided, however, PREIT Associates, L.P. and
Pennsylvania Real Estate Investment Trust shall only be required under this
Section 18.1 to disclose information that is deemed to be "public" information.
Borrower shall not be responsible for Lender's fees and expenses incurred in
connection with the transactions contemplated by this Section 18.1. Lender shall
reimburse Borrower for the reasonable actual out-of-pocket third party costs
incurred by Borrower in excess of $1,500.00 in connection with the transactions
contemplated by this Section 18.1. Borrower shall deliver on the date hereof, at
Borrower's sole cost and expense, a nonconsolidation opinion, and within ten
(10) Business Days after demand of Lender, an update of same (which update
Borrower will not be required to provide more than once), each in form and
substance and delivered by counsel acceptable to Lender and the Rating Agency
rating or proposed to rate the Securities, as may be required by Lender and/or
such Rating Agency. Borrower's failure to deliver the opinions required hereby
shall constitute an Event of Default hereunder.
Article - COSTS
Section . Performance at Borrower's Expense. Borrower acknowledges and
confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, provided, however, no commitment fee shall be imposed in
connection with the substitution of collateral, (c) obtaining certain consents,
waivers and approvals with respect to the Property, or (d) the review of any
Lease or proposed Lease or the preparation or review of any subordination,
non-disturbance agreement (the occurrence of any of the above shall be called an
"Event"). Borrower further acknowledges and confirms that it shall be
responsible for the payment of all costs of reappraisal of the Property or any
part thereof, whether required by law, regulation, Lender or any governmental or
quasi-governmental authority. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any Event or otherwise. Wherever it is provided for herein that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, all legal fees and disbursements of Lender (whether of retained firms, the
reimbursement for the expenses of in-house staff or otherwise) and all costs and
expenses of Lender, if any.
Section . Attorney's Fees for Enforcement. (a) Borrower shall pay all
legal fees incurred by Lender in connection with (i) the preparation of the
Note, this Security Instrument and the Other Security Documents; and (ii) the
items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender on
demand any and all expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender in protecting its interest in the Property or the
Collateral or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property or the Collateral, whether or not
any legal proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by Lender
until such expenses are paid by Borrower.
<PAGE>
Article - DEFINITIONS
Section . General Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Security Instrument may be used interchangeably in singular
or plural form and the word "Borrower" shall mean "each Borrower and any
subsequent owner or owners of the Property or any part thereof or any interest
therein," the word "Lender" shall mean "Lender and any subsequent holder of the
Note," the word "Note" shall mean "the Note and any other evidence of
indebtedness secured by this Security Instrument," the word "person" shall
include an individual, corporation, limited liability company, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, the word "Property" shall include any portion of the Property and
any interest therein, and the phrases "attorneys' fees" and "counsel fees" shall
include any and all attorneys', paralegal and law clerk fees and disbursements,
including, but not limited to fees and disbursements at the pre-trial, trial and
appellate levels incurred or paid by Lender in protecting its interest in the
Property, the Leases and the Rents and enforcing its rights under this Security
Instrument.
Section . Headings, Etc. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section . No Oral Change. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower, or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section . Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section . Duplicate Originals; Counterparts. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Security Instrument may be executed in
several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Security
Instrument.
<PAGE>
Section . Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section . Subrogation. If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower's obligations hereunder, under the Note and the Other Security
Documents and the performance and discharge of the Other Obligations.
Section . Entire Agreement. The Note, this Security Instrument and the
Other Security Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Security Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Security Documents.
[Signatures Appear on the Next Page]
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower as of the date first above written.
BORROWER:
PR PEMBROKE LLC,
a Delaware limited liability company
By: PR Pembroke Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
--------------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this 13th day of April,
1999, by Jeffrey A. Linn, the Authorized Signatory of PR Pembroke Manager LLC,
manager of PR PEMBROKE LLC, a Delaware limited liability company, manager on
behalf of said company.
/s/ Illegible
- ----------------------------------
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being
<PAGE>
Exhibit 10.13
PROMISSORY NOTE
$10,700,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PR HIDDEN LAKES LLC, a Delaware limited liability company ("Borrower"), promises
to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation ("Lender"), at Lender's office located at 650 Dresher Road, P.O. Box
809, Horsham, Pennsylvania 19044-0809, Attn: Servicing - Accounting Manager, or
at such other place as Lender may designate to Borrower in writing from time to
time, the principal sum of TEN MILLION SEVEN HUNDRED THOUSAND AND 00/100 DOLLARS
($10,700,000.00), or so much thereof as is outstanding and unpaid, together with
interest thereon at the rate of 6.773% per annum ("Interest Rate"), in lawful
money of the United States of America, which, at the time of payment, shall be
legal tender in payment of all debts and dues, public and private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay principal
and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments of
principal and interest in the amount of $70,283.73 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note or the other Loan
Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a date
other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days
<PAGE>
from and including the date of this Note to and including the ninth day of such
month (or if the date of this Note is after the ninth day of the month, then the
next following month) (b) by a daily rate based on the Interest Rate calculated
for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall be
applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05, or as
required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days
prior written notice to Lender specifying a date ("Defeasance Date") which shall
be a Payment Date, on which the amount required to defease the Loan ("Defeasance
Deposit") is to be made and on which the Defeasance is to occur, as well as the
anticipated outstanding principal amount of this Note as of the Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the outstanding principal balance of this Note to but not including
the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments, then due under this Note,
the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the Defeasance Date.
(v) Borrower shall pay to Lender the required Defeasance
Deposit for the Defeasance, or at Borrower's option, Borrower shall deliver to
Lender U.S. Government Securities which provide payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date
(including the outstanding principal balance of this Note due on the Maturity
Date), and in amounts equal to the full amounts due on each Payment Date under
this Note.
(vi) Borrower shall execute and deliver one or more security
agreements in form and substance satisfactory to Lender (collectively, "Security
Agreement"), creating a first priority lien on, and security interest in, the
Defeasance Deposit and the U.S. Government Securities purchased with Defeasance
Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies, Borrower
also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification from
Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any costs and
expenses associated with the Release Instruments (as defined in Section 2.05(f)
hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a confirmation, in form
and substance satisfactory to Lender, by a "Big Five" independent certified
public accounting firm, that Defeasance Deposit is sufficient to pay all
Scheduled Defeasance Payments and other amounts required to be paid by Borrower
hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation, in form
and substance satisfactory to Lender, that all conditions to Defeasance have
been met from any applicable Rating Agency that has required as a condition to
Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with the
Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee.
<PAGE>
The Successor Borrower shall assume in writing the obligations under this Note,
the Security Agreement and the other Loan Documents, by agreements in form and
substance satisfactory to Lender, whereupon Borrower shall, pursuant to the
express terms of such agreement, be relieved of its obligations thereunder.
Borrower shall pay $10 to any such Successor Borrower as consideration for
assuming Borrower's obligations under the Note and the Security Agreement.
Notwithstanding anything in this Note or the Security Instrument to the
contrary, no other assumption fee shall be payable upon a transfer of this Note
in accordance with this Section 2.05(d), but Borrower shall pay all
out-of-pocket costs and expenses incurred by Lender, including Lender's
reasonable attorneys fees and expenses, incurred in connection therewith.
(e) Repayment Upon Default. If all or any part of the principal
amount of this Note is prepaid upon acceleration of this Note following the
occurrence of an Event of Default prior to the Optional Defeasance Date, then,
in addition to such principal payment, Borrower shall be required to make such
payments ("Yield Maintenance Payments") in an amount equal to the greater of (i)
one percent (1%), or (ii) the excess, if any, of (A) the aggregate respective
present values of all scheduled interest and principal payments payable on each
Payment Date in respect of this Note for the period from the date of such
prepayment upon acceleration to the Maturity Date, discounted monthly at a rate
equal to the Treasury Constant Maturity Yield Index (defined below) and based on
a 360-day year of twelve 30-day months over (B) the then current outstanding
principal amount of this Note. For purposes hereof, "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) ("FRB
Release") published during the second full week preceding the Prepayment Date
for instruments having a maturity coterminous with the remaining term of this
Note. In the event the FRB Release is no longer published, Lender shall select a
comparable publication to determine the Treasury Constant Maturity Yield Index.
If there is no Treasury Constant Maturity Yield Index for instruments having a
maturity coterminous with the remaining term of this Note, then 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
shall be used, 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). The Yield Maintenance Payments to be paid in connection with
any prepayment under this Section 2.05(e) shall be determined by Lender and
shall be conclusive and binding on Borrower (absent manifest error). For
purposes of this Section 2.05(e), the unpaid principal amount due on this Note
on the date of prepayment shall be determined after giving effect to any payment
of scheduled amortization made on such date.
(f) Release of the Mortgaged Property. No repayment, prepayment or
Defeasance of all or any portion of this Note shall cause, give rise to a right
to require, or otherwise result in, the release of the real or personal property
subject to the lien or mortgage created by the Security Instrument (referred to
in this Section 2.05(f) as "Mortgaged Property"), except as follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the
requirements of Section 2.05(b) have been satisfied, the Mortgaged Property
shall be released from the lien and mortgage created by the Security Instrument,
whereupon the U.S. Government Securities pledged pursuant to the Security
Agreement shall be the sole source of Borrower's collateral securing this Note.
Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the
Security Instrument shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged
Property contemplated in this Section 2.05(f), Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date, a release of the
Mortgaged Property (and related Loan Documents approved by Lender) for execution
by Lender which shall be in a form appropriate in the applicable state and
otherwise satisfactory to Lender in its reasonable discretion, along with all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Note: (a) if any
payment of principal and interest or any other payment required under this Note
is not received by Lender on or before the date such payment is due; or (b) if
any default should occur under any of the other Loan Documents which is not
fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
4.02 Late Charges. If any payment is not received by Lender on or
before the date on which such payment originally was due, then, in addition to
any default interest
<PAGE>
payments due hereunder, Borrower also shall pay to Lender a late charge in an
amount equal to five percent (5.0%) of the amount of such overdue payment to
defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of the
delinquent payment. Such late charge shall be immediately due and payable,
without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full on or
before the Maturity Date or the date on which the due date of the indebtedness
has been accelerated pursuant to the provisions hereof, the unpaid principal and
accrued interest and other amounts then due shall bear interest at a rate per
annum ("Default Interest Rate") equal to the lesser of (a) five percent (5.0%)
in excess of the Interest Rate or (b) the maximum rate of interest, if any,
which may be charged or collected from Borrower under applicable law. In
addition, Lender shall have the right, without acceleration of the indebtedness,
to collect interest at the Default Interest Rate on any payment due hereunder
(including without limitation late charges and fees for legal counsel) which is
not received by Lender on or before the date on which such payment originally
was due. Interest at the Default Interest Rate shall be immediately due and
payable from the due date specified herein and shall accrue until all Events of
Default have been fully cured or full payment is received, as applicable.
4.04 Interest on Judgments. Interest shall accrue on any judgment
obtained by Lender in connection with the enforcement or collection of this Note
from the date any such judgment becomes due until such judgment amount is paid
in full at a rate equal to the greater of (a) the Default Interest Rate or (b)
the legal rate applicable to judgments within such jurisdiction; provided,
however, that interest shall not accrue at a rate in excess of the maximum rate
of interest, if any, which may be charged or collected from Borrower under
applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of Lender in
this Note and in the other Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's sole discretion and as often as occasion therefor shall arise. If
Borrower's obligations under this Note or any of the other Loan Documents are
enforced by Lender through an attorney-at-law, or any payment due under this
Note or the other Loan Documents is collected by or through an attorney-at-law
or collection agency, Borrower agrees to pay all costs incurred by Lender in
connection therewith, including, but not limited to, reasonable fees and
disbursements of legal counsel (whether with respect to a retained firm or
Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
<PAGE>
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others who may
become liable for payment of all or any part of the indebtedness evidenced by
this Note, hereby waives
<PAGE>
presentment for payment, demand, protest, and notice of dishonor, protest,
nonpayment, demand, intent to accelerate, and acceleration. Borrower, for itself
and all others who may become liable for payment of all or any part of the
indebtedness evidenced by this Note, 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 party and property (real and personal), against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note, absent this paragraph,
may not otherwise qualify as a negotiable instrument under applicable law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
<PAGE>
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this Note
or under the other Loan Documents are to be in writing, addressed to the
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
Borrower: PR Hidden Lakes LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together with the
other Loan Documents and Lender's commitment letter to Borrower, contain the
entire agreements between Borrower and Lender relating to the subject matter
hereof and thereof, and supersede all prior discussions and agreements (oral or
written) relative hereto and thereto which are not contained herein or therein.
Borrower represents and warrants that it is not relying on any promises,
covenants, representations or agreements in connection with this Note or the
other Loan Documents, other than as expressly set forth herein or therein. In
the event of any conflict between the terms of the Loan Documents, the following
order of priority shall be used to resolve such conflict: The Note shall control
over the Security Instrument and the Security Instrument shall control over all
other Loan Documents. Time is of the essence with respect to all provisions of
this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party
<PAGE>
against whom enforcement thereof is sought and then only to the extent expressly
set forth in such writing. No person other than a duly authorized officer or
agent of Lender shall be deemed an agent of Lender nor have any authority to
waive, modify, supplement or terminate in any manner whatsoever any of the terms
of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms and
provisions of this Note and the other Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or the
other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this Note
nor any uncertainty or ambiguity herein shall be construed or resolved against
Lender by virtue of the fact that such document has originated with Lender as
drafter. Borrower acknowledges that it has reviewed this Note and has had the
opportunity to consult with counsel on same. This Note, therefore, shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto. All
personal pronouns used herein, whether used in the masculine, feminine or neuter
gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other words of similar
import refer to this Note as a whole and not to any particular section,
paragraph or other subdivision; "Section" refers to the entire section and not
to any particular subsection, paragraph of other subdivision. Reference to days
for performance shall mean calendar days unless Business Days are expressly
indicated.
8.07 Governing Law. This Note and the other Loan Documents shall be
interpreted, construed and enforced according to the laws of the state in which
the real property encumbered by the Security Instrument is located (without
giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its acceptance
of this Note, agree and consent to the exclusive jurisdiction and venue of any
state or federal court sitting in the county and state where the real property
encumbered by the Security Instrument
<PAGE>
is located with respect to any legal action, proceeding, or controversy between
them and hereby expressly waive any and all rights under applicable law or in
equity to object to the jurisdiction and venue of said courts. Borrower further
irrevocably consents to service of process by certified mail, return receipt
requested, to Borrower at the address for Borrower last provided to Lender in
accordance with the notice provision of this Note and agrees that such service
shall be effective ten (10) days after mailing. Nothing herein shall, however,
preclude or prevent Lender from bringing any one or more actions against
Borrower in any other jurisdiction as may be necessary to enforce or realize
upon the Security or other collateral provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PR HIDDEN LAKES LLC,
a Delaware limited liability company
By: PR Hidden Lakes Manager LLC,
its manager
By: /s/ Jeffrey A. Linn
------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:_________________________________
Name:_______________________________
Title:______________________________
Date:_______________________________
<PAGE>
Exhibit 10.14
================================================================================
PR HIDDEN LAKES LLC, as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 2480 Fox Hill Drive
Miamisburg, OH
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Single Purpose Entity. 17
Section 4.4 Restoration After Casualty/Condemnation. 19
Article 5 - REPRESENTATIONS AND WARRANTIES 24
Section 5.1 Warranty of Title. 24
Section 5.2 Authority. 24
Section 5.3 Legal Status and Authority. 24
Section 5.4 Validity of Documents. 24
Section 5.5 Litigation. 25
<PAGE>
Section 5.6 Status of Property. 25
Section 5.7 No Foreign Person. 26
Section 5.8 Separate Tax Lot. 26
Section 5.9 ERISA Compliance. 26
Section 5.10 Leases. 27
Section 5.11 Financial Condition. 27
Section 5.12 Business Purposes. 28
Section 5.13 Taxes. 28
Section 5.14 Mailing Address. 28
Section 5.15 No Change in Facts or Circumstances. 28
Section 5.16 Disclosure. 28
Section 5.17 Third Party Representations. 28
Section 5.18 Illegal Activity. 28
Section 5.19 FUNB Line of Credit. 28
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 29
Section 6.1 Relationship of Borrower and Lender. 29
Section 6.2 Servicing of the Loan. 29
Article 7 - FURTHER ASSURANCES 29
Section 7.1 Recording of Security Instrument, Etc. 29
Section 7.2 Further Acts, Etc. 29
Section 7.3 Changes in Tax, Debt Credit and Documentary
Stamp Laws. 30
Section 7.4 Estoppel Certificates. 30
Section 7.5 Flood Insurance. 31
Section 7.6 Splitting of Security Instrument. 31
Section 7.7 Replacement Documents. 31
Section 7.8 Amended Financing Statements. 32
Article 8 - DUE ON SALE/ENCUMBRANCE 32
Section 8.1 No Sale/Encumbrance. 32
Section 8.2 Sale/Encumbrance Defined. 32
Section 8.3 Lender's Rights. 33
Section 8.4 Right To Substitute Property 34
Article 9 - PREPAYMENT 34
Section 9.1 Prepayment Only in Accordance with Note. 34
Article 10 - DEFAULT 34
Section 10.1 Events of Default. 34
Article 11 - RIGHTS AND REMEDIES 35
Section 11.1 Remedies. 36
Section 11.2 Application of Proceeds. 38
<PAGE>
Section 11.3 Right to Cure Defaults. 39
Section 11.4 Actions and Proceedings. 39
Section 11.5 Recovery of Sums Required To Be Paid. 39
Section 11.6 Examination of Books and Records. 39
Section 11.7 Other Rights, Etc. 40
Section 11.8 Right to Release Any Portion of the Property. 40
Section 11.9 Violation of Laws. 40
Section 11.10 Right of Entry. 41
Article 12 - ENVIRONMENTAL HAZARDS 41
Section 12.1 Environmental Representations and Warranties. 41
Section 12.2 Environmental Covenants. 42
Section 12.3 Lender's Rights. 43
Article 13 - INDEMNIFICATION 44
Section 13.1 General Indemnification. 44
Section 13.2 Mortgage and/or Intangible Tax. 45
Section 13.3 ERISA Indemnification. 45
Section 13.4 Environmental Indemnification. 45
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. 46
Article 14 - WAIVERS 47
Section 14.1 Waiver of Counterclaim. 47
Section 14.2 Marshalling and Other Matters. 47
Section 14.3 Waiver of Notice. 47
Section 14.4 Waiver of Statute of Limitations. 47
Section 14.5 Sole Discretion of Lender. 47
Section 14.6 Survival. 47
Section 14.7 Waiver of Trial By Jury. 48
Article 15 - EXCULPATION 48
Section 15.1 Exculpation. 48
Section 15.2 Reservation of Certain Rights. 49
Section 15.3 Exceptions to Exculpation. 49
Section 15.4 Recourse. 49
Section 15.5 Bankruptcy Claims. 50
Article 16 - NOTICES 50
Section 16.1 Notices. 50
Article 17 - APPLICABLE LAW 51
Section 17.1 Choice of Law. 51
Section 17.2 Usury Laws. 51
Section 17.3 Provisions Subject to Applicable Law. 52
<PAGE>
Section 17.4 Inapplicable Provision. 52
Article 18 - SECONDARY MARKET 52
Section 18.1 Dissemination of Information. 52
Article 19 - COSTS 53
Section 19.1 Performance at Borrower's Expense. 53
Section 19.2 Attorney's Fees for Enforcement. 53
Article 20 - DEFINITIONS 54
Section 20.1 General Definitions. 54
Section 20.2 Headings, Etc. 54
Article 21 - MISCELLANEOUS PROVISIONS 54
Section 21.1 No Oral Change. 54
Section 21.2 Liability. 54
Section 21.3 Duplicate Originals; Counterparts. 54
Section 21.4 Number and Gender. 55
Section 21.5 Subrogation. 55
Section 21.6 Entire Agreement. 55
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
o ADA: Subsection 3.10(a);
o Applicable Law: Subsection 3.10(a);
o Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
o Bankruptcy Code: Subsection 1.1(f);
o Borrower: Preamble;
o Business Day: Section 16.1;
o Casualty Consultant: Subsection 4.4(b)(iii);
o Casualty Retainage: Subsection 4.4(b)(iii);
o Collateral: Section 1.3;
o Debt: Section 2.1;
o Default Rate: Section 10.3;
o Environmental Indemnity: Subsection 10.1(c);
o Environmental Law: Section 12.1;
o Environmental Liens: Section 12.2;
o Environmental Report: Section 12.1;
o ERISA: Subsection 4.2(a);
o Escrow Fund: Section 3.5;
o Event: Section 19.1;
o Event of Default: Section 10.1;
o Exculpated Parties: Section 15.1;
o Force Majeure: Subsection 4.4(b);
o Guarantor: Section 5.5;
o Hazardous Substances: Section 12.1;
o Improvements: Subsection 1.1(c);
o Indemnified Parties: Section 13.1;
o Indemnitor: Subsection 10.1(c);
o Independent Director: Subsection 4.3(c);
o Insurance Premiums: Subsection 3.3(b);
o Investor: Section 18.1;
o Land: Subsection 1.1(a);
o Lease Guaranty: Subsection 3.7(a);
o Leases: Subsection 1.1(f);
o Lender: Preamble;
o Loan Application: Section 5.15;
o Losses: Section 13.1;
o Net Proceeds: Subsection 4.4(b);
<PAGE>
o Net Proceeds Deficiency: Subsection 4.4(b)(v);
o Note: Recitals;
o Obligations: Section 2.3;
o Other Charges: Subsection 3.4(a);
o Other Obligations: Section 2.2;
o Other Security Documents: Section 3.2;
o Participations: 18.1;
o Permitted Exceptions: Section 5.1;
o Person: Section 20.1;
o Personal Property: Subsection 1.1(e);
o Policies/Policy: Subsection 3.3(b), 3.3(b);
o Property: Section 1.1;
o Qualified Insurer: Subsection 3.3(b);
o Rating Agency: Subsection 3.3(b);
o Registrar: Section 18.2;
o Release: Section 12.1;
o Remediation: Section 12.1;
o Rents: Subsection 1.1(f);
o Restoration: Subsection 3.3(d);
o Securities: Section 18.1;
bd Securitization: Section 18.1;
o Security Instrument: Preamble;
o Servicer: Section 6.2;
o SPE Member: Subsection 4.3(b);
o Taxes: Subsection 3.4(a); and
o Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security Instrument") is
made as of the 13th day of April, 1999, by PR HIDDEN LAKES LLC, a Delaware
limited liability company, having its principal place of business at The
Bellevue, Suite 300, 200 South Broad Street, Philadelphia, Pennsylvania 19102,
as mortgagor ("Borrower"), to GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation, having an address at 650 Dresher Road, Horsham, Pennsylvania
19044-8015, as mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given to Lender
is indebted to Lender in the principal sum of $10,700,000 in lawful money of the
United States of America (the note together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.
Borrower desires to secure the payment of the Debt (as defined in
Article 2) and the performance of all of its obligations under the Note and the
Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section. Property Mortgaged. Borrower does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Lender and to its successors and assigns with power of sale in accordance with
the terms and conditions hereof, for the use and benefit of Lender, and (ii)
grant a security interest to Lender and to its successors and assigns with power
of sale, in accordance with the terms and conditions hereof, for the use and
benefit of Lender, in, the following property, rights, interests and estates now
owned, or hereafter acquired by Borrower (collectively, the "Property"):
() Land. The real property described in Exhibit A attached hereto and
made a part hereof (the "Land");
() Additional Land. All additional lands, estates and development
rights hereafter acquired by Borrower for use in connection with the Land and
the development of the Land that may, from time to time, by supplemental
mortgage or otherwise be expressly made subject to the lien of this Security
Instrument;
() Improvements. The buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on the Land (the "Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights, strips and
gores of land, streets, ways, alleys, passages, sewer rights, water, water
courses, water rights and powers, air rights and development rights, and all
estates, rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
now or hereafter belonging, relating or pertaining to the Land and the
Improvements and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or proposed, in
front of or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment, fixtures
(including, but not limited to all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Borrower, or in which Borrower has or shall have
an interest, now or hereafter located upon the Land or the Improvements, or
appurtenant thereto, and used in connection with the present or future operation
and occupancy of the Land and the Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located upon the Land
and the Improvements, or appurtenant thereto, or used in connection with the
present or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or states where any of the Property is located (the
"Uniform Commercial Code"), superior in lien to the lien of this Security
Instrument and all proceeds and products of the above;
() Leases and Rents. All leases and other agreements affecting the use,
enjoyment or occupancy of all or any part of the Land or the Improvements
heretofore or hereafter entered into whether before or after the filing by or
against Borrower of any petition for relief under 11 U.S.C. ss. 101 et seq. (the
"Bankruptcy Code"), as the same may be amended from time to time (the "Leases")
and all right, title and interest of Borrower, its successors and assigns
therein and thereunder, including, without limitation, all guarantees, letters
of credit and any other credit support given by any guarantor in connection
therewith, cash or securities deposited under the Leases to secure the
performance by the lessees of their obligations thereunder and all rents,
additional rents, revenues, issues and profits (including all oil and gas or
other mineral royalties and bonuses) from the Land and the Improvements whether
paid or accruing before or after the filing by or against Borrower of any
petition for relief under the Bankruptcy Code (the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;
<PAGE>
() Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Property, whether from the exercise of the right of eminent domain (including,
but not limited to any transfer made in lieu of or in anticipation of the
exercise of the right), or for a change of grade, or for any other injury to or
decrease in the value of the Property;
() Insurance Proceeds. All proceeds of and any unearned premiums on any
insurance policies covering the Property, including, without limitation, the
right to receive and apply the proceeds of any insurance judgments, or
settlements made in lieu thereof, for damage to the Property;
() Tax Certiorari. All refunds, rebates or credits in connection with a
reduction in real estate taxes and assessments charged against the Property as a
result of tax certiorari or any applications or proceedings for reduction;
() Rights. The right, in the name and on behalf of Borrower, to
commence any action or proceeding to protect the interest of Lender in the
Property and while an Event of Default (defined in Section 10.1) remains
uncured, to appear in and defend any action or proceeding brought with respect
to the Property;
() Agreements. All agreements, contracts, certificates, instruments,
franchises, permits, licenses, plans, specifications and other documents, now or
hereafter entered into, and all rights therein and thereto, respecting or
pertaining to the use, occupation, construction, management or operation of the
Land and any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right, title and
interest of Borrower therein and thereunder, including, without limitation, the
right, while an Event of Default remains uncured, to receive and collect any
sums payable to Borrower thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims, deposits,
trade names, trademarks, servicemarks, logos, copyrights, goodwill, books and
records and all other general intangibles specific to or used in connection with
the operation of the Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, proceeds of
insurance and condemnation awards, into cash or liquidation claims;
() Other Rights. Any and all other rights of Borrower in and to the
items set forth in Subsections (a) through (m) above.
Section. Assignment of Leases and Rents. Borrower hereby absolutely
and
<PAGE>
unconditionally assigns to Lender Borrower's right, title and interest in
and to all current and future Leases and Rents; it being intended by Borrower
that this assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Nevertheless, subject to the terms of
this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable license
to collect and receive the Rents. Borrower shall hold the Rents, or a portion
thereof, sufficient to discharge all current sums due on the Debt, for use in
the payment of such sums.
Section. Security Agreement. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code, the "Collateral").
Section. Pledge of Monies Held. Borrower hereby pledges to Lender, and
grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, any sums deposited in the Escrow
Fund (defined in Section 3.5) and the Net Proceeds (defined in Section 4.4), as
additional security for the Obligations until expended or applied as provided in
this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto the
Lender and its successors and assigns, with power of sale in accordance with the
terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section. Debt. This Security Instrument and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Lender may determine in its sole
discretion (the "Debt"):
<PAGE>
() the payment of the indebtedness evidenced by the Note in lawful
money of the United States of America;
() the payment of interest, default interest, late charges and other
sums, as provided in the Note, this Security Instrument or the Other Security
Documents (defined in Section 3.2); () the payment of any prepayment
consideration, defeasance payment, exit fee or similar fees provided in the
Note;
() the payment of all other monies agreed or provided to be paid by
Borrower in the Note, this Security Instrument or the Other Security Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the security
interest created hereby; and
() the payment of all sums advanced and costs and expenses incurred by
Lender in connection with the Debt or any part thereof, any renewal, extension,
modification, consolidation, change, substitution, replacement, restatement or
increase of the Debt or any part thereof, or the acquisition or perfection of
the security therefor, whether made or incurred at the request of Borrower or
Lender.
Section. Other Obligations. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower contained
herein;
() the performance of each obligation of Borrower contained in the Note
in addition to the payment of the Debt and of Borrower and of any Guarantor
(defined in Section 5.5) contained in the Other Security Documents; and
() the performance of each obligation of Borrower and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part of the
Note, this Security Instrument or the Other Security Documents.
Section. Debt and Other Obligations. Borrower's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
Section. Payments. Unless payments are made in the required amount in
immediately available funds at the place where the Note is payable, remittances
in payment of all or any part of the Debt shall not, regardless of any receipt
or credit issued therefor,
<PAGE>
constitute payment until the required amount is actually received by Lender in
funds immediately available at the place where the Note is payable (or any other
place as Lender, in Lender's sole discretion, may have established by delivery
of written notice thereof to Borrower) and shall be made and accepted subject to
the condition that any check or draft may be handled for collection in
accordance with the practice of the collecting bank or banks. Acceptance by
Lender of any payment in an amount less than the amount then due shall be deemed
an acceptance on account only, and the failure to pay the entire amount then due
shall be and continue to be an Event of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section. Payment of Debt. Borrower will pay the Debt at the time and in
the manner provided in the Note and in this Security Instrument.
Section. Incorporation by Reference. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note or the other Obligations (the "Other Security
Documents"), are hereby made a part of this Security Instrument to the same
extent and with the same force as if fully set forth herein.
Section. Insurance.
() Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
() Property Insurance. Insurance with respect to the Improvements and
building equipment insuring against any peril included within the classification
"All Risks of Physical Loss" in amounts at all times sufficient to prevent
Lender from becoming a co-insurer within the terms of the applicable policies
and under applicable law, but in any event such insurance shall be maintained in
an amount equal to the full insurable value of the Improvements and building
equipment, the term "full insurable value" to mean the actual replacement cost
of the Improvements and building equipment (without taking into account any
depreciation, and exclusive of excavations, footings and foundations,
landscaping and paving) determined annually by an insurer, a recognized
independent insurance broker or an independent appraiser selected and paid by
Borrower and in no event less than the coverage required pursuant to the terms
of any Lease. Absent such annual adjustment, each policy shall contain inflation
guard coverage insuring that the policy limit will be increased over time to
reflect the effect of inflation. Borrower shall also maintain insurance against
loss or damage to such furniture, furnishings, fixtures, equipment and other
items (whether personalty or fixtures) included in the Property and owned by
<PAGE>
Borrower from time to time, to the extent applicable, in the amount of the cost
of replacing the same, in each case, with inflation guard coverage to reflect
the effect of inflation, or annual valuation. Each policy or policies shall
contain a replacement cost endorsement and either an agreed amount endorsement
(to avoid the operation of any co-insurance provisions) or a waiver of any
co-insurance provisions, all subject to Lender's approval. The maximum
deductible shall be $10,000.00;
() Liability Insurance. Comprehensive general liability insurance,
including personal injury, bodily injury, death and property damage liability,
insurance against any and all claims, including all legal liability to the
extent insurable and imposed upon Lender and all court costs and attorneys' fees
and expenses, arising out of or connected with the possession, use, leasing,
operation, maintenance or condition of the Property in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to the Property but
in no event for a combined single limit of less than $5,000,000. During any
construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers' compensation
insurance with respect to any work on or about the Property covering all persons
subject to the workers' compensation laws of the state in which the Property is
located;
() Business Interruption. Business interruption and/or loss of "rental
income" insurance in an amount sufficient to avoid any co-insurance penalty and
to provide proceeds which will cover a period of not less than one (1) year from
the date of casualty or loss with a six month extended period of indemnity, the
term "rental income" to mean the sum of (A) the total then ascertainable Rents
payable under the Leases and (B) the total ascertainable amount of all other
amounts to be received by Borrower from third parties which are the legal
obligation of the tenants, reduced to the extent such amounts would not be
received because of operating expenses not incurred during a period of
non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.
() Boiler and Machinery Insurance. Broad form boiler and machinery
insurance (without exclusion for explosion) covering all boilers or other
pressure vessels, machinery, and equipment located in, on or about the Property
and insurance against loss of occupancy or use arising from any breakdown in
such amount per accident equal to the replacement value of the improvements
housing the machinery or $2,000,000 or such other amount reasonably determined
by Lender. If one or more large HVAC units is in operation
<PAGE>
at the Property, "System Breakdowns" coverage shall be required, as determined
by Lender. Minimum liability coverage per accident must equal the value of such
unit(s);
() Flood Insurance. If required by Subsection 5.6(a) hereof, flood
insurance in an amount at least equal to the lesser of (A) the minimum amount
required, under the terms of coverage, to compensate for any damage or loss on a
replacement basis (or the unpaid balance of the indebtedness secured hereby if
replacement cost coverage is not available for the type of building insured); or
(B) the maximum insurance available under the appropriate National Flood
Insurance Administration program. The deductible may not exceed $25,000.
() During the period of any construction, renovation or alteration of
the Improvements, the cost of which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Lender's request, a completed value, "All
Risk" Builder's Risk form, or "Course of Construction" insurance policy in
non-reporting form for any Improvements under construction, renovation or
alteration in an amount approved by Lender may be required. During the period of
any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect to the Property
or on any replacements or substitutions thereof or additions thereto as may from
time to time be required by Lender against other insurable hazards or casualties
which at the time are commonly insured against in the case of property similarly
situated, including, without limitation, sinkhole, mine subsidence, earthquake
and environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
() All insurance provided for in Subsection 3.3(a) hereof shall be
obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25 million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Lender (a "Rating Agency"), (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall
name Lender as an additional named insured and the Policy referred to in
Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all proceeds
be payable to Lender as set forth in Section 4.4 hereof. The Policies referred
to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omission
of Lender. All Policies described in Subsection 3.3(a) above shall contain (i) a
provision that such Policies shall not
<PAGE>
be canceled or terminated, nor shall they expire, without at least thirty (30)
days' prior written notice to Lender in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any mortgage, loss payees, additional insureds and named insureds
(other than Borrower). In the event that the Property or the Improvements
constitutes a legal non-conforming use under applicable building, zoning or land
use laws or ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with
a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. Certificates of insurance with respect to all renewal
and replacement Policies shall be delivered to Lender not less than thirty (30)
days prior to the expiration date of any of the Policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums (the "Insurance Premiums"). Originals or certificates of
such replacement Policies shall be delivered to Lender promptly after Borrower's
receipt thereof but in any case within thirty (30) days after the effective date
thereof. If Borrower fails to maintain and deliver to Lender copies of the
Policies or certificates of insurance required by this Security Instrument, upon
ten (10) days' prior notice to Borrower, Lender may procure such insurance at
Borrower's sole cost and expense.
() Borrower shall comply with all insurance requirements and shall not
bring or keep or permit to be brought or kept any article upon any of the
Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or in part,
by fire or other casualty, Borrower shall give prompt notice of such damage to
Lender and provided that Borrower shall have received the Net Proceeds, Borrower
shall promptly commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible to the condition the
Property was in immediately prior to such fire or other casualty, with such
alterations as may be approved by Lender (the "Restoration") and otherwise in
accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may be effected
under a blanket policy or policies covering the Property and other properties
and assets not constituting a part of the security hereunder; provided that any
such blanket policy shall specify, except in the case of public liability
insurance, the portion of the total coverage of such policy that is allocated to
the Property, and any sublimit in such blanket policy applicable to the
Property, and shall in any case comply in all other respects with the
requirements of this Section 3.3.
() The insurance coverage required under Subsection 3.3(a)(ii) may be
satisfied by a layering of Commercial General Liability, Umbrella and Excess
Liability Policies, but in no event will the Commercial General Liability policy
be written for an
<PAGE>
amount less than $1,000,000 per occurrences and $2,000,000 aggregate for bodily
injury and property damage liability.
() The delivery to Lender of the insurance policies or the certificates
of insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance as relating to the Property by Borrower to Lender
as further security for the indebtedness secured hereby. In the event of
foreclosure of this Security Instrument, 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 Borrower 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 Lender or other transferee in the event of
such other transfer of title. Approval of any insurance by Lender shall not be a
representation of the solvency of any insurer or the sufficiency of any amount
of insurance.
() Lender 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 Lender has caused the insurance to be placed with the insurer after
failure of Borrower to furnish such insurance. Borrower shall not obtain
insurance for the Property in addition to that required by Lender without the
prior written consent of Lender, which consent will not be unreasonably withheld
provided that (i) Lender is named insured on such insurance, (ii) Lender
receives complete copies of all policies evidencing such insurance, and (iii)
such insurance complies with all of the applicable requirements set forth
herein.
Section. Payment of Taxes, Etc. () Subject to the terms and conditions
of Section 3.5 hereof, Borrower shall pay by their due date all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including, without limitation, vault charges and license fees for the
use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have been deposited with Lender in accordance with the terms of
this Security Instrument, Borrower shall furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall become
delinquent.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any of the Taxes, provided that (i) no Event of Default has
occurred and is continuing under the
<PAGE>
Note, this Security Instrument or any of the Other Security Documents, (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property, (iii) such proceeding
shall suspend the collection of the Taxes from Borrower and from the Property or
Borrower shall have paid all of the Taxes under protest, (iv) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
default thereunder, (v) neither the Property nor any part thereof or interest
therein will be in danger of being sold, forfeited, terminated, canceled or
lost, (vi) Borrower shall have set aside adequate reserves for the payment of
the Taxes, together with all interest and penalties thereon, unless Borrower has
paid all of the Taxes under protest, and (vii) Borrower shall have furnished the
security as may be required in the proceeding, or as may be reasonably requested
by Lender to insure the payment of any contested Taxes, together with all
interest and penalties thereon, taking into consideration the amount in the
Escrow Fund available for payment of Taxes.
Section. Escrow Fund. At the option of Lender, Lender may require
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of Insurance Premiums and Taxes pursuant to Sections
3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance Premiums shall be
made by Borrower to Lender in amounts determined by Lender in its discretion on
the date hereof to be held by Lender in escrow. Additionally, Borrower shall pay
to Lender on the tenth (10th) day of each calendar month (a) one-twelfth of an
amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, upon the due dates established by the appropriate taxing
authority during the next ensuing twelve (12) months and (b) one-twelfth of an
amount which would be sufficient to pay the Insurance Premiums due for the
renewal of the coverage afforded by the Policies upon the expiration thereof
(the initial deposits together with the amounts in (a) and (b) above shall be
called the "Escrow Fund"). Borrower agrees to notify Lender immediately of any
changes to the amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has obtained knowledge and authorizes Lender or
its agent to obtain the bills for Taxes and Other Charges directly from the
appropriate tax authority. Monthly payments to the Escrow Fund as required
hereunder and the monthly payments of interest or principal or both, payable
pursuant to the Note, shall be added together and shall be paid as an aggregate
sum by Borrower to Lender. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, Lender shall be obligated to pay the Taxes
and Insurance Premiums as they become due on their respective due dates on
behalf of Borrower by applying the Escrow Fund to the payments of such Taxes and
Insurance Premiums required to be made by Borrower pursuant to Sections 3.3 and
3.4 hereof. If the amount of the Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Escrow Fund. In allocating such
excess, Lender may deal with the person shown on the records of Lender to be the
owner of the Property. If the Escrow Fund is not sufficient to pay the items set
forth in (a) and (b) above, Borrower shall promptly pay to Lender, upon demand,
an amount which Lender shall reasonably estimate as sufficient to
<PAGE>
make up the deficiency. The Escrow Fund shall not constitute a trust fund and
may be commingled with other monies held by Lender.
Section. Condemnation. Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, Borrower shall deliver
to Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Borrower shall not make any
agreement in lieu of condemnation of the Property or any portion thereof without
the prior written consent of Lender in each instance, which consent shall not be
unreasonably withheld or delayed in the case of a taking of an insubstantial
portion of the Property. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the award by the condemning authority but shall
be entitled to receive out of the award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by the
power of eminent domain, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the
provisions of in accordance with Section 4.4 of this Security Instrument. If the
Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of the award or payment, Lender shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive the award or payment, or a portion thereof sufficient to pay the Debt.
Section. Leases and Rents. () Except as otherwise consented to by
Lender, all Leases shall be written on a standard form of lease which shall have
been approved by Lender. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior written consent of Lender,
which consent shall not be unreasonably withheld or delayed. All proposed leases
shall be subject to the prior approval of Lender except that all proposed leases
which (i) are on the same form of lease which has been approved by Lender, (ii)
are the result of an arms-length transaction, (iii) which provide for rental
rates comparable to existing market rates, (iv) where space to be leased does
not exceed more than ten percent (10%) of total rentable space of the Property,
(v) where the proposed tenant is an independent third party not affiliated with
the Borrower, and (vi) do not contain any terms which would materially affect
Lender's rights under this Security Instrument, the Note or the Other Security
Documents, shall not be subject to the prior approval of Lender. Notwithstanding
subsections (ii), (iii) and (v) above, Borrower may lease units to employees
<PAGE>
of Borrower, but the aggregate number of units leased to such employees shall
not exceed 1.5% of the total number of units at the Property. Borrower (i) shall
observe and perform all the obligations imposed upon the lessor under the Leases
if the failure to perform or observe the same would materially and adversely
affect the value of the Property taken as a whole and shall not do or permit to
be done anything to impair the value of the Leases as security for the Debt;
(ii) shall promptly send copies to Lender of all notices of default which
Borrower shall send or receive thereunder; (iii) shall enforce in a commercially
reasonable manner all of the terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or performed;
provided, however, with respect to multifamily residential property, a
residential Lease may be terminated in the event of a default by the tenant
thereunder; (iv) shall not collect any of the Rents more than one (1) month in
advance (provided that a security deposit shall not be deemed rent collected in
advance); (v) shall not execute any other assignment of the lessor's interest in
the Leases or the Rents; (vi) shall not (A) materially alter, modify or change
the terms of the Leases without the prior written consent of Lender, which
consent shall not be unreasonably withheld or delayed if the alteration,
modification or change does not materially and adversely affect the value of the
Property taken as a whole and provided further that such Lease, as altered,
modified or changed, is otherwise in compliance with the requirements of this
Security Instrument, or (B) cancel or terminate any Lease (except for defaults
thereunder) of more than ten (10%) percent of the rentable space of the Property
or accept a surrender thereof or convey or transfer or suffer or permit a
conveyance or transfer of the Land or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (vii) shall not alter, modify or change the
terms of any guaranty, letter of credit or other credit support with respect to
the Leases (the "Lease Guaranty") or cancel or terminate such Lease Guaranty
without the prior written consent of Lender; and (viii) shall not consent to any
assignment of or subletting under the Leases not in accordance with their terms,
without the prior written consent of Lender. Notwithstanding the foregoing,
subdivisions (ii), (vi), (vii) and (viii) shall not apply to residential Leases
for space in a multifamily residential property.
Section. Maintenance of Property. Borrower shall cause the Property to
be maintained in a good and safe condition and repair. The Improvements and the
Personal Property shall not be removed, demolished or altered if the costs of
same would exceed $500,000 (except for normal replacement of the Personal
Property) without the consent of Lender. Subject to Section 4.4(c) hereof,
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
Section 3.6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Land. Borrower shall not initiate,
join in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof. If
under applicable zoning provisions the use of all or any portion of the Property
is or shall become a nonconforming use, Borrower will not cause or permit the
nonconforming use or Improvement to be discontinued or abandoned without the
express written consent of Lender.
<PAGE>
Section. Waste. Borrower shall not commit or suffer any waste of the
Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section. Compliance With Laws. () Borrower shall promptly comply with
all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the Property, or
the use thereof including, but not limited to, the Americans with Disabilities
Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request, provide
Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any document
regarding Lender's approval of alterations of the Property, Borrower shall not
alter the Property in any manner which would materially increase Borrower's
responsibilities for compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans, specifications, or working
drawings for alterations of the Property shall create no responsibility or
liability on behalf of Lender for their completeness, design, sufficiency or
their compliance with Applicable Laws. The foregoing shall apply to tenant
improvements constructed by Borrower or by any of its tenants. Lender may
condition any such approval upon receipt of a certificate of compliance with
Applicable Laws from an independent architect, engineer, or other person
acceptable to Lender.
() Borrower shall give prompt notice to Lender of the receipt by
Borrower of any notice related to a violation of any Applicable Laws and of the
commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the Applicable Laws affecting the Property,
provided that (i) no Event of Default has occurred and is continuing under the
Note, this Security Instrument or any of the Other Security Documents; (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property; (iii) such proceeding
shall be permitted under and be conducted in accordance with the provisions of
any other instrument to which Borrower is subject and shall not constitute a
<PAGE>
default thereunder; (iv) neither the Property nor any part thereof or interest
therein nor any of the tenants or occupants thereof shall be affected in any
material adverse way as a result of such proceeding; and (v) Borrower shall have
furnished to Lender all other items reasonably requested by Lender.
Section. Books and Records. () Borrower and any Guarantors and
Indemnitors shall keep adequate books and records of account in accordance with
the methods utilized by them as of the date hereof, consistently applied and
furnish to Lender:
() quarterly certified rent rolls signed and dated by Borrower,
detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing the total
revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of Borrower,
any Guarantors and any Indemnitors, in the form required by Lender, prepared and
certified by the respective Borrower, Guarantor and/or Indemnitor, as
applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly basis
consistent with the quarterly certified rent rolls described above within ninety
(90) days after the close of each fiscal year;
() an annual operating budget presented on a monthly basis consistent
with the annual operating statement described above for the Property and all
proposed capital replacements and improvements at least thirty (30) days prior
to the start of each calendar year; and
() such other financial statements, including monthly operating
statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its affiliates
shall furnish to Lender:
() a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and
<PAGE>
deposits received from tenants and any other information requested by Lender,
in reasonable detail and certified by Borrower under penalty of perjury to be
true and complete, but no more frequently than quarterly; and
() an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and Indemnitor shall
furnish Lender with such other additional financial or management information as
may, from time to time, be reasonably required by Lender in form and substance
satisfactory to Lender.
Section. Payment For Labor and Materials. Borrower will promptly pay
when due all bills and costs for labor, materials, and specifically fabricated
materials incurred in connection with the Property and never permit to exist
beyond the due date thereof in respect of the Property or any part thereof any
lien or security interest, even though inferior to the liens and the security
interests hereof, and in any event never permit to be created or exist in
respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section. Performance of Other Agreements. Borrower shall observe and
perform each and every term to be observed or performed by Borrower pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Property.
Section. Change of Name, Identity or Structure. Borrower will not
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days prior
to the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of the Lender.
Section. Existence. Borrower will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names.
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section. Property Use. The Property shall be used only for multifamily
<PAGE>
apartments, and for no other use without the prior written consent of Lender,
which consent may be withheld in Lender's discretion.
Section. ERISA. () It shall not engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Security Instrument and the
Other Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of this
Security Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(32) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities, within
the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests in
Borrower are held by "benefit plan investors" within the meaning of 29
C.F.R. ss. 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. ss. 2510.3-101(c) or
(e) or an investment company registered under The Investment Company
Act of 1940.
Section. Single Purpose Entity. () It has not and shall not:
() engage in any business or activity other than the ownership,
operation and maintenance of the Property, and activities incidental thereto;
() acquire or own any material assets other than (A) the Property, and
(B) such incidental Personal Property as may be necessary for the operation of
the Property;
() merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent;
() fail to preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of the jurisdiction
of its organization or formation, or without the prior written consent of
Lender, amend, modify,
<PAGE>
terminate or fail to comply with the provisions of Borrower's Partnership
Agreement, Articles or Certificate of Incorporation, Operating Agreement or
similar organizational documents, as the case may be, as same may be further
amended or supplemented, if such amendment, modification, termination or failure
to comply would adversely affect the ability of Borrower to perform its
obligations hereunder, under the Note or under the Other Security Documents;
() own any subsidiary or make any investment in, any person or entity
without the consent of Lender;
() commingle its assets with the assets of any of its general partners,
members, shareholders, affiliates, principals or of any other person or entity;
() incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt and trade payables
incurred in the ordinary course of business, provided same are paid when due;
() fail to maintain its records, books of account and bank accounts
separate and apart from those of the general partners, members, shareholders,
principals and affiliates of Borrower, the affiliates of a general partner or
member, or shareholder of Borrower, and any other person or entity;
() enter into any contract or agreement with any general partner,
member, shareholder, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms- length basis with third
parties other than any general partner, member, shareholder, principal or
affiliate of Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof;
() seek the dissolution or winding up in whole, or in part, of
Borrower;
() maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any general partner, member, shareholder, principal or affiliate of Borrower,
or any general partner, member, shareholder, principal or affiliate thereof or
any other person;
() hold itself out to be responsible for the debts of another person;
() make any loans or advances to any third party, including any general
partner, member, shareholder, principal or affiliate of Borrower, or any general
partner, principal or affiliate thereof;
<PAGE>
() fail to file its own tax returns;
() agree to, enter into or consummate any transaction which would
render Borrower unable to furnish the certification or other evidence referred
to in Section 4.2(b) hereof;
() fail either to hold itself out to the public as a legal entity
separate and distinct from any other entity or person or to conduct its business
solely in its own name in order not (A) to mislead others as to the identity
with which such other party is transacting business, or (B) to suggest that
Borrower is responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner, principal
or affiliate thereof);
() fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; or
() file or consent to the filing of any petition, either voluntary or
involuntary, to take advantage of any applicable insolvency, bankruptcy,
liquidation or reorganization statute, or make an assignment for the benefit of
creditors.
() If Borrower is a limited partnership or a limited liability company,
each general partner or at least one member (the "SPE Member") of Borrower, as
applicable, is a corporation or limited liability company whose sole asset is
its interest in Borrower and each general partner or the SPE Member of Borrower,
as applicable, will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(a) as if
such representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a manager under
the law where the Borrower is organized.
() Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors (an "Independent Director") of each
general partner of Borrower (or of the SPE Member of Borrower) reasonably
satisfactory to Lender who shall not have been at the time of such individual's
initial appointment, and may not have been at any time during the preceding five
years, and shall not be at any time while serving as a director of the general
partner (or SPE Member) either (i) a shareholder of, or an officer, director
(other than an Independent Director), partner or employee of, Borrower or any of
its shareholders, partners, members, subsidiaries or affiliates, (ii) a customer
of, or supplier to, Borrower or any of its shareholders, partners, members,
subsidiaries or affiliates, (iii) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, member, employee, supplier or
customer. As used herein, the term "control": means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policy of a person or entity, whether through ownership of voting securities, by
contract or otherwise.
<PAGE>
() Borrower shall not cause or permit the board of directors of the
general partner of Borrower (or of the SPE Member of Borrower) to take any
action which, under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a vote of the
board of directors of the general partner of Borrower (or the SPE Member of
Borrower) unless at the time of such action there shall be at least one member
of the board of directors who is an Independent Director.
Section. Restoration After Casualty/Condemnation. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed $500,000
("Casualty Amount"); (ii) the costs of completing the Restoration as reasonably
estimated by Borrower shall be less than or equal to the Casualty Amount; (iii)
no Event of Default shall have occurred and be continuing under the Note, this
Security Instrument or any of the Other Security Documents; (iv) the Property
and the use thereof after the Restoration will be in compliance with, and
permitted under, all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental Laws (defined in
Section 12.1); and (v) such fire or other casualty or taking, as applicable,
does not materially impair access to the Property or the Improvements, then the
Net Proceeds will be disbursed directly to Borrower and Borrower shall commence
and diligently prosecute to completion, subject to Force Majeure (defined
herein), the Restoration of the Property to as nearly as possible the condition
it was in immediately prior to such fire or other casualty or to such taking.
Except upon the occurrence and continuance of an Event of Default, Borrower
shall settle any insurance claims with respect to the Net Proceeds which in the
aggregate are less than or equal to the Casualty Amount. Lender shall have the
right to participate in and reasonably approve any settlement for insurance
claims with respect to the Net Proceeds which in the aggregate are equal to or
greater than the Casualty Amount. If an Event of Default shall have occurred and
be continuing, Borrower hereby irrevocably empowers Lender, in the name of
Borrower as its true and lawful attorney-in-fact, to file and prosecute such
claim and to collect and to make receipt for any such payment. If the Net
Proceeds are received by Borrower, such Net Proceeds shall, until the completion
of the related work, be held in trust for Lender and shall be segregated from
other funds of Borrower to be used to pay for the cost of the Restoration in
accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount, such Net
Proceeds shall, subject to the provisions of the Leases that are superior to the
lien of this Security Instrument or with respect to which subordination,
non-disturbance agreements binding upon Lender have entered into concerning the
deposits of Net Proceeds, be forthwith paid to Lender to be held by Lender in a
segregated account to be made available to Borrower for the Restoration in
accordance with the provisions of this Subsection 4.4(b). Subject to Section
4.4(c) hereof, Borrower shall commence and diligently prosecute to
<PAGE>
completion, subject to Force Majeure (defined below), the Restoration (in the
case of a taking, to the extent the Property is capable of being restored). The
term "Net Proceeds" for purposes of this Section 4.4 shall mean: (i) the net
amount of all insurance proceeds received by Lender under the Policies carried
pursuant to Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security
Instrument as a result of such damage or destruction, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any, in collecting the same, or (ii) the net amount of all awards and
payments received by Lender with respect to a taking referenced in Section 3.6
of this Security Instrument, after deduction of its reasonable costs and
expenses (including, but not limited to reasonable counsel fees), if any, in
collecting the same, whichever the case may be. The term "Force Majeure" for the
purpose of this Section 4.4 shall have the following meaning: Borrower shall be
excused for the period of any delay in the performance of any obligations
hereunder when prevented from so doing by cause or causes beyond Borrower's
control such as, without limitation, all labor disputes, civil commotion, war,
war-like operations, invasion, rebellion, hostilities, military or usurped
power, sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, and acts of God.
() If the Net Proceeds are greater than the Casualty Amount, the Net
Proceeds shall be made available to Borrower for payment of, or reimbursement of
Borrower's expenses in connection with, the Restoration, subject to the
following conditions:
(A) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security
Documents;
(B) Lender shall, within a reasonable period of time prior to request
for initial disbursement, be furnished with an estimate of the
cost of the Restoration accompanied by an independent architect's
certification as to such costs and appropriate plans and
specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash equivalent
deposited by Borrower with Lender, are sufficient to cover the
cost of the Restoration as such costs are certified by the
independent architect;
(D) (1) in the event that the Net Proceeds are insurance proceeds,
less than fifty percent (50%) of the total floor area of the
Improvements has been damaged or destroyed, or rendered unusable
as a result of such fire or other casualty; or (2) in the event
that the Net Proceeds are condemnation awards, less than fifty
percent (50%) of the Land constituting the Property is taken,
such Land that is taken is located along the perimeter or
periphery of the Property and no portion of the Improvements is
located in such Lands;
(E) Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note
which will be incurred with respect to the Property as a result
of the occurrence of any such fire or other
<PAGE>
casualty or taking, whichever the case may be, will be covered
out of (1) the Net Proceeds, or (2) other funds of Borrower;
(F) Lender shall be satisfied that, upon the completion of the
Restoration and related lease-up, if applicable, the net cash flow
of the Property will be restored to a level sufficient to cover
all carrying costs and operating expenses of the Property,
including, without limitation, debt service on the Note at a
coverage ratio (on a "normalized" basis, i.e., after deducting
replacement reserve requirements and reserves for tenant
improvements and leasing commissions from net operating income,
whether or not such sums are escrowed with Lender) of at least
1.30 : 1.0 (assuming an interest rate equal to 9.0% per annum),
or, if lower, the coverage ratio which existed as of the date
immediately preceding such casualty or taking as the case may be;
(G) the Restoration can reasonably be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity Date
(as defined in the Note), (2) the earliest date required for such
completion under the terms of any Lease and (3) such time as may
be required under applicable zoning law, ordinance, rule or
regulation in order to repair and restore the Property to as
nearly as possible the condition it was in immediately prior to
such fire or other casualty or to such taking, as applicable;
(H) the Property and the use thereof after the Restoration will be in
compliance with, and permitted under, all applicable zoning laws,
ordinances, rules and regulations (including, without limitation,
all applicable Environmental Laws (defined in Section 12.1)); and
(I) such fire or other casualty or taking, as applicable, does not
materially impair access to the Property or the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net Proceeds
shall be held by Lender and, until disbursed in accordance with the provisions
of this Subsection 4.4(b), shall constitute additional security for the
Obligations. The Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
<PAGE>
() If the Net Proceeds exceed the Casualty Amount, Lender shall have
the use of the plans and specifications and all permits, licenses and approvals
required or obtained in connection with the Restoration. If the Net Proceeds
exceed the Casualty Amount, the identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and an independent consulting engineer selected by Lender (the "Casualty
Consultant"), such acceptance not to be unreasonably withheld or delayed. All
costs and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration including, without limitation, reasonable counsel
fees and disbursements and the Casualty Consultant's fees, shall be paid by
Borrower.
In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage"
as used in this Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the Casualty Consultant certifies to
Lender that 50% of the required Restoration has been completed. There shall be
no Casualty Retainage with respect to costs actually incurred by Borrower for
work in place in completing the last 50% of the required Restoration. The
Casualty Retainage shall in no event, and notwithstanding anything to the
contrary set forth above in this Subsection 4.4(b), be less than the amount
actually held back by Borrower from contractors, subcontractors and materialmen
engaged in the Restoration. The Casualty Retainage shall not be released until
the Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b) and that
all approvals necessary for the re-occupancy and use of the Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage, provided, however, that Lender will release the portion of the
Casualty Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
<PAGE>
() If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender, be sufficient to pay in full the balance of
the costs which are estimated by the Casualty Consultant to be incurred in
connection with the completion of the Restoration, Borrower shall deposit the
deficiency (the "Net Proceeds Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency
deposited with Lender shall be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Subsection 4.4(b) shall constitute additional security for the
Obligations.
() The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section. Warranty of Title. Borrower has good and marketable title to
the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
<PAGE>
Section. Authority. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's part
to be performed.
Section. Legal Status and Authority. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section. Validity of Documents. (a) The execution, delivery and
performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section. Litigation. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the best of Borrower's knowledge, threatened or contemplated
against Borrower, any person guaranteeing the payment of the Debt or any portion
thereof or performance by Borrower of any terms of this Security Instrument (a
"Guarantor"), if any, an Indemnitor (defined in Subsection 10.1(c)), if any, or
against or affecting the Property that (a) has not been disclosed to Lender, and
has a material, adverse effect on the Property or Borrower's, any Guarantor's or
any Indemnitor's ability to perform its obligations under the Note, this
<PAGE>
Security Instrument or the Other Security Documents, or (b) is not adequately
covered by insurance, each as determined by Lender in its sole and absolute
discretion.
Section. Status of Property. () No portion of the Improvements is
located in an area identified by the Secretary of Housing and Urban Development
or any successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, or the National Flood Insurance Reform Act of 1994, as each may be
amended, or any successor law, or, if any portion of the Improvements is now or
at any time in the future located within any such area, Borrower has obtained
and will maintain the insurance prescribed in Section 3.3 hereof.
() Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Property and the conduct of its business and all required zoning, building code,
land use, environmental and other similar permits or approvals, all of which are
in full force and effect as of the date hereof and, to the best of Borrower's
knowledge, not subject to revocation, suspension, forfeiture or modification.
() To the best of Borrower's knowledge, and except as expressly set
forth in that certain Property Condition Survey of Cobblestone Apartments, dated
April 1, 1999, by Environmental Management Group, and that certain Phase I
Environmental Site Assessment of the Property dated April 1, 1999, prepared by
Environmental Management Group, the Property and the present and contemplated
use and occupancy thereof are in full compliance with all Applicable Laws,
including, without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited to,
the ADA) and other similar laws.
() The Property is served by all utilities required for the current or
contemplated use thereof. All utility service is provided by public utilities
and the Property has accepted or is equipped to accept such utility service.
() To the best of Borrower's knowledge, all public roads and streets
necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other casualty.
() All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
() Borrower has paid in full for, and is the owner of, all furnishings,
<PAGE>
fixtures and equipment (other than tenants' property) used in connection with
the operation of the Property, free and clear of any and all security interests,
liens or encumbrances, except the lien and security interest created hereby.
() To the best of Borrower's knowledge, all liquid and solid waste
disposal, septic and sewer systems located on the Property are in a good and
safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on the
certified rent roll delivered to Lender have been collected by Borrower except
as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the Property.
Section. No Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as
amended and the related Treasury Department regulations, including temporary
regulations.
Section. Separate Tax Lot. The Property is assessed for real estate tax
purposes as one or more wholly independent tax lot or lots, separate from any
adjoining land or improvements not constituting a part of such lot or lots, and
no other land or improvements is assessed and taxed together with the Property
or any portion thereof.
Section. ERISA Compliance. () As of the date hereof and throughout the
term of this Security Instrument, (i) Borrower is not and will not be an
"employee benefit plan" as defined in Section 3(32) of ERISA, which is subject
to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this Security
Instrument, (i) Borrower is not and will not be a "governmental plan" within the
meaning of Section 3(32) of ERISA, and (ii) transactions by or with Borrower are
not and will not be subject to state statutes applicable to Borrower regulating
investments of and fiduciary obligations with respect to governmental plans.
Section. Leases. Except as disclosed in the certified rent roll for the
Property delivered to and approved by Lender, or as otherwise set forth on
Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's interest
in the Leases; (b) the Leases are valid and enforceable; (c) the terms of all
alterations, modifications and amendments to the Leases are reflected in the
certified rent roll delivered to and approved by Lender; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
<PAGE>
(except to Lender); (e) none of the Rents have been collected for more than one
(1) month in advance (provided that a security deposit shall not be deemed rent
collected in advance); (f) the premises demised under the Leases have been
completed and the tenants under the Leases have accepted the same and have taken
possession of the same on a rent-paying basis; (g) to the best of Borrower's
knowledge, there exist no offsets or defenses to the payment of any portion of
the Rents; (h) Borrower has received no notice from any tenant challenging the
validity or enforceability of any Lease; (i) all payments due under the Leases
are current and are consistent with the certified rent roll for the Property
delivered to and approved by Lender; (j) to the best of Borrower's knowledge, no
tenant under any Lease is in default thereunder, or is a debtor in any
bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the tenants under the Leases other than
expressly set forth in each Lease; (l) the Leases are valid and enforceable
against Borrower and, to the best of Borrower's knowledge, the tenants set forth
therein; (m) no Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (n) to the best of Borrower's
knowledge, no person or entity has any possessory interest in, or right to
occupy, the Property except under and pursuant to a Lease; (o) each Lease (other
than a residential Lease) is subordinate to this Security Instrument, either
pursuant to its terms or a recorded subordination agreement; and (p) to the best
of Borrower's knowledge, no brokerage commissions or finders fees are due and
payable regarding any Lease.
Section. Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section. Business Purposes. The loan evidenced by the Note is solely
for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section. Taxes. Borrower, any Guarantor and any Indemnitor have filed
all federal, state, county, municipal, and city income and other tax returns
required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section. Mailing Address. Borrower's mailing address, as set forth in
the opening paragraph hereof or as changed in accordance with Article 16, is
true and correct.
Section. No Change in Facts or Circumstances. All information in the
application for the loan submitted to Lender (the "Loan Application") and in all
financing statements, rent rolls, reports, certificates and other documents
submitted in connection with
<PAGE>
the Loan Application or in satisfaction of the terms thereof, are accurate,
complete and correct in all material respects. There has been no adverse change
in any condition, fact, circumstance or event that would make any such
information materially inaccurate, incomplete or otherwise misleading.
Section. Disclosure. To the best of Borrower's knowledge, Borrower has
disclosed to Lender all material facts and has not failed to disclose any
material fact that could cause any representation or warranty made herein to be
materially misleading.
Section. Third Party Representations. To the best of Borrower's
knowledge, each of the representations and the warranties made by each Guarantor
and Indemnitor herein or in any Other Security Document(s) is true and correct
in all material respects.
Section. Illegal Activity. To the best of Borrower's knowledge, no
portion of the Property has been or will be purchased, improved, fixtured,
equipped or furnished with proceeds of any criminal or other illegal activity
and to the best of Borrower's knowledge, there are no illegal activities or
activities relating to controlled substance at the Property.
Section. FUNB Line of Credit. No more than five (5) Business Days after
the expiration or earlier termination of, or concurrently with the giving of
notice by PREIT Associates, L.P. to the public that an event of default has
occurred under, that certain Revolving Credit Loan Agreement between PREIT
Associates, L.P. and Corestates Bank, N.A., as agent (predecessor-in-interest to
First Union National Bank, as agent), and First Trust Savings Bank, Fleet Bank,
N.A. and PNC Bank, as lenders, dated September 30, 1997, Borrower shall notify
Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section. Relationship of Borrower and Lender. The relationship between
Borrower and Lender is solely that of debtor and creditor, and Lender has no
fiduciary or other special relationship with Borrower, and no term or condition
of any of the Note, this Security Instrument and the Other Security Documents
shall be construed so as to deem the relationship between Borrower and Lender to
be other than that of debtor and creditor.
Section. Servicing of the Loan. At the option of Lender, the loan
secured hereby may be serviced by a servicer/trustee (the "Servicer") selected
by Lender and Lender may delegate all or any portion of its responsibilities
under the Note, this Security Instrument, and the Other Security Documents to
the Servicer.
<PAGE>
Article - FURTHER ASSURANCES
Section. Recording of Security Instrument, Etc. Borrower forthwith upon
the execution and delivery of this Security Instrument and thereafter, from time
to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, this Security Instrument, the Other Security
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of this Security Instrument,
any mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section. Further Acts, Etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Lender, the property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument, or
for complying with all Applicable Laws. Borrower, on demand, will execute and
deliver and hereby authorizes Lender to execute in the name of Borrower or
without the signature of Borrower to the extent Lender may lawfully do so, one
or more financing statements, chattel mortgages or other instruments, to
evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section. Changes in Tax, Debt Credit and Documentary Stamp Laws. () If
any law is enacted or adopted or amended after the date of this Security
Instrument which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender's interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.
<PAGE>
() Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of this Security Instrument
or the Debt. If such claim, credit or deduction shall be required by law, Lender
shall have the option, by written notice of not less than ninety (90) days, to
declare the Debt immediately due and payable.
() If at any time the United States of America, any State thereof or
any subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, this Security Instrument, or any of the Other Security
Documents or impose any other tax or charge on the same, Borrower will pay for
the same, with interest and penalties thereon, if any.
Section. Estoppel Certificates. () After request by Lender, Borrower,
within twenty (20) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the terms of payment and
maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by Section 18.1
hereof, at Lender's request, Borrower, any Guarantors and any Indemnitors shall
provide an estoppel certificate to the Investor (defined in Section 18.1) or any
prospective Investor confirming the accuracy of information provided by such
person to Lender under or in respect of this Security Instrument.
<PAGE>
() After written request by Borrower not more than twice annually,
Lender shall furnish Borrower a statement setting forth (i) the amount of the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the balance of the sums in
the Escrow Fund, if any, and (v) to the best of Lender's knowledge, whether
Borrower is currently in default.
Section. Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).
Section. Splitting of Security Instrument. This Security Instrument and
the Note shall, at any time until the same shall be fully paid and satisfied, at
the sole election of Lender, be split or divided into two or more notes and two
or more security instruments, each of which shall cover all or a portion of the
Property to be more particularly described therein. To that end, Borrower, upon
written request of Lender, shall execute, acknowledge and deliver to Lender
and/or its designee or designees substitute notes and security instruments in
such principal amounts, aggregating not more than the then unpaid principal
amount secured by this Security Instrument, and containing terms, provisions and
clauses no less favorable to Borrower than those contained herein and in the
Note, and such other documents and instruments as may be required by Lender to
effect the splitting of the Note and this Security Instrument.
Section. Replacement Documents. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any Other Security Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or Other
Security Document, Borrower will issue, in lieu thereof, a replacement Note or
Other Security Document, dated the date of such lost, stolen, destroyed or
mutilated Note or Other Security Document in the same principal amount thereof
and otherwise of like tenor. Borrower shall not be responsible to Lender for
Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section. Amended Financing Statements. Borrower will execute and
deliver to the Lender, prior to or contemporaneously with the effective date of
any such change, any financing statement or financing statement change required
by the Lender to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Lender, Borrower
shall execute a certificate in form satisfactory to the Lender listing the trade
names under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect to
the Property.
<PAGE>
Article - DUE ON SALE/ENCUMBRANCE
Section. No Sale/Encumbrance. Borrower agrees that Borrower shall not,
without the prior written consent of Lender, sell, convey, mortgage, grant,
bargain, encumber, pledge, assign, or otherwise transfer the Property or any
part thereof or permit the Property or any part thereof to be sold, conveyed,
mortgaged, granted, bargained, encumbered, pledged, assigned, or otherwise
transferred. Notwithstanding the foregoing, the Property may be transferred with
the prior written consent of Lender which consent shall not be unreasonably
withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, provided that (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one quarter of one percent (.25%) of
the outstanding principal balance of the Note shall be paid by Borrower to
Lender upon notice being given to Borrower of approval of the proposed transfer
(unless the proposed transferee is an affiliate of Borrower, in which event no
transfer fee shall be due and payable), (iv) no transfer shall be permitted
hereunder if an Event of Default, or an event which with the giving of notice or
lapse of time or both could become an Event of Default, has occurred and is
continuing, and (v) such transferee shall be a single purpose bankruptcy remote
entity and Borrower shall cause to be delivered to Lender a non-consolidation
opinion or an update of the same, in form and substance reasonably acceptable to
Lender, upon Lender's request to do so. Borrower agrees that Borrower shall not
incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Debt and trade payables incurred in
the ordinary course of business in connection with the operation of the
Property, provided same are paid when due.
Section. Sale/Encumbrance Defined. A sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment, or transfer within the meaning of this
Article 8 shall be deemed to include, but not be limited to (a) an installment
sales agreement wherein Borrower agrees to sell the Property or any part thereof
for a price to be paid in installments; (b) an agreement by Borrower leasing all
or a substantial part of the Property for other than actual occupancy by a space
tenant thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Borrower's right, title and interest in and to any Leases
or any Rents; (c) if Borrower or any general partner or managing member (or if
no managing member, any member) of Borrower is a corporation, the voluntary or
involuntary sale, conveyance, transfer or pledge of such corporation's stock (or
the stock of any corporation directly or indirectly controlling such corporation
by operation of law or otherwise) or the creation or issuance of new stock by
which an aggregate of more than 49% of such corporation's stock shall be vested
in a party or parties who are not now owners of more than 49% of such
corporation's stock; (d) if Borrower or any general partner or managing member
(or if no managing member, any member) of Borrower is a limited or general
partnership or joint venture, the change, removal or resignation of a general
partner or the transfer or pledge of the partnership interest of any general
partner or any profits or proceeds relating to such partnership interest or the
transfer or pledge of any partnership
<PAGE>
interest of any limited partner or any profits or proceeds relating to any such
partnership interest, which, whether singly or in the aggregate, result in more
than 49% of the beneficial interests in Borrower, or the profits or proceeds
relating thereto, having been transferred or pledged; and (e) if Borrower or any
general partner or member of Borrower is a limited liability company, the
change, removal or resignation of a managing member or the transfer of the
membership interest of a managing member or any profits or proceeds relating to
such membership interest or the transfer or pledge of any membership interest of
any other member or any profits or proceeds relating to any such membership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged. Notwithstanding the foregoing, the
following transfers shall not be deemed to be a sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment or transfer within the meaning
of this Article 8: (a) transfer by devise or descent or by operation of law upon
the death of a member, general partner or stockholder of Borrower, any Guarantor
or Indemnitor or any member or general partner thereof, (b) a sale, transfer or
hypothecation of a membership, partnership or shareholder interest in Borrower,
whichever the case may be, by a current member, general partner or shareholder,
as applicable, to an immediate family member (i.e., parents, spouses, siblings,
children or grandchildren) of such member, general partner or shareholder, or to
a trust for the benefit of an immediate family member of such member, general
partner or shareholder, and (c) a change in the form of organizational structure
or name of Borrower, provided that there is no transfer or change in the
ownership interests in Borrower, and provided further that Borrower shall remain
in full compliance with Section 4.3 of this Security Instrument, provided that,
as to each of clauses (a), (b) and (c) of this sentence, with respect to any
such sale, transfer, hypothecation or change in organizational structure,
Borrower shall deliver a non-consolidation opinion or an update of the same, in
form and substance reasonably satisfactory to Lender, upon Lender's request to
do so.
Section. Lender's Rights. Lender reserves the right to condition the
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section. Right To Substitute Property. The terms and conditions of this
Article 8 shall be subject to Borrower's rights pursuant to that certain letter
dated the date hereof from Lender to Borrower regarding Borrower's rights to
substitute security for the
<PAGE>
Debt. Inquiries regarding the aforementioned letter shall be made to Borrower at
the address set forth in Article 16 below.
Article - PREPAYMENT
Section. Prepayment Only in Accordance with Note. The Debt may be
prepaid only in strict accordance with the express terms and conditions of the
Note including, without limitation, payment of the Prepayment Consideration if
applicable.
Article - DEFAULT
Section. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for purposes of
this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the provisions
of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE Member of
Borrower violates or does not comply with any of the provisions of Section 4.3;
() if any representation or warranty of Borrower, Indemnitor (as
defined in that certain Environmental Indemnity Agreement dated as of the date
hereof (the "Environmental Indemnity") or any Guarantor, or any member, general
partner, principal or beneficial owner of any of the foregoing, made herein or
in the Environmental Indemnity or in any guaranty, or in any certificate,
report, financial statement or other instrument or document furnished to Lender
shall have been false or misleading in any material respect when made;
() if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
() except for the specific defaults set forth in this Section 10.1, any
other default hereunder or any of the Other Security Documents by Borrower,
which default is not cured (i) in the case of any default which can be cured by
the payment of a sum of money, within five (5) days after written notice from
Lender to Borrower, or (ii) in the case of any other default, within thirty (30)
days after written notice from Lender to Borrower; provided that if such default
cannot reasonably be cured within such thirty (30) day period and Borrower shall
have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to
<PAGE>
cure such default, it being agreed that no such extension shall be for a period
in excess of one hundred twenty (120) days, unless, only in the case of cures
that require construction or remedial work, such cure cannot with diligence be
completed within such one hundred twenty (120) day period, in which case such
period shall be extended for an additional one hundred twenty (120) days;
() if Borrower or any Guarantor or Indemnitor shall make an assignment
for the benefit of creditors or if Borrower shall generally not be paying its
debts as they become due; or
() if the Policies are not kept in full force and effect, or Borrower
has not delivered evidence of the renewal of the Policies ten (10) days prior to
their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower or any Guarantor or Indemnitor shall make a general
assignment for the benefit of its creditors'; or (ii) there shall be commenced
against Borrower or any Guarantor or Indemnitor any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed, undischarged or unbonded for a period of ninety (90) days;
or (iii) there shall be commenced against the Borrower or any Guarantor or
Indemnitor any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of any order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within ninety (90) days from the entry thereof; or (iv) the
Borrower or any Guarantor or Indemnitor shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
Article - RIGHTS AND REMEDIES
Section. Remedies. () Upon the occurrence of any Event of Default,
Borrower agrees that Lender, may take such action, without notice or demand, as
it deems advisable to protect and enforce the rights of Lender against Borrower
and in and to the Property, including, but not limited to the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Lender may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Lender:
<PAGE>
() declare the entire unpaid Debt to be immediately due and payable;
() institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of law in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
() with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this Security
Instrument for the balance of the Debt not then due, unimpaired and without loss
of priority;
() sell for cash or upon credit the Property or any part thereof and
all estate, claim, demand, right, title and interest of Borrower therein and
rights of redemption thereof, pursuant to power of sale or otherwise, at one or
more sales, as an entity or in parcels, at such time and place, upon such terms
and after such notice thereof as may be required or permitted by law;
() subject to the provisions of Article 15, institute an action, suit
or proceeding in equity for the specific performance of any covenant, condition
or agreement contained herein, in the Note or in the Other Security Documents;
() subject to the provisions of Article 15, recover judgment on the
Note either before, during or after any proceedings for the enforcement of this
Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of Borrower,
any Guarantor, Indemnitor or of any person, firm or other entity liable for the
payment of the Debt;
() subject to any applicable law, the license granted to Borrower under
Section 1.2 shall automatically be revoked and Lender may enter into or upon the
Property, either personally or by its agents, nominees or attorneys and
dispossess Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or servants
wholly therefrom, and take possession of all books, records and accounts
relating thereto and Borrower agrees to surrender possession of the Property and
of such books, records and accounts to Lender upon demand, and thereupon Lender
may (A) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat; (B) complete any construction on the Property in such manner and form
as Lender deems
<PAGE>
advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Property; (D) exercise all rights and powers of
Borrower with respect to the Property, whether in the name of Borrower or
otherwise, including, without limitation, the right to make, cancel, enforce or
modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all Rents of the Property and every part thereof; (E) require Borrower
to pay monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Borrower; (F) require Borrower to
vacate and surrender possession of the Property to Lender or to such receiver
and, in default thereof, Borrower may be evicted by summary proceedings or
otherwise; and (G) apply the receipts from the Property to the payment of the
Debt, in such order, priority and proportions as Lender shall deem appropriate
in its sole discretion after deducting therefrom all expenses (including
reasonable attorneys' fees) incurred in connection with the aforesaid operations
and all amounts necessary to pay the Taxes, Other Charges, insurance and other
expenses in connection with the Property, as well as just and reasonable
compensation for the services of Lender, its counsel, agents and employees;
() exercise any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (A) the right to take possession of the Collateral
or any part thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the Collateral, and (B)
request Borrower at its expense to assemble the Collateral and make it available
to Lender at a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to the Collateral
sent to Borrower in accordance with the provisions hereof at least five (5) days
prior to such action, shall constitute commercially reasonable notice to
Borrower;
() apply any sums then deposited in the Escrow Fund and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the Note; and
all other sums payable pursuant to the Note, this Security
Instrument and the Other Security Documents, including, without
limitation, advances made by Lender pursuant to the terms of
this Security Instrument;
<PAGE>
() surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit on the
Debt in such priority and proportion as Lender in its discretion shall deem
proper, and in connection therewith, Borrower hereby appoints Lender as agent
and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any Net
Proceeds Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or through
Borrower from making use of or withdrawing any sums from any lockbox or similar
account, if any;
() pursue such other remedies as Lender may have under applicable law.
() In the event of a sale, by foreclosure, power of sale, or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien and security interest on the remaining portion of the Property unimpaired
and without loss of priority. Notwithstanding the provisions of this Section
11.1 to the contrary, if any Event of Default as described in Subsection 10.1
(h)(i) or (ii) shall occur, the entire unpaid Debt shall be automatically due
and payable, without any further notice, demand or other action by Lender.
() Lender may adjourn from time to time any sale by it to be made under
or by virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Lender, without further
notice or publication, may make such sale at the time and place to which the
same shall be so adjourned.
() Upon any sale made under or by virtue of this Section 11.1, whether
made under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Lender may bid for and acquire the
Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Debt the net sales price
after deducting therefrom the expenses of the sale and costs of the action and
any other sums which Lender is authorized to deduct under this Security
Instrument.
Section. Application of Proceeds. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
<PAGE>
Section. Right to Cure Defaults. Upon the occurrence of any Event of
Default, Lender may, but without any obligation to do so and without notice to
or demand on Borrower and without releasing Borrower from any obligation
hereunder, cure the same in such manner and to such extent as Lender may deem
necessary to protect the security hereof. Lender is authorized to enter upon the
Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in the Property or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including
reasonable attorneys' fees to the extent permitted by law), with interest as
provided in this Section 11.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or in appearing in, defending, or
bringing any such action or proceeding shall bear interest at the Default Rate
(as defined in the Note), for the period after notice from Lender that such cost
or expense was incurred to the date of payment to Lender. All such costs and
expenses incurred by Lender together with interest thereon calculated at the
Default Rate shall be deemed to constitute a portion of the Debt and be secured
by this Security Instrument and the Other Security Documents and shall be
immediately due and payable upon demand by Lender therefor.
Section. Actions and Proceedings. After the occurrence and during the
continuance of an Event of Default, Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property and to bring any
action or proceeding, in the name and on behalf of Borrower, which Lender, in
its discretion, decides should be brought to protect its interest in the
Property.
Section. Recovery of Sums Required To Be Paid. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
Section. Examination of Books and Records. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during reasonable business hours at any office of Borrower, its affiliates or
any Guarantor or Indemnitor where the books and records are located.
<PAGE>
Section. Other Rights, Etc. () The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of any
term of this Security Instrument. Borrower shall not be relieved of Borrower's
obligations hereunder by reason of (i) the failure of Lender to comply with any
request of Borrower, any Guarantor or any Indemnitor to take any action to
foreclose this Security Instrument or otherwise enforce any of the provisions
hereof or of the Note or the Other Security Documents, (ii) the release,
regardless of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (iii) any agreement or
stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Security Instrument or the Other
Security Documents.
() It is agreed that the risk of loss or damage to the Property is on
Borrower, and Lender shall have no liability whatsoever for decline in value of
the Property, for failure to maintain the Policies, or for failure to determine
whether insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property or
collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other security
held by Lender in such order and manner as Lender, in its discretion, may elect.
Lender may take action to recover the Debt, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Security Instrument. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
Section. Right to Release Any Portion of the Property. Lender, may
release any portion of the Property for such consideration as Lender may require
without, as to the remainder of the Property, in any way impairing or affecting
the lien or priority of this Security Instrument, or improving the position of
any subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
Section. Violation of Laws. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
<PAGE>
Section. Right of Entry. Lender and its agents shall have the right
upon prior written notice to enter and inspect the Property at all reasonable
times upon not less than five (5) Business Days' notice (except in the case of
emergencies when no notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section. Environmental Representations and Warranties. Borrower
represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated April 1, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger to human health or the environment.
"Environmental Law" includes, but is not limited to, the following statutes, as
amended, any successor thereto, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations and the
like addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community
Right-to-Know Act; the Hazardous
<PAGE>
Substances Transportation Act; the Resource Conservation and Recovery Act
(including, but not limited to Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act.
"Environmental Law" also includes, but is not limited to, any present, and for
the purposes of Sections 12.2, 12.3 and 13.4 only, future, federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law: conditioning transfer of property upon a negative declaration or
other approval of a governmental authority of the environmental condition of the
property; requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of the Property to any governmental
authority or other person or entity, whether or not in connection with transfer
of title to or interest in property. "Hazardous Substances" include but are not
limited to any and all substances (whether solid, liquid or gas) (i) defined,
listed, or otherwise classified as pollutants, hazardous wastes, hazardous
substances, hazardous materials, extremely hazardous wastes, or words of similar
meaning or regulatory effect under any present, or for the purposes of Sections
12.2. 12.3 and 13.4 only, future, Environmental Laws or (ii) that may have a
negative impact on human health or the environment, including, but not limited
to petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, radon, radioactive materials, flammables and
explosives. "Release" of any Hazardous Substance includes, but is not limited to
any release, deposit, discharge, emission, leaking, spilling, seeping,
migrating, injecting, pumping, pouring, emptying, escaping, dumping or disposing
of Hazardous Substances. "Remediation" includes, but is not limited to any
response, remedial removal, or corrective action, any activity to cleanup,
detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance,
any actions to prevent, cure or mitigate any Release of any Hazardous Substance,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances.
Section. Environmental Covenants. Borrower covenants and agrees that so
long as the Borrower owns, manages, is in possession of, or otherwise controls
the operation of the Property: (a) all uses and operations on or of the
Property, whether by Borrower or any other person or entity, shall be in
compliance with all Environmental Laws and permits issued pursuant thereto; (b)
there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d)
Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for
<PAGE>
interviews; (f) Borrower shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of environmental conditions
in connection with the Property, pursuant to any reasonable written request of
Lender after Lender has reason to believe this Section 12.2 has been violated
(including, but not limited to sampling, testing and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas), and share with Lender the reports and other results thereof, and Lender
and other Indemnified Parties (defined in Section 13.1) shall be entitled to
rely on such reports and other results thereof; (g) Borrower shall, at its sole
cost and expense, comply with all reasonable written requests of Lender to (i)
reasonably effectuate Remediation of any condition (including, but not limited
to a Release of a Hazardous Substance) in, on, under or from the Property, (ii)
comply with any Environmental Law, (iii) comply with any directive from any
governmental authority, and (iv) take any other reasonable action necessary or
appropriate for protection of human health or the environment; (h) Borrower
shall not do or allow any tenant or other user of the Property to do any act
that materially increases the dangers to human health or the environment, poses
an unreasonable risk of harm to any person or entity (whether on or off the
Property), impairs or may impair the value of the Property, is contrary to any
requirement of any insurer, constitutes a public or private nuisance,
constitutes waste, or violates any covenant, condition, agreement or easement
applicable to the Property; and (i) Borrower shall immediately notify Lender in
writing promptly after it has become aware of (A) any presence or Releases or
threatened Releases of Hazardous Substances in, on, under, from or migrating
towards the Property which is required to be reported to a governmental
authority under any Environmental Law, (B) any actual Environmental Lien
affecting the Property, (C) any required Remediation of environmental conditions
relating to the Property, and (D) any written or oral notice or other
communication of which Borrower becomes aware from any source whatsoever
(including, but not limited to a governmental entity) relating in any way to
Hazardous Substances or Remediation thereof, possible liability of any person or
entity pursuant to any Environmental Law, other environmental conditions in
connection with the Property, or any actual or threatened administrative or
judicial proceedings in connection with anything referred to in this Article 12.
Section. Lender's Rights. Lender, its environmental consultant, and any
other person or entity designated by Lender, including, but not limited to any
receiver and any representative of a governmental entity, shall have the right,
but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Substance or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to Borrower, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, but not limited to conducting any environmental assessment
or audit of the Property or portions thereof to confirm Borrower's compliance
with the provisions of this Article 12, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Such audit shall
be performed in a manner so as to minimize interference with the conduct of
business at the Property. If such audit discloses that a violation of or a
liability under any Environmental Law exists or if such audit was required
<PAGE>
or prescribed by law, regulation or governmental or quasi-governmental
authority, Borrower shall pay all costs and expenses incurred in connection with
such audit; otherwise, the costs and expenses of such audit shall,
notwithstanding anything to the contrary set forth in this Section, be paid by
Lender.
Article - INDEMNIFICATION
Section. General Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement, or
punitive damages, of whatever kind or nature (including, but not limited to
attorneys' fees and other costs of defense) (the "Losses") imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws;
(j) the enforcement by any Indemnified Party of the provisions of this Article
13; (k) any and all claims and demands whatsoever which may be asserted against
Lender 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
Lease; (l) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the loan evidenced by the
<PAGE>
Note and secured by this Security Instrument; or (m) any misrepresentation made
by Borrower in this Security Instrument, the Other Security Documents, or any
documents or information provided pursuant to Section 18.1 hereof. Any amounts
payable to Lender by reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender and any person or entity
who is or will have been involved in the origination of this loan, any person or
entity who is or will have been involved in the servicing of this loan, any
person or entity in whose name the encumbrance created by this Security
Instrument is or will have been recorded, persons and entities who may hold or
acquire or will have held a full or partial interest in this loan (including,
but not limited to Investors or prospective Investors in the Securities, as well
as custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in this loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, members, partners, employees,
agents, servants, representatives, affiliates, subsidiaries, participants,
successors and assigns of any and all of the foregoing (including, but not
limited to any other person or entity who holds or acquires or will have held a
participation or other full or partial interest in this loan or the Property,
whether during the term of this loan or as a part of or following a foreclosure
of this loan and including, but not limited to any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
Section. Mortgage and/or Intangible Tax. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents or
in connection with a transfer of all or a portion of the Property pursuant to a
foreclosure, deed in lieu of foreclosure or otherwise.
Section. ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
attorneys' fees and costs incurred in the investigation, defense, and settlement
of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in Lender's sole discretion) that
Lender may incur, directly or indirectly, as a result of a default under
Sections 4.2 or 5.9.
Section. Environmental Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses and costs of Remediation
(whether or not performed voluntarily), reasonable engineers' fees, reasonable
environmental consultants' fees, and costs of investigation (including, but not
limited to sampling, testing and analysis of soil, water, air, building
materials and other materials and substances whether solid, liquid or gas)
<PAGE>
imposed upon or incurred by or asserted against any Indemnified Parties, and
arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Borrower, any
person or entity affiliated with Borrower or tenant or other users of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any time located in, under, on or above the Property;
(d) any activity by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including, but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened violations of
any Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including, but not limited
to any failure by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property to comply with any order of any
governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section. Duty to Defend; Attorneys' Fees and Other Fees and Expenses.
Upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the
<PAGE>
foregoing, any Indemnified Parties may, in their sole and absolute discretion,
engage their own attorneys and other professionals to defend or assist them,
and, at the option of Indemnified Parties, their attorneys shall control the
resolution of claim or proceeding. Upon demand, Borrower shall pay or, in the
sole and absolute discretion of the Indemnified Parties, reimburse, the
Indemnified Parties for the payment of reasonable fees and disbursements of
attorneys, engineers, environmental consultants, laboratories and other
professionals in connection therewith.
<PAGE>
Article - WAIVERS
Section. Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Lender arising out of or in any way
connected with this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section. Marshalling and Other Matters. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Borrower hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all persons
to the extent permitted by Applicable Law.
Section. Waiver of Notice. To the extent permitted by Applicable Law,
Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Security Instrument
specifically and expressly provides for the giving of notice by Lender to
Borrower and except with respect to matters for which Lender is required by
Applicable Law to give notice, and Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Security Instrument does not specifically and expressly provide for the giving
of notice by Lender to Borrower.
Section. Waiver of Statute of Limitations. Borrower hereby expressly
waives and releases to the fullest extent permitted by law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.
Section. Sole Discretion of Lender. Wherever pursuant to this Security
Instrument (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove all decisions that arrangements or terms are satisfactory
or not satisfactory, and all other decisions and determinations made by Lender,
shall be in the sole and absolute discretion of Lender and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
Section. Survival. Except as hereinafter specifically set forth below,
the representations and warranties, covenants, and other obligations arising
under Article 12 shall in no way be impaired by: any satisfaction or other
termination of this Security Instrument,
<PAGE>
any assignment or other transfer of all or any portion of this Security
Instrument or Lender's interest in the Property (but, in such case, shall
benefit both Indemnified Parties and any assignee or transferee), any exercise
of Lender's rights and remedies pursuant hereto including, but not limited to
foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any
rights and remedies pursuant to the Note or any of the Other Security Documents,
any transfer of all or any portion of the Property (whether by Borrower or by
Lender, following foreclosure or acceptance of a deed in lieu of foreclosure or
at any other time), any amendment to this Security Instrument, the Note or the
Other Security Documents, and any act or omission that might otherwise be
construed as a release or discharge of Borrower from the obligations pursuant
hereto. All obligations and liabilities of Borrower under Article 12 shall cease
and terminate on the first (1st) anniversary of the date of payment to Lender in
cash of the entire Debt, provided that contemporaneously with or subsequent to
such payment, Borrower, at its sole cost and expense, delivers to Lender an
environmental audit of the Property in form and substance, and prepared by a
qualified environmental consultant, reasonably satisfactory in all respects to
Lender and indicating the Property is in full compliance with all applicable
Environmental Laws.
Section. Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH
Article - EXCULPATION .
Section. Exculpation. Notwithstanding anything to the contrary contained in this
Security Instrument or in any Other Security Document (but subject to the
provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender shall not enforce the
liability and obligation of Borrower to perform and observe the obligations
contained in the Note or this Security Instrument by any action or proceeding to
collect damages or wherein a money judgment or any deficiency judgment or order
or any judgment establishing any personal obligation or liability shall be
sought against Borrower or any principal director, officer, employee,
beneficiary, shareholder, partner, member, trustee, agent or affiliate of
Borrower or any person owning, directly or indirectly, any legal or beneficial
interest in Borrower, or any successors or assigns of any of the foregoing
(collectively, the "Exculpated Parties"). Lender may bring a foreclosure action,
action for specific performance or other appropriate action or proceeding to
enable Lender to enforce and realize upon this Security Instrument, the Other
Security Documents, and the interest in the Property, the Rents and any other
collateral given to Lender created by this Security Instrument and the Other
Security Documents; provided, however, subject to the provisions of Sections
15.2, 15.3, 15.4 and
<PAGE>
15.5, that any judgment in any action or proceeding shall be enforceable against
Borrower only to the extent of Borrower's interest in the Property, in the Rents
and in any other collateral given to Lender in connection with the Note. Lender,
by accepting the Note and this Security Instrument, agrees that it shall not,
except as otherwise provided below, sue for or demand any deficiency judgment
against Borrower or any of the Exculpated Parties in any action or proceeding,
under or by reason of or under or in connection with the Note, the Other
Security Documents or this Security Instrument.
Section. Reservation of Certain Rights. The provisions of Section 15.1
shall not (a) constitute a waiver, release or impairment of the Obligations; (b)
impair the right of Lender to name Borrower as a party defendant in any action
or suit for judicial foreclosure and sale under this Security Instrument; (c)
affect the validity or enforceability of any indemnity, guaranty, master lease
or similar instrument made in connection with the Note, this Security
Instrument, or the Other Security Documents; (d) impair the ability of Lender to
obtain the appointment of a receiver; or (e) impair the enforcement of the
Assignment of Leases and Rents executed in connection herewith.
Section. Exceptions to Exculpation. Notwithstanding the provisions of
Article 15.1 to the contrary, Borrower and Indemnitor shall be personally liable
to Lender on a joint and several basis for the Losses Lender incurs due to: (a)
fraud or intentional misrepresentation by Borrower or any other person or entity
in connection with the execution and the delivery of the Note, this Security
Instrument or the Other Security Documents; (b) Borrower's misapplication or
misappropriation of Rents received by Borrower after the occurrence and during
the continuance of an Event of Default; (c) Borrower's misapplication or
misappropriation of tenant security deposits or Rents collected in advance; (d)
the misapplication or misappropriation of insurance proceeds or condemnation
awards after the occurrence and during the continuance of an Event of Default;
(e) any fees or commissions paid by Borrower after the occurrence and during the
continuance of an Event of Default to any principal, affiliate or general
partner of Borrower, Indemnitor or Guarantor in violation of the terms of the
Note, this Security Instrument or the Other Security Documents; (f) gross
negligence or criminal acts perpetrated by it resulting in forfeiture, seizure
or loss of any portion of the security; (g) any failure by Borrower or
Indemnitor to comply with the terms and provisions of Section 13.4 hereof or of
the Environmental Indemnity; (h) any failure by Borrower or any general partner
or the SPE Member of Borrower to comply with the terms and provisions of Section
4.3 hereof; or (i) any sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment or transfer of the Property or any part thereof, within the
meaning of Article 8 hereof, without the prior written consent of Lender.
Section. Recourse. Notwithstanding the foregoing, the agreement of
Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect in the event
(i) Borrower fails to comply with the terms and conditions of Section 4.3, 8.1,
8.2 or 8.3, (ii) the Property or any part thereof shall become an asset in (A) a
voluntary bankruptcy or insolvency proceeding, or (B) an involuntary bankruptcy
or insolvency proceeding commenced by any Person (other than Lender) and
Borrower fails to use its best efforts to obtain a dismissal of such
proceedings, or (iii) Borrower or any Guarantor or Indemnitor fails to comply
with the terms
<PAGE>
and provisions of Section 3.11 hereof within thirty (30) days after written
notice from Lender to Borrower (which notice shall be a second notice given
after the expiration of any notice given pursuant to Section 10.1(e)); provided,
however, so long as PREIT Associates, L.P., a Delaware limited partnership,
maintains that certain line of credit with First Union National Bank, as agent,
pursuant to that certain Revolving Credit Loan Agreement with Corestates Bank,
N.A. (predecessor-in-interest to First Union National Bank), as agent, and First
Trust Savings Bank, Fleet Bank, N.A. and PNC Bank, as lenders, dated September
30, 1997 (or another credit arrangement containing market standard financial
covenants for net worth, leverage and liquidity), the occurrence of any of the
events referred to in subsections (i)-(iii) above shall not create recourse
liability against Borrower or any Guarantor or Indemnitor.
Section. Bankruptcy Claims. Nothing herein shall be deemed to be a
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
Article - NOTICES
Section. Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (a) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof, (b) one (1) Business Day (defined below) after having been deposited
for overnight delivery with any reputable overnight courier service, or (c)
three (3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Borrower: PR Hidden Lakes LLC
c/o PREIT-RUBIN
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Facsimile No. (215) 546-0240
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
<PAGE>
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in the
State of New York.
Article - APPLICABLE LAW
Section. Choice of Law. THIS SECURITY INSTRUMENT SHALL BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE
THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section. Usury Laws. This Security Instrument and the Note are subject
to the express condition that at no time shall Borrower be obligated or required
to pay interest on the Debt at a rate which could subject the holder of the Note
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is permitted by applicable law to contract
or agree to pay. If by the terms of this Security
<PAGE>
Instrument or the Note, Borrower is at any time required or obligated to pay
interest on the Debt at a rate in excess of such maximum rate, the rate of
interest under the Security Instrument and the Note shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate of interest from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding.
Section. Provisions Subject to Applicable Law. All rights, powers and
remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section. Inapplicable Provision. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
Article - SECONDARY MARKET
Section. Dissemination of Information. If Lender determines at any time
to sell, transfer or assign the Note, this Security Instrument and the Other
Security Documents, and any or all servicing rights with respect thereto, or to
grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities (such sale and/or issuance, the
"Securitization") evidencing a beneficial interest in a rated or unrated public
offering or private placement (the "Securities"), Lender may forward to each
purchaser, transferee, assignee, servicer, participant, investor, or their
respective successors in such Participations and/or Securities (collectively,
the "Investor") or any Rating Agency rating such Securities and each prospective
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the Debt and to Borrower, any Guarantor, any Indemnitors and
the Property (including, without limitation, all financial statements), which
shall have been furnished by Borrower, any Guarantor or any Indemnitors, as
Lender determines necessary or desirable. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any transfer made
or any Securities created pursuant to this Section, including, without
limitation, the delivery of an estoppel certificate required in accordance with
Subsection 7.4(c) hereof and such other documents as may be reasonably requested
by Lender and, upon Lender's reasonable request, meeting with any Rating Agency
for due diligence purposes. Borrower shall also furnish and
<PAGE>
Borrower, any Guarantor and any Indemnitor consent to Lender furnishing to such
Investors or such prospective Investors or any Rating Agency any and all
information concerning the Property, the Leases, the financial condition of
Borrower, any Guarantor and any Indemnitor as may be requested by Lender, any
Investor or any prospective Investor or Rating Agency in connection with any
sale, transfer or Participation, provided, however, PREIT Associates, L.P. and
Pennsylvania Real Estate Investment Trust shall only be required under this
Section 18.1 to disclose information that is deemed to be "public" information.
Borrower shall not be responsible for Lender's fees and expenses incurred in
connection with the transactions contemplated by this Section 18.1. Lender shall
reimburse Borrower for the reasonable actual out-of-pocket third party costs
incurred by Borrower in excess of $1,500.00 in connection with the transactions
contemplated by this Section 18.1. Borrower shall deliver on the date hereof, at
Borrower's sole cost and expense, a nonconsolidation opinion, and within ten
(10) Business Days after demand of Lender, an update of same (which update
Borrower will not be required to provide more than once), each in form and
substance and delivered by counsel acceptable to Lender and the Rating Agency
rating or proposed to rate the Securities, as may be required by Lender and/or
such Rating Agency. Borrower's failure to deliver the opinions required hereby
shall constitute an Event of Default hereunder.
Article - COSTS
Section. Performance at Borrower's Expense. Borrower acknowledges and
confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, provided, however, no commitment fee shall be imposed in
connection with the substitution of collateral, (c) obtaining certain consents,
waivers and approvals with respect to the Property, or (d) the review of any
Lease or proposed Lease or the preparation or review of any subordination,
non-disturbance agreement (the occurrence of any of the above shall be called an
"Event"). Borrower further acknowledges and confirms that it shall be
responsible for the payment of all costs of reappraisal of the Property or any
part thereof, whether required by law, regulation, Lender or any governmental or
quasi-governmental authority. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any Event or otherwise. Wherever it is provided for herein that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, all legal fees and disbursements of Lender (whether of retained firms, the
reimbursement for the expenses of in-house staff or otherwise) and all costs and
expenses of Lender, if any.
Section. Attorney's Fees for Enforcement. (a) Borrower shall pay all
legal fees incurred by Lender in connection with (i) the preparation of the
Note, this Security Instrument and the Other Security Documents; and (ii) the
items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender on
demand any and all expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender in protecting its interest in the
<PAGE>
Property or the Collateral or in collecting any amount payable hereunder or in
enforcing its rights hereunder with respect to the Property or the Collateral,
whether or not any legal proceeding is commenced hereunder or thereunder and
whether or not any default or Event of Default shall have occurred and is
continuing, together with interest thereon at the Default Rate from the date
paid or incurred by Lender until such expenses are paid by Borrower.
Article - DEFINITIONS
Section. General Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Security Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any subsequent owner or
owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender and any subsequent holder of the Note," the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, limited liability company, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word
"Property" shall include any portion of the Property and any interest therein,
and the phrases "attorneys' fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights under this Security Instrument.
Section. Headings, Etc. The headings and captions of various Sections
of this Security Instrument are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section. No Oral Change. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower, or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section. Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section. Duplicate Originals; Counterparts. This Security Instrument
may be executed in any number of duplicate originals and each duplicate original
shall be deemed
<PAGE>
to be an original. This Security Instrument may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Security Instrument.
Section. Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section. Subrogation. If any or all of the proceeds of the Note have
been used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall be
subrogated to all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the holder of such
indebtedness and such former rights, claims, liens, titles, and interests, if
any, are not waived but rather are continued in full force and effect in favor
of Lender and are merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the performance and discharge
of Borrower's obligations hereunder, under the Note and the Other Security
Documents and the performance and discharge of the Other Obligations.
Section. Entire Agreement. The Note, this Security Instrument and the
Other Security Documents constitute the entire understanding and agreement
between Borrower and Lender with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Security Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Security Documents.
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower as of the date first above written.
BORROWER:
Signed and Acknowledged PR HIDDEN LAKES LLC
in the presence of: a Delaware limited liability company
/s/ Karen Deans By: PR Hidden Lakes Manager, LLC
- ------------------------- its manager
/s/ Clare Dobbins
- ------------------------- By: /s/ Jeffrey A. Linn
-----------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
<PAGE>
STATE OF )
) SS:
COUNTY OF )
The foregoing instrument was acknowledged before me this 13th day of
April, 1999, by Jeffrey A. Linn, Authorized Signatory of PR Hidden Lakes
Manager, LLC, a Delaware limited liability company, manager of and on behalf of
PR Hidden Lakes LLC.
/s/ Illegible
-----------------------------------
This instrument was prepared by:
Robert Hempstead, Esq.
Sills Cummis Radin Tischman Epstein & Gross
One Riverfront Plaza
Newark, New Jersey 07102
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings
and improvements thereon, situate, lying and being
<PAGE>
Exhibit 10.15
PROMISSORY NOTE
$5,950,000.00 April 13, 1999
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
PREIT ASSOCIATES, L.P., a Delaware limited partnership ("Borrower"), promises to
pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California
corporation ("Lender"), at Lender's office located at 650 Dresher Road, P.O. Box
809, Horsham, Pennsylvania 19044-0809, Attn: Servicing - Accounting Manager, or
at such other place as Lender may designate to Borrower in writing from time to
time, the principal sum of FIVE MILLION NINE HUNDRED FIFTY THOUSAND AND 00/100
DOLLARS ($5,950,000.00), or so much thereof as is outstanding and unpaid,
together with interest thereon at the rate of 6.773% per annum ("Interest
Rate"), in lawful money of the United States of America, which, at the time of
payment, shall be legal tender in payment of all debts and dues, public and
private.
1. COMPUTATION OF INTEREST. Interest under this Note shall be paid in
arrears and shall be calculated based on a 360-day year and paid for the actual
number of days elapsed for any whole or partial month in which interest is being
calculated. Interest shall accrue from the date on which funds are advanced
(regardless of the time of day such advance is made) through and including the
day on which funds are repaid, unless payment is received by Lender prior to the
time set forth in Section 2.03 hereof.
2. PAYMENT OF PRINCIPAL AND INTEREST.
2.01 Principal and Interest Payments. Borrower shall pay principal
and interest due under this Note as follows:
Borrower shall pay consecutive monthly installments of
principal and interest in the amount of $39,083.01 (each a "Monthly Amount"),
beginning on the tenth day of June, 1999 ("First Payment Date"), and continuing
on the tenth day of each and every successive month thereafter (each a "Payment
Date") through and including the Payment Date immediately prior to the Maturity
Date (as defined below); and
On the tenth day of May, 2009 ("Maturity Date"), the entire
outstanding principal balance hereof, together with all accrued but unpaid
interest thereon and any other amounts due under the Note or the other Loan
Documents (hereafter defined) shall be due and payable in full.
2.02 Payment of Short Interest. If this Note is executed on a date
other than the tenth day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days
<PAGE>
from and including the date of this Note to and including the ninth day of such
month (or if the date of this Note is after the ninth day of the month, then the
next following month) (b) by a daily rate based on the Interest Rate calculated
for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day for all
purposes, including, without limitation, the accrual of interest on principal.
2.04 Application of Payments. Payments under this Note shall be
applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder unless partial prepayments are
expressly permitted in the event of partial release of collateral under Section
2.05 (b) below. No principal amount repaid may be reborrowed. All amounts due
under this Note shall be payable without setoff, counterclaim or any other
deduction whatsoever.
2.05 Loan Repayment and Defeasance.
(a) Repayment. Other than as set forth in this Section 2.05, or as
required or permitted pursuant hereto in connection with a casualty or
condemnation, Borrower shall have no right to prepay all or any portion of the
indebtedness evidenced by this Note (sometimes referred to in this Section 2.05
as "Loan") prior to February 10, 2009 (after which date Borrower shall incur no
prepayment penalty or fee).
(b) Voluntary Defeasance of the Note. On or after that date
("Optional Defeasance Date") which is the earlier to occur of (i) three years
after the date of this Note or (ii) two years after the Loan is sold into a
securitization ("Securitization"), and subject to confirmation from applicable
rating agencies ("Rating Agencies") having been obtained therefor and to the
terms and conditions set forth in this Section 2.05(b), Borrower may defease all
(but not less than all) of the Loan (hereinafter, "Defeasance"). Defeasance
shall be subject to satisfaction of each of the following conditions precedent:
(i) Borrower shall provide not less than thirty (30) days prior
written notice to Lender specifying a date ("Defeasance Date") which shall be a
Payment Date, on which the amount required to defease the Loan ("Defeasance
Deposit") is to be made and on which the Defeasance is to occur, as well as the
anticipated outstanding principal amount of this Note as of the Defeasance Date.
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the outstanding principal balance of this Note to but not including
the Defeasance Date.
<PAGE>
(iii) Borrower shall pay to Lender all other sums, not
including scheduled interest or principal payments, then due under this Note,
the Security Instrument and any of the other Loan Documents.
(iv) No Event of Default shall exist on the Defeasance Date.
(v) Borrower shall pay to Lender the required Defeasance
Deposit for the Defeasance, or at Borrower's option, Borrower shall deliver to
Lender U.S. Government Securities which provide payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date
(including the outstanding principal balance of this Note due on the Maturity
Date), and in amounts equal to the full amounts due on each Payment Date under
this Note.
(vi) Borrower shall execute and deliver one or more security
agreements in form and substance satisfactory to Lender (collectively, "Security
Agreement"), creating a first priority lien on, and security interest in, the
Defeasance Deposit and the U.S. Government Securities purchased with Defeasance
Deposit in accordance with the provisions of Section 2.05(c).
(vii) Borrower shall deliver to Lender an opinion of
Borrower's counsel, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion, stating, among other things, that Lender
has a perfected first priority security interest in the U.S. Government
Securities purchased with the Defeasance Deposit.
(viii) If required by the applicable Rating Agencies, Borrower
also shall deliver or cause to be delivered from Borrower's counsel a
non-consolidation opinion with respect to the Successor Borrower (as defined
below), if any, which opinion shall be in form and substance satisfactory to
Lender in its reasonable discretion and to the applicable Rating Agencies. In
addition, if the Loan is included in any REMIC formed pursuant to a
Securitization, Borrower also shall deliver or cause to be delivered an opinion
of Borrower's counsel, which opinion shall be in form and substance satisfactory
to Lender in its reasonable discretion, stating that (A) after a Defeasance, the
Loan will continue to be a "qualified mortgage" within the meaning of Section
860G of the United States Internal Revenue Code (as now or hereafter amended,
"Code") and (B) the REMIC will not fail to maintain its status as a "real estate
mortgage investment conduit" within the meaning of Section 860D of the Code as a
result of such Defeasance.
(ix) Borrower shall deliver to Lender a certification from
Borrower, in form and substance satisfactory to Lender, certifying that the
requirements set forth in this Section 2.05(b) have been satisfied.
(x) Borrower shall deliver such other certificates,
documents or instruments as Lender may reasonably request, all of which shall be
in form and substance acceptable to Lender.
<PAGE>
(xi) Borrower shall pay all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any costs and
expenses associated with the Release Instruments (as defined in Section 2.05(f)
hereof) and reasonable attorneys fees and expenses.
(xii) Borrower shall deliver to Lender a confirmation, in form
and substance satisfactory to Lender, by a "Big Five" independent certified
public accounting firm, that Defeasance Deposit is sufficient to pay all
Scheduled Defeasance Payments and other amounts required to be paid by Borrower
hereunder in connection with the proposed Defeasance.
(xiii) Borrower shall deliver to Lender confirmation, in form
and substance satisfactory to Lender, that all conditions to Defeasance have
been met from any applicable Rating Agency that has required as a condition to
Defeasance that such conditions have been met.
(c) Purchase of U.S. Government Securities. In connection with the
Defeasance of this Note, Borrower shall purchase U.S. Government Securities
which provide payments on or prior to, but as close as possible to, all
successive Payment Dates after the Defeasance Date, (including the outstanding
principal balance of this Note due on the Maturity Date), and in amounts equal
to the full amounts due on each Payment Date under this Note ("Scheduled
Defeasance Payments"), or, at Borrower's option, Borrower shall pay Lender the
required Defeasance Deposit in accordance with Section 2.5(b)(v) above. Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Government Securities (which
purchases, if made by Lender, shall be made on an arms-length basis at then
prevailing market rates) which provide payments on or prior to, but as close as
possible to, all successive Payment Dates after the Defeasance Date, (including
the outstanding principal balance of this Note due on the Maturity Date), and in
amounts equal to the Scheduled Defeasance Payments. Borrower, pursuant to the
Security Agreement or other appropriate document, shall irrevocably authorize
and direct that the payments received from the U.S. Government Securities may be
made directly to Lender and applied to satisfy the obligations of the Borrower
under this Note. In connection with the Defeasance of the Loan, any portion of
the Defeasance Deposit in excess of the amount necessary to purchase the U.S.
Government Securities required by this Section 2.05 (c) and satisfy Borrower's
obligations under Section 2.05 shall be remitted to Borrower. Any amounts
received in payment on the U.S. Government Securities in excess of the amounts
necessary to make monthly payments pursuant to Section 2 (including payments due
on the Maturity Date) shall be remitted to Borrower.
(d) Successor Borrower Option. If requested by Borrower, in
connection with a Defeasance of the Loan, Lender, at Borrower's expense, shall
establish or designate one or more successor entities ("Successor Borrower") and
Borrower shall transfer and assign all obligations, rights and duties under and
to this Note, together with the pledged U.S. Government Securities, to the
Successor Borrower. The obligation of the Lender to establish or designate a
Successor Borrower shall be retained by the original Lender named herein
notwithstanding the sale or transfer of this Loan unless such obligation is
specifically assumed by the transferee. The
<PAGE>
Successor Borrower shall assume in writing the obligations under this Note, the
Security Agreement and the other Loan Documents, by agreements in form and
substance satisfactory to Lender, whereupon Borrower shall, pursuant to the
express terms of such agreement, be relieved of its obligations thereunder.
Borrower shall pay $10 to any such Successor Borrower as consideration for
assuming Borrower's obligations under the Note and the Security Agreement.
Notwithstanding anything in this Note or the Security Instrument to the
contrary, no other assumption fee shall be payable upon a transfer of this Note
in accordance with this Section 2.05(d), but Borrower shall pay all
out-of-pocket costs and expenses incurred by Lender, including Lender's
reasonable attorneys fees and expenses, incurred in connection therewith.
(e) Repayment Upon Default. If all or any part of the
principal amount of this Note is prepaid upon acceleration of this Note
following the occurrence of an Event of Default prior to the Optional Defeasance
Date, then, in addition to such principal payment, Borrower shall be required to
make such payments ("Yield Maintenance Payments") in an amount equal to the
greater of (i) one percent (1%), or (ii) the excess, if any, of (A) the
aggregate respective present values of all scheduled interest and principal
payments payable on each Payment Date in respect of this Note for the period
from the date of such prepayment upon acceleration to the Maturity Date,
discounted monthly at a rate equal to the Treasury Constant Maturity Yield Index
(defined below) and based on a 360-day year of twelve 30-day months over (B) the
then current outstanding principal amount of this Note. For purposes hereof,
"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) ("FRB Release") published during the second full week
preceding the Prepayment Date for instruments having a maturity coterminous with
the remaining term of this Note. In the event the FRB Release is no longer
published, Lender shall select a comparable publication to determine the
Treasury Constant Maturity Yield Index. If there is no Treasury Constant
Maturity Yield Index for instruments having a maturity coterminous with the
remaining term of this Note, then 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 shall be used, 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). The Yield
Maintenance Payments to be paid in connection with any prepayment under this
Section 2.05(e) shall be determined by Lender and shall be conclusive and
binding on Borrower (absent manifest error). For purposes of this Section
2.05(e), the unpaid principal amount due on this Note on the date of prepayment
shall be determined after giving effect to any payment of scheduled amortization
made on such date.
(f) Release of the Mortgaged Property. No repayment, prepayment
or Defeasance of all or any portion of this Note shall cause, give rise to a
right to require, or otherwise result in, the release of the real or personal
property subject to the lien or mortgage created by the Security Instrument
(referred to in this Section 2.05(f) as "Mortgaged Property"), except as
follows:
<PAGE>
(i) If Borrower has elected Defeasance, and the requirements of
Section 2.05(b) have been satisfied, the Mortgaged Property shall be released
from the lien and mortgage created by the Security Instrument, whereupon the
U.S. Government Securities pledged pursuant to the Security Agreement shall be
the sole source of Borrower's collateral securing this Note. Sections 3.1, 7.2,
7.4(a), 11.2, 11.7 and 14.2 and Articles 13 and 15 of the Security Instrument
shall otherwise remain in full force and effect.
(ii) In connection with the release of the Mortgaged Property
contemplated in this Section 2.05(f), Borrower shall submit to Lender, not less
than thirty (30) days prior to the Defeasance Date, a release of the Mortgaged
Property (and related Loan Documents approved by Lender) for execution by Lender
which shall be in a form appropriate in the applicable state and otherwise
satisfactory to Lender in its reasonable discretion, along with all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release (collectively, "Release Instruments"), together
with a certification from Borrower, in form and substance satisfactory to
Lender, certifying that such documentation (A) is in compliance with all Legal
Requirements, and (B) will effect such releases in accordance with the terms of
this Section 2.05.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note
and the obligations created hereby (including without limitation the amounts
authorized by Section 4 to be collected by Lender and the Prepayment
Consideration when due hereunder) are secured by, among other things, a first
mortgage, security interest and lien on certain real and personal property
collateral of Borrower, tangible and intangible, as described more particularly
in that certain Deed of Trust and Security Agreement or Mortgage and Security
Agreement, as applicable (either, "Security Instrument") from Borrower to
Lender, dated as of date hereof. The Security Instrument together with this Note
and all other documents executed by Borrower now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, and all extensions, renewals and modifications thereof, are
collectively referred to herein as the "Loan Documents."
4. DEFAULT.
4.01 Event of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Note: (a) if any
payment of principal and interest or any other payment required under this Note
is not received by Lender on or before the date such payment is due; or (b) if
any default should occur under any of the other Loan Documents which is not
fully cured following applicable notice or prior to the expiration of any
applicable grace or cure period. Upon the occurrence of an Event of Default, at
Lender's option, the outstanding principal balance of this Note, together with
all unpaid interest accrued thereon and all other sums due hereunder or under
any other of the other Loan Documents, shall, without notice or prior demand,
immediately become due and payable.
4.02 Late Charges. If any payment is not received by Lender on or
before the date on which such payment originally was due, then, in addition to
any default interest
<PAGE>
payments due hereunder, Borrower also shall pay to Lender a late charge in an
amount equal to five percent (5.0%) of the amount of such overdue payment to
defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of the
delinquent payment. Such late charge shall be immediately due and payable,
without notice or demand therefor.
4.03 Default Interest Rate. If this Note is not paid in full on or
before the Maturity Date or the date on which the due date of the indebtedness
has been accelerated pursuant to the provisions hereof, the unpaid principal and
accrued interest and other amounts then due shall bear interest at a rate per
annum ("Default Interest Rate") equal to the lesser of (a) five percent (5.0%)
in excess of the Interest Rate or (b) the maximum rate of interest, if any,
which may be charged or collected from Borrower under applicable law. In
addition, Lender shall have the right, without acceleration of the indebtedness,
to collect interest at the Default Interest Rate on any payment due hereunder
(including without limitation late charges and fees for legal counsel) which is
not received by Lender on or before the date on which such payment originally
was due. Interest at the Default Interest Rate shall be immediately due and
payable from the due date specified herein and shall accrue until all Events of
Default have been fully cured or full payment is received, as applicable.
4.04 Interest on Judgments. Interest shall accrue on any judgment
obtained by Lender in connection with the enforcement or collection of this Note
from the date any such judgment becomes due until such judgment amount is paid
in full at a rate equal to the greater of (a) the Default Interest Rate or (b)
the legal rate applicable to judgments within such jurisdiction; provided,
however, that interest shall not accrue at a rate in excess of the maximum rate
of interest, if any, which may be charged or collected from Borrower under
applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of Lender in
this Note and in the other Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's sole discretion and as often as occasion therefor shall arise. If
Borrower's obligations under this Note or any of the other Loan Documents are
enforced by Lender through an attorney-at-law, or any payment due under this
Note or the other Loan Documents is collected by or through an attorney-at-law
or collection agency, Borrower agrees to pay all costs incurred by Lender in
connection therewith, including, but not limited to, reasonable fees and
disbursements of legal counsel (whether with respect to a retained firm or
Lender's in-house staff) and collection agency costs, whether or not suit be
brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
<PAGE>
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
contained in this Note, the liability of Borrower and the Exculpated Parties (as
defined in Section 15.1 of the Security Instrument) to pay the indebtedness
evidenced by this Note and for the performance of the other agreements,
covenants and obligations contained herein and in the other Loan Documents shall
be limited as set forth in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no
time shall Borrower be required or obligated to pay interest (or any other
amount agreed to be paid hereunder which shall be deemed to be interest) at a
rate which would subject Lender to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by applicable law to pay. If, from any circumstance whatsoever,
Borrower is at any time required or obligated to pay interest (or any other
amount agreed to be paid hereunder shall be deemed to be interest) at a rate in
excess of such maximum rate, then the amount to be paid immediately shall be
reduced to such maximum rate, and, as required by applicable law, all previous
payments in excess of such maximum shall be deemed to have been payments in
reduction of the principal balance owing under this Note in the inverse order of
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 sums paid or agreed to be paid
to Lender for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note.
7. GENERAL CONDITIONS.
7.01 No Waiver by Lender. No failure to accelerate the debt
evidenced hereby nor failure or delay in exercising any other right or remedy
upon the occurrence of an Event of Default hereunder, or any acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (a) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; 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 payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others who may
become liable for payment of all or any part of the indebtedness evidenced by
this Note, hereby waives
<PAGE>
presentment for payment, demand, protest, and notice of dishonor, protest,
nonpayment, demand, intent to accelerate, and acceleration. Borrower, for itself
and all others who may become liable for payment of all or any part of the
indebtedness evidenced by this Note, 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 party and property (real and personal), against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
7.03 Unconditional Payment. If 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. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note, absent this paragraph,
may not otherwise qualify as a negotiable instrument under applicable law.
7.06 Sale of Loan by Lender. Lender shall have the right to
transfer, sell or assign this Note, the Security Instrument and the other
Security Documents, and the Obligations hereunder. Lender shall provide Borrower
with notice of any such transfer, sale or assignment within five (5) days prior
thereto, but Lender's failure to so notify Borrower shall have no effect or
consequence and Lender shall have no liability to Borrower thereon or hereunder.
<PAGE>
8. MISCELLANEOUS.
8.01 Notices. All notices and other communications under this Note
or under the other Loan Documents are to be in writing, addressed to the
respective party as set forth in this section, and shall be deemed to have been
duly given (a) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (b) one (1) business day after having been deposited
for overnight delivery, fee prepaid, with any reputable overnight courier
service, or (c) three (3) business days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested.
Initial addresses for each party are as follows:
Borrower: PREIT Associates, L.P.
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written notice to
the other given in accordance with this section; provided, however, that no such
change of address will be effective until written notice thereof is actually
received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice are
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together with the
other Loan Documents and Lender's commitment letter to Borrower, contain the
entire agreements between Borrower and Lender relating to the subject matter
hereof and thereof, and supersede all prior discussions and agreements (oral or
written) relative hereto and thereto which are not contained herein or therein.
Borrower represents and warrants that it is not relying on any promises,
covenants, representations or agreements in connection with this Note or the
other Loan Documents, other than as expressly set forth herein or therein. In
the event of any conflict between the terms of the Loan Documents, the following
order of priority shall be used to resolve such conflict: The Note shall control
over the Security Instrument and the Security Instrument shall control over all
other Loan Documents. Time is of the essence with respect to all provisions of
this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party against whom enforcement thereof is
sought and then only to the extent expressly set forth in such writing. No
person other than a duly authorized officer or agent of Lender shall be deemed
<PAGE>
an agent of Lender nor have any authority to waive, modify, supplement or
terminate in any manner whatsoever any of the terms of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms and
provisions of this Note and the other Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. 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 and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or the
other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this Note
nor any uncertainty or ambiguity herein shall be construed or resolved against
Lender by virtue of the fact that such document has originated with Lender as
drafter. Borrower acknowledges that it has reviewed this Note and has had the
opportunity to consult with counsel on same. This Note, therefore, shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto. All
personal pronouns used herein, whether used in the masculine, feminine or neuter
gender, shall be deemed to 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. "Herein," "hereof" and "hereunder" and other words of similar
import refer to this Note as a whole and not to any particular section,
paragraph or other subdivision; "Section" refers to the entire section and not
to any particular subsection, paragraph of other subdivision. Reference to days
for performance shall mean calendar days unless Business Days are expressly
indicated.
8.07 Governing Law. This Note and the other Loan Documents shall be
interpreted, construed and enforced according to the laws of the state in which
the real property encumbered by the Security Instrument is located (without
giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its acceptance
of this Note, agree and consent to the exclusive jurisdiction and venue of any
state or federal court sitting in the county and state where the real property
encumbered by the Security Instrument is located with respect to any legal
action, proceeding, or controversy between them and hereby expressly waive any
and all rights under applicable law or in equity to object to the jurisdiction
<PAGE>
and venue of said courts. Borrower further irrevocably consents to service of
process by certified mail, return receipt requested, to Borrower at the address
for Borrower last provided to Lender in accordance with the notice provision of
this Note and agrees that such service shall be effective ten (10) days after
mailing. Nothing herein shall, however, preclude or prevent Lender from bringing
any one or more actions against Borrower in any other jurisdiction as may be
necessary to enforce or realize upon the Security or other collateral provided
for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Note under seal as of
the date first above written.
PREIT ASSOCIATES, L.P.,
a Delaware limited partnership
By: Pennsylvania Real Estate
Investment Trust, its general
partner
By: /s/ Jeffrey A. Linn
------------------------------
Name: Jeffrey A. Linn
Title: Senior Vice President
PAY TO THE ORDER OF ________________________________, WITHOUT RECOURSE.
GMAC COMMERCIAL MORTGAGE CORPORATION
By:___________________________________
Name:_________________________________
Title:________________________________
Date:_________________________________
<PAGE>
Exhibit 10.16
================================================================================
PREIT ASSOCIATES, L.P., as mortgagor
(Borrower)
to
GMAC COMMERCIAL MORTGAGE CORPORATION, as mortgagee
(Lender)
-----------------------------------
MORTGAGE AND
SECURITY AGREEMENT
-----------------------------------
Dated: April 13, 1999
Location: 2031 Locust Street
Philadelphia, PA
PREPARED BY AND UPON
RECORDATION RETURN TO:
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 - GRANTS OF SECURITY 1
Section 1.1 Property Mortgaged. 1
Section 1.2 Assignment of Leases and Rents. 3
Section 1.3 Security Agreement. 4
Section 1.4 Pledge of Monies Held. 4
Article 2 - DEBT AND OBLIGATIONS SECURED 4
Section 2.1 Debt. 4
Section 2.2 Other Obligations. 5
Section 2.3 Debt and Other Obligations. 5
Section 2.4 Payments. 5
Article 3 - BORROWER COVENANTS 6
Section 3.1 Payment of Debt. 6
Section 3.2 Incorporation by Reference. 6
Section 3.3 Insurance. 6
Section 3.4 Payment of Taxes, Etc. 10
Section 3.5 Escrow Fund. 11
Section 3.6 Condemnation. 11
Section 3.7 Leases and Rents. 12
Section 3.8 Maintenance of Property. 13
Section 3.9 Waste. 13
Section 3.10 Compliance With Laws. 13
Section 3.11 Books and Records. 14
Section 3.12 Payment For Labor and Materials. 15
Section 3.13 Performance of Other Agreements. 16
Section 3.14 Change of Name, Identity or Structure. 16
Section 3.15 Existence. 16
Article 4 - SPECIAL COVENANTS 16
Section 4.1 Property Use. 16
Section 4.2 ERISA. 16
Section 4.3 Intentionally Deleted. 17
Section 4.4 Restoration After Casualty/Condemnation. 17
Article 5 - REPRESENTATIONS AND WARRANTIES 21
Section 5.1 Warranty of Title. 21
Section 5.2 Authority. 21
Section 5.3 Legal Status and Authority. 22
<PAGE>
Section 5.4 Validity of Documents. 22
Section 5.5 Litigation. 22
Section 5.6 Status of Property. 23
Section 5.7 No Foreign Person. 24
Section 5.8 Separate TAX Lot. 24
Section 5.9 ERISA Compliance. 24
Section 5.10 Leases. 24
Section 5.11 Financial Condition. 25
Section 5.12 Business Purposes. 25
Section 5.13 Taxes. 25
Section 5.14 Mailing Address. 25
Section 5.15 No Change in Facts or Circumstances. 25
Section 5.16 Disclosure. 26
Section 5.17 Third Party Representations. 26
Section 5.18 Illegal Activity. 26
Section 5.19 FUNB Line of Credit. 26
Article 6 - DEBTOR/CREDITOR RELATIONSHIP 26
Section 6.1 Relationship of Borrower and Lender. 26
Section 6.2 Servicing of the Loan. 26
Article 7 - FURTHER ASSURANCES 26
Section 7.1 Recording of Security Instrument, Etc. 26
Section 7.2 Further Acts, Etc. 27
Section 7.3 Changes in TAX, Debt Credit and Documentary Stamp Laws. 27
Section 7.4 Estoppel Certificates. 28
Section 7.5 Flood Insurance. 28
Section 7.6 Splitting of Security Instrument. 29
Section 7.7 Replacement Documents. 29
Section 7.8 Amended Financing Statements. 29
Article 8 - DUE ON SALE/ENCUMBRANCE 29
Section 8.1 No Sale/Encumbrance. 29
Section 8.2 Sale/Encumbrance Defined. 30
Section 8.3 Lender's Rights. 31
Section 8.4 Right To Substitute Property 31
Article 9 - PREPAYMENT 31
Section 9.1 Prepayment Only in Accordance with Note. 31
Article 10 - DEFAULT 32
Section 10.1 Events of Default. 32
<PAGE>
Article 11 - RIGHTS AND REMEDIES 33
Section 11.1 Remedies. 33
Section 11.2 Application of Proceeds. 36
Section 11.3 Right to Cure Defaults. 36
Section 11.4 Actions and Proceedings. 37
Section 11.5 Recovery of Sums Required To Be Paid. 37
Section 11.6 Examination of Books and Records. 37
Section 11.7 Other Rights, Etc. 37
Section 11.8 Right to Release Any Portion of the Property. 38
Section 11.9 Violation of Laws. 38
Section 11.10 Right of Entry. 38
Article 12 - ENVIRONMENTAL HAZARDS 38
Section 12.1 Environmental Representations and Warranties. 38
Section 12.2 Environmental Covenants. 40
Section 12.3 Lender's Rights. 41
Article 13 - INDEMNIFICATION 41
Section 13.1 General Indemnification. 41
Section 13.2 Mortgage and/or Intangible Tax. 43
Section 13.3 ERISA Indemnification. 43
Section 13.4 Environmental Indemnification. 43
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees and
Expenses. 44
Article 14 - WAIVERS 44
Section 14.1 Waiver of Counterclaim. 44
Section 14.2 Marshalling and Other Matters. 44
Section 14.3 Waiver of Notice. 45
Section 14.4 Waiver of Statute of Limitations. 45
Section 14.5 Sole Discretion of Lender. 45
Section 14.6 Survival. 45
Section 14.7 Waiver of Trial By Jury. 45
Article 15 - EXCULPATION 46
Section 15.1 Exculpation. 46
Section 15.2 Reservation of Certain Rights. 46
Section 15.3 Exceptions to Exculpation. 46
Section 15.4 Recourse. 47
Section 15.5 Bankruptcy Claims. 47
Article 16 - NOTICES 47
Section 16.1 Notices. 48
<PAGE>
Article 17 - APPLICABLE LAW 49
Section 17.1 Choice of Law. 49
Section 17.2 Usury Laws. 49
Section 17.3 Provisions Subject to Applicable Law. 49
Section 17.4 Inapplicable Provision. 49
Article 18 - SECONDARY MARKET 50
Section 18.1 Dissemination of Information. 50
Article 19 - COSTS 50
Section 19.1 Performance at Borrower's Expense. 50
Section 19.2 Attorney's Fees for Enforcement. 51
Article 20 - DEFINITIONS 51
Section 20.1 General Definitions. 51
Section 20.2 Headings, Etc. 52
Article 21 - MISCELLANEOUS PROVISIONS 52
Section 21.1 No Oral Change. 52
Section 21.2 Liability. 52
Section 21.3 Duplicate Originals; Counterparts. 52
Section 21.4 Number and Gender. 52
Section 21.5 Subrogation. 52
Section 21.6 Entire Agreement. 52
<PAGE>
Exhibits -
Exhibit A - Description of Land
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
o ADA: Subsection 3.10(a);
o Applicable Law: Subsection 3.10(a);
o Attorneys' Fees/Counsel Fees: Section 20.1, 20.1;
o Bankruptcy Code: Subsection 1.1(f);
o Borrower: Preamble;
o Business Day: Section 16.1;
o Casualty Consultant: Subsection 4.4(b)(iii);
o Casualty Retainage: Subsection 4.4(b)(iii);
o Collateral: Section 1.3;
o Debt: Section 2.1;
o Default Rate: Section 10.3;
o Environmental Indemnity: Subsection 10.1(c);
o Environmental Law: Section 12.1;
o Environmental Liens: Section 12.2;
o Environmental Report: Section 12.1;
o ERISA: Subsection 4.2(a);
o Escrow Fund: Section 3.5;
o Event: Section 19.1;
o Event of Default: Section 10.1;
o Exculpated Parties: Section 15.1;
o Force Majeure: Subsection 4.4(b);
o Guarantor: Section 5.5;
o Hazardous Substances: Section 12.1;
o Improvements: Subsection 1.1(c);
o Indemnified Parties: Section 13.1;
o Indemnitor: Subsection 10.1(c);
o Independent Director: Subsection 4.3(c);
o Insurance Premiums: Subsection 3.3(b);
o Investor: Section 18.1;
o Land: Subsection 1.1(a);
o Lease Guaranty: Subsection 3.7(a);
o Leases: Subsection 1.1(f);
o Lender: Preamble;
o Loan Application: Section 5.15;
o Losses: Section 13.1;o
<PAGE>
o Net Proceeds: Subsection 4.4(b);
o Net Proceeds Deficiency: Subsection 4.4(b)(v);
o Note: Recitals;
o Obligations: Section 2.3;
o Other Charges: Subsection 3.4(a);
o Other Obligations: Section 2.2;
o Other Security Documents: Section 3.2;
o Participations: 18.1;
o Permitted Exceptions: Section 5.1;
o Person: Section 20.1;
o Personal Property: Subsection 1.1(e);
o Policies/Policy: Subsection 3.3(b), 3.3(b);
o Property: Section 1.1;
o Qualified Insurer: Subsection 3.3(b);
o Rating Agency: Subsection 3.3(b);
o Registrar: Section 18.2;
o Release: Section 12.1;
o Remediation: Section 12.1;
o Rents: Subsection 1.1(f);
o Restoration: Subsection 3.3(d);
o Securities: Section 18.1;
o Securitization: Section 18.1;
o Security Instrument: Preamble;
o Servicer: Section 6.2;
o Taxes: Subsection 3.4(a); and
o Uniform Commercial Code: Subsection 1.1(e).
<PAGE>
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security
Instrument") is made as of the 13th day of April, 1999, by PREIT ASSOCIATES,
L.P., a Delaware limited partnership, having its principal place of business at
The Bellevue, Suite 300, 200 South Broad Street, Philadelphia, Pennsylvania
19102, as mortgagor ("Borrower"), to GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation, having an address at 650 Dresher Road, Horsham,
Pennsylvania 19044-8015, as mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given
to Lender is indebted to Lender in the principal sum of $5,950,000 in lawful
money of the United States of America (the note together with all extensions,
renewals, modifications, consolidations, substitutions, replacements,
restatements and increases thereof shall collectively be referred to as the
"Note"), with interest from the date thereof at the rates set forth in the Note,
principal and interest to be payable in accordance with the terms and conditions
provided in the Note.
Borrower desires to secure the payment of the Debt (as
defined in Article 2) and the performance of all of its obligations under the
Note and the Other Obligations (as defined in Article 2).
Article - GRANTS OF SECURITY
Section . Property Mortgaged. Borrower does hereby
irrevocably (i) mortgage, grant, bargain, sell, pledge, assign, warrant,
transfer and convey to Lender and to its successors and assigns with power of
sale in accordance with the terms and conditions hereof, for the use and benefit
of Lender, and (ii) grant a security interest to Lender and to its successors
and assigns with power of sale, in accordance with the terms and conditions
hereof, for the use and benefit of Lender, in, the following property, rights,
interests and estates now owned, or hereafter acquired by Borrower
(collectively, the "Property"):
() Land. The real property described in Exhibit A attached
hereto and made a part hereof (the "Land");
() Additional Land. All additional lands, estates and
development rights hereafter acquired by Borrower for use in
connection with the Land and the development of the Land that may,
from time to time, by supplemental mortgage or otherwise be
expressly made subject to the lien of this Security Instrument;
() Improvements. The buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located on
the Land (the "Improvements");
<PAGE>
() Easements. All easements, rights-of-way or use, rights,
strips and gores of land, streets, ways, alleys, passages, sewer
rights, water, water courses, water rights and powers, air rights
and development rights, and all estates, rights, titles, interests,
privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way now or hereafter
belonging, relating or pertaining to the Land and the Improvements
and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line
thereof and all the estates, rights, titles, interests, dower and
rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity,
of Borrower of, in and to the Land and the Improvements and every
part and parcel thereof, with the appurtenances thereto;
() Fixtures and Personal Property. All machinery, equipment,
fixtures (including, but not limited to all heating, air
conditioning, plumbing, lighting, communications and elevator
fixtures) and other property of every kind and nature whatsoever
owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon the Land or the
Improvements, or appurtenant thereto, and used in connection with
the present or future operation and occupancy of the Land and the
Improvements and all building equipment, materials and supplies of
any nature whatsoever owned by Borrower, or in which Borrower has or
shall have an interest, now or hereafter located upon the Land and
the Improvements, or appurtenant thereto, or used in connection with
the present or future operation and occupancy of the Land and the
Improvements (collectively, the "Personal Property"), and the right,
title and interest of Borrower in and to any of the Personal
Property which may be subject to any security interests, as defined
in the Uniform Commercial Code, as adopted and enacted by the state
or states where any of the Property is located (the "Uniform
Commercial Code"), superior in lien to the lien of this Security
Instrument and all proceeds and products of the above;
() Leases and Rents. All leases and other agreements
affecting the use, enjoyment or occupancy of all or any part of the
Land or the Improvements heretofore or hereafter entered into
whether before or after the filing by or against Borrower of any
petition for relief under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy
Code"), as the same may be amended from time to time (the "Leases")
and all right, title and interest of Borrower, its successors and
assigns therein and thereunder, including, without limitation, all
guarantees, letters of credit and any other credit support given by
any guarantor in connection therewith, cash or securities deposited
under the Leases to secure the performance by the lessees of their
obligations thereunder and all rents, additional rents, revenues,
issues and profits (including all oil and gas or other mineral
royalties and bonuses) from the Land and the Improvements whether
paid or accruing before or after the filing by or against Borrower
of any petition for relief under the Bankruptcy Code (the "Rents")
and all
<PAGE>
proceeds from the sale or other disposition of the Leases and the
right to receive and apply the Rents to the payment of the Debt;
() Condemnation Awards. All awards or payments, including
interest thereon, which may heretofore and hereafter be made with
respect to the Property, whether from the exercise of the right of
eminent domain (including, but not limited to any transfer made in
lieu of or in anticipation of the exercise of the right), or for a
change of grade, or for any other injury to or decrease in the value
of the Property;
() Insurance Proceeds. All proceeds of and any unearned
premiums on any insurance policies covering the Property, including,
without limitation, the right to receive and apply the proceeds of
any insurance judgments, or settlements made in lieu thereof, for
damage to the Property;
() TAX Certiorari. All refunds, rebates or credits in
connection with a reduction in real estate taxes and assessments
charged against the Property as a result of TAX certiorari or any
applications or proceedings for reduction;
() Rights. The right, in the name and on behalf of Borrower,
to commence any action or proceeding to protect the interest of
Lender in the Property and while an Event of Default (defined in
Section 10.1) remains uncured, to appear in and defend any action or
proceeding brought with respect to the Property; ------
() Agreements. All agreements, contracts, certificates,
instruments, franchises, permits, licenses, plans, specifications
and other documents, now or hereafter entered into, and all rights
therein and thereto, respecting or pertaining to the use,
occupation, construction, management or operation of the Land and
any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right,
title and interest of Borrower therein and thereunder, including,
without limitation, the right, while an Event of Default remains
uncured, to receive and collect any sums payable to Borrower
thereunder;
() Intangibles. All accounts, escrows, chattel paper, claims,
deposits, trade names, trademarks, servicemarks, logos, copyrights,
goodwill, books and records and all other general intangibles
specific to or used in connection with the operation of the
Property, if any; and
() Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation,
proceeds of insurance and condemnation awards, into cash or
liquidation claims;
() Other Rights. Any and all other rights of Borrower in and
to the items set forth in Subsections (a) through (m) above.
<PAGE>
Section . Assignment of Leases and Rents. Borrower hereby
absolutely and unconditionally assigns to Lender Borrower's right, title and
interest in and to all current and future Leases and Rents; it being intended by
Borrower that this assignment constitutes a present, absolute assignment and not
an assignment for additional security only. Nevertheless, subject to the terms
of this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable
license to collect and receive the Rents. Borrower shall hold the Rents, or a
portion thereof, sufficient to discharge all current sums due on the Debt, for
use in the payment of such sums.
Section . Security Agreement. This Security Instrument is
both a real property mortgage and a "security agreement" within the meaning of
the Uniform Commercial Code. The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. By executing and delivering this Security
Instrument, Borrower hereby grants to Lender, as security for the Obligations
(defined in Section 2.3), a security interest in the Property to the full extent
that the Property may be subject to the Uniform Commercial Code (said portion of
the Property so subject to the Uniform Commercial Code, the "Collateral").
Section . Pledge of Monies Held. Borrower hereby pledges to
Lender, and grants to Lender a security interest in, any and all monies now or
hereafter held by Lender, including, without limitation, any sums deposited in
the Escrow Fund (defined in Section 3.5) and the Net Proceeds (defined in
Section 4.4), as additional security for the Obligations until expended or
applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
unto the Lender and its successors and assigns, with power of sale in accordance
with the terms and conditions hereof, for the use and benefit of Lender, and the
successors and assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Borrower shall well and truly pay to Lender the Debt at the
time and in the manner provided in the Note and this Security Instrument, shall
well and truly perform the Other Obligations as set forth in this Security
Instrument and shall well and truly abide by and comply with each and every
covenant and condition set forth herein and in the Note, these presents and the
estate hereby granted shall cease, terminate and be void.
Article - DEBT AND OBLIGATIONS SECURED
Section . Debt. This Security Instrument and the grants,
assignments and transfers made in Article 1 are given for the purpose of
securing the following, in such order
<PAGE>
of priority as Lender may determine in its sole discretion (the "Debt"):
() the payment of the indebtedness evidenced by the Note in
lawful money of the United States of America;
() the payment of interest, default interest, late charges
and other sums, as provided in the Note, this Security Instrument or
the Other Security Documents (defined in Section 3.2);
() the payment of any prepayment consideration, defeasance
payment, exit fee or similar fees provided in the Note;
() the payment of all other monies agreed or provided to be
paid by Borrower in the Note, this Security Instrument or the Other
Security Documents;
() the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the
security interest created hereby; and
() the payment of all sums advanced and costs and expenses
incurred by Lender in connection with the Debt or any part thereof,
any renewal, extension, modification, consolidation, change,
substitution, replacement, restatement or increase of the Debt or
any part thereof, or the acquisition or perfection of the security
therefor, whether made or incurred at the request of Borrower or
Lender.
Section . Other Obligations. This Security Instrument and the
grants, assignments and transfers made in Article 1 are also given for the
purpose of securing the following (the "Other Obligations"):
() the performance of all other obligations of Borrower
contained herein;
() the performance of each obligation of Borrower contained
in the Note in addition to the payment of the Debt and of Borrower
and of any Guarantor (defined in Section 5.5) contained in the Other
Security Documents; and
() the performance of each obligation of Borrower and any
Guarantor contained in any renewal, extension, modification,
consolidation, change, substitution, replacement for, restatement or
increase of all or any part of the Note, this Security Instrument or
the Other Security Documents.
Section . Debt and Other Obligations. Borrower's obligations
for the payment of the Debt and the performance of the Other Obligations shall
be referred to collectively below as the "Obligations."
<PAGE>
Section . Payments. Unless payments are made in the required
amount in immediately available funds at the place where the Note is payable,
remittances in payment of all or any part of the Debt shall not, regardless of
any receipt or credit issued therefor, constitute payment until the required
amount is actually received by Lender in funds immediately available at the
place where the Note is payable (or any other place as Lender, in Lender's sole
discretion, may have established by delivery of written notice thereof to
Borrower) and shall be made and accepted subject to the condition that any check
or draft may be handled for collection in accordance with the practice of the
collecting bank or banks. Acceptance by Lender of any payment in an amount less
than the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default.
Article - BORROWER COVENANTS
Borrower covenants and agrees with Lender that:
Section . Payment of Debt. Borrower will pay the Debt at the
time and in the manner provided in the Note and in this Security Instrument.
Section . Incorporation by Reference. All the covenants,
conditions and agreements contained in (a) the Note and (b) all and any of the
documents other than the Note or this Security Instrument now or hereafter
executed by Borrower and/or others and by or in favor of Lender, which wholly or
partially secure or guaranty payment of the Note or the other Obligations (the
"Other Security Documents"), are hereby made a part of this Security Instrument
to the same extent and with the same force as if fully set forth herein.
Section . Insurance.
() Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and the Property providing at least the
following coverages:
() Property Insurance. Insurance with respect to the
Improvements and building equipment insuring against any peril included within
the classification "All Risks of Physical Loss" in amounts at all times
sufficient to prevent Lender from becoming a co-insurer within the terms of the
applicable policies and under applicable law, but in any event such insurance
shall be maintained in an amount equal to the full insurable value of the
Improvements and building equipment, the term "full insurable value" to mean the
actual replacement cost of the Improvements and building equipment (without
taking into account any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) determined annually by an insurer, a
recognized independent insurance broker or an independent appraiser selected and
paid by Borrower and in no event less than the coverage required pursuant to the
terms of any Lease. Absent such
<PAGE>
annual adjustment, each policy shall contain inflation guard coverage insuring
that the policy limit will be increased over time to reflect the effect of
inflation. Borrower shall also maintain insurance against loss or damage to such
furniture, furnishings, fixtures, equipment and other items (whether personalty
or fixtures) included in the Property and owned by Borrower from time to time,
to the extent applicable, in the amount of the cost of replacing the same, in
each case, with inflation guard coverage to reflect the effect of inflation, or
annual valuation. Each policy or policies shall contain a replacement cost
endorsement and either an agreed amount endorsement (to avoid the operation of
any co-insurance provisions) or a waiver of any co-insurance provisions, all
subject to Lender's approval. The maximum deductible shall be $10,000.00;
() Liability Insurance. Comprehensive general liability
insurance, including personal injury, bodily injury, death and property damage
liability, insurance against any and all claims, including all legal liability
to the extent insurable and imposed upon Lender and all court costs and
attorneys' fees and expenses, arising out of or connected with the possession,
use, leasing, operation, maintenance or condition of the Property in such
amounts as are generally available at commercially reasonable premiums and are
generally required by institutional lenders for properties comparable to the
Property but in no event for a combined single limit of less than $5,000,000.
During any construction of the Property, Borrower's general contractor for such
construction shall also provide the insurance required in this Subsection b.
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances;
() Workers' Compensation Insurance. Statutory workers'
compensation insurance with respect to any work on or about the Property
covering all persons subject to the workers' compensation laws of the state in
which the Property is located;
() Business Interruption. Business interruption and/or loss
of "rental income" insurance in an amount sufficient to avoid any co-insurance
penalty and to provide proceeds which will cover a period of not less than one
(1) year from the date of casualty or loss with a six month extended period of
indemnity, the term "rental income" to mean the sum of (A) the total then
ascertainable Rents payable under the Leases and (B) the total ascertainable
amount of all other amounts to be received by Borrower from third parties which
are the legal obligation of the tenants, reduced to the extent such amounts
would not be received because of operating expenses not incurred during a period
of non-occupancy of that portion of the Property then not being occupied. The
amount of coverage shall be adjusted annually to reflect the rents payable
during the succeeding twelve (12) month period.
<PAGE>
() Boiler and Machinery Insurance. Broad form boiler and
machinery insurance (without exclusion for explosion) covering all boilers or
other pressure vessels, machinery, and equipment located in, on or about the
Property and insurance against loss of occupancy or use arising from any
breakdown in such amount per accident equal to the replacement value of the
improvements housing the machinery or $2,000,000 or such other amount reasonably
determined by Lender. If one or more large HVAC units is in operation at the
Property, "System Breakdowns" coverage shall be required, as determined by
Lender. Minimum liability coverage per accident must equal the value of such
unit(s);
() Flood Insurance. If required by Subsection 5.6(a) hereof,
flood insurance in an amount at least equal to the lesser of (A) the minimum
amount required, under the terms of coverage, to compensate for any damage or
loss on a replacement basis (or the unpaid balance of the indebtedness secured
hereby if replacement cost coverage is not available for the type of building
insured); or (B) the maximum insurance available under the appropriate National
Flood Insurance Administration program. The deductible may not exceed $25,000.
() During the period of any construction, renovation or
alteration of the Improvements, the cost of which exceeds the lesser of 10% of
the principal amount of the Note or $500,000, at Lender's request, a completed
value, "All Risk" Builder's Risk form, or "Course of Construction" insurance
policy in non-reporting form for any Improvements under construction, renovation
or alteration in an amount approved by Lender may be required. During the period
of any construction of any addition to the existing Improvements, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Lender, shall be
required.
() Other Insurance. Such other insurance with respect to the
Property or on any replacements or substitutions thereof or additions thereto as
may from time to time be required by Lender against other insurable hazards or
casualties which at the time are commonly insured against in the case of
property similarly situated, including, without limitation, sinkhole, mine
subsidence, earthquake and environmental insurance, due regard being given to
the height and type of buildings, their construction, location, use and
occupancy.
() All insurance provided for in Subsection 3.3(a) hereof
shall be obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating of "A" or better ("AA" or
better for Loans of $25 million or more), or a comparable claims paying ability
assigned by S & P of equivalent one or more credit rating agencies approved by
Lender (a "Rating Agency"), (each such insurer shall be referred to below as a
"Qualified Insurer"). All insurers providing insurance required by this Security
Instrument shall be authorized to issue insurance in the state in which the
Property is located. The Policy referred to in Subsection 3.3(a)(ii) above shall
name Lender as an additional named
<PAGE>
insured and the Policy referred to in Subsection 3.3(a)(i), (iv), (v) and (vi)
above shall provide that all proceeds be payable to Lender as set forth in
Section 4.4 hereof. The Policies referred to in Subsections 3.3(a)(i), (v) and
(vi) shall also contain: (i) a standard "non-contributory mortgagee" endorsement
or its equivalent relating, inter alia, to recovery by Lender notwithstanding
the negligent or willful acts or omission of Lender. All Policies described in
Subsection 3.3(a) above shall contain (i) a provision that such Policies shall
not be canceled or terminated, nor shall they expire, without at least thirty
(30) days' prior written notice to Lender in each instance; and (ii) include
effective waivers by the insurer of all claims for Insurance Premiums (defined
below) against any mortgage, loss payees, additional insureds and named insureds
(other than Borrower). In the event that the Property or the Improvements
constitutes a legal non-conforming use under applicable building, zoning or land
use laws or ordinances, the policy shall include an ordinance or law coverage
endorsement which will contain Coverage A: "Loss Due to Operation of Law" (with
a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. Certificates of insurance with respect to all renewal
and replacement Policies shall be delivered to Lender not less than thirty (30)
days prior to the expiration date of any of the Policies required to be
maintained hereunder which certificates shall bear notations evidencing payment
of applicable premiums (the "Insurance Premiums"). Originals or certificates of
such replacement Policies shall be delivered to Lender promptly after Borrower's
receipt thereof but in any case within thirty (30) days after the effective date
thereof. If Borrower fails to maintain and deliver to Lender copies of the
Policies or certificates of insurance required by this Security Instrument, upon
ten (10) days' prior notice to Borrower, Lender may procure such insurance at
Borrower's sole cost and expense.
() Borrower shall comply with all insurance requirements and
shall not bring or keep or permit to be brought or kept any article upon any of
the Property or cause or permit any condition to exist thereon which would be
prohibited by an insurance requirement, or would invalidate the insurance
coverage required hereunder to be maintained by Borrower on or with respect to
any part of the Property pursuant to this Section 3.3.
() If the Property shall be damaged or destroyed, in whole or
in part, by fire or other casualty, Borrower shall give prompt notice of such
damage to Lender and provided that Borrower shall have received the Net
Proceeds, Borrower shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such fire or other
casualty, with such alterations as may be approved by Lender (the "Restoration")
and otherwise in accordance with Section 4.4 of this Security Instrument.
() The insurance coverage required under Section 3.3(a) may
be effected under a blanket policy or policies covering the Property and other
properties and assets not constituting a part of the security hereunder;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of
<PAGE>
such policy that is allocated to the Property, and any sublimit in such blanket
policy applicable to the Property, and shall in any case comply in all other
respects with the requirements of this Section 3.3.
() The insurance coverage required under Subsection
3.3(a)(ii) may be satisfied by a layering of Commercial General Liability,
Umbrella and Excess Liability Policies, but in no event will the Commercial
General Liability policy be written for an amount less than $1,000,000 per
occurrences and $2,000,000 aggregate for bodily injury and property damage
liability.
() The delivery to Lender of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance as relating to the Property by
Borrower to Lender as further security for the indebtedness secured hereby. In
the event of foreclosure of this Security Instrument, 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 Borrower 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 Lender or other
transferee in the event of such other transfer of title. Approval of any
insurance by Lender shall not be a representation of the solvency of any insurer
or the sufficiency of any amount of insurance.
() Lender 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 Lender has caused the insurance to be placed with the
insurer after failure of Borrower to furnish such insurance. Borrower shall not
obtain insurance for the Property in addition to that required by Lender without
the prior written consent of Lender, which consent will not be unreasonably
withheld provided that (i) Lender is named insured on such insurance, (ii)
Lender receives complete copies of all policies evidencing such insurance, and
(iii) such insurance complies with all of the applicable requirements set forth
herein.
Section . Payment of Taxes, Etc. () Subject to the terms and
conditions of Section 3.5 hereof, Borrower shall pay by their due date all
taxes, assessments, water rates, sewer rents, governmental impositions, and
other charges, including, without limitation, vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Land, now or hereafter
levied or assessed or imposed against the Property or any part thereof (the
"Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to the
Property as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes and
Other Charges have
<PAGE>
been deposited with Lender in accordance with the terms ofthis Security
Instrument, Borrower shall furnish to Lender paid receipts for the payment of
the Taxes and Other Charges prior to the date the same shall become delinquent.
() After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Taxes, provided that (i) no Event
of Default has occurred and is continuing under the Note, this Security
Instrument or any of the Other Security Documents, (ii) Borrower is permitted to
do so under the provisions of any other mortgage, deed of trust or deed to
secure debt affecting the Property, (iii) such proceeding shall suspend the
collection of the Taxes from Borrower and from the Property or Borrower shall
have paid all of the Taxes under protest, (iv) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default
thereunder, (v) neither the Property nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, canceled or lost, (vi)
Borrower shall have set aside adequate reserves for the payment of the Taxes,
together with all interest and penalties thereon, unless Borrower has paid all
of the Taxes under protest, and (vii) Borrower shall have furnished the security
as may be required in the proceeding, or as may be reasonably requested by
Lender to insure the payment of any contested Taxes, together with all interest
and penalties thereon, taking into consideration the amount in the Escrow Fund
available for payment of Taxes.
Section . Escrow Fund. At the option of Lender, Lender may
require Borrower to establish an Escrow Fund (defined below) sufficient to
discharge its obligations for the payment of Insurance Premiums and Taxes
pursuant to Sections 3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance
Premiums shall be made by Borrower to Lender in amounts determined by Lender in
its discretion on the date hereof to be held by Lender in escrow. Additionally,
Borrower shall pay to Lender on the tenth (10th) day of each calendar month (a)
one-twelfth of an amount which would be sufficient to pay the Taxes payable, or
estimated by Lender to be payable, upon the due dates established by the
appropriate taxing authority during the next ensuing twelve (12) months and (b)
one-twelfth of an amount which would be sufficient to pay the Insurance Premiums
due for the renewal of the coverage afforded by the Policies upon the expiration
thereof (the initial deposits together with the amounts in (a) and (b) above
shall be called the "Escrow Fund"). Borrower agrees to notify Lender immediately
of any changes to the amounts, schedules and instructions for payment of any
Taxes and Insurance Premiums of which it has obtained knowledge and authorizes
Lender or its agent to obtain the bills for Taxes and Other Charges directly
from the appropriate TAX authority. Monthly payments to the Escrow Fund as
required hereunder and the monthly payments of interest or principal or both,
payable pursuant to the Note, shall be added together and shall be paid as an
aggregate sum by Borrower to Lender. Provided there are sufficient amounts in
the Escrow Fund and no Event of Default exists, Lender shall be obligated to pay
the Taxes and Insurance Premiums as they become due on their
<PAGE>
respective due dates on behalf of Borrower by applying the Escrow Fund to the
payments of such Taxes and Insurance Premiums required to be made by Borrower
pursuant to Sections 3.3 and 3.4 hereof. If the amount of the Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Sections 3.3
and 3.4 hereof, Lender shall, in its discretion, return any excess to Borrower
or credit such excess against future payments to be made to the Escrow Fund. In
allocating such excess, Lender may deal with the person shown on the records of
Lender to be the owner of the Property. If the Escrow Fund is not sufficient to
pay the items set forth in (a) and (b) above, Borrower shall promptly pay to
Lender, upon demand, an amount which Lender shall reasonably estimate as
sufficient to make up the deficiency. The Escrow Fund shall not constitute a
trust fund and may be commingled with other monies held by Lender.
Section . Condemnation. Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding and shall deliver to Lender copies of any and all papers
served in connection with such proceedings. Lender may participate in any such
proceedings to the extent permitted by law. Upon an Event of Default, Borrower
shall deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Borrower shall not make any agreement in lieu of condemnation of the Property or
any portion thereof without the prior written consent of Lender in each
instance, which consent shall not be unreasonably withheld or delayed in the
case of a taking of an insubstantial portion of the Property. Notwithstanding
any taking by any public or quasi-public authority through eminent domain or
otherwise (including, but not limited to any transfer made in lieu of or in
anticipation of the exercise of such taking), Borrower shall continue to pay the
Debt at the time and in the manner provided for its payment in the Note and in
this Security Instrument and the Debt shall not be reduced until any award or
payment therefor shall have been actually received and applied by Lender, after
the deduction of expenses of collection, to the reduction or discharge of the
Debt. Lender shall not be limited to the interest paid on the award by the
condemning authority but shall be entitled to receive out of the award interest
at the rate or rates provided herein or in the Note. If the Property or any
portion thereof is taken by the power of eminent domain, Borrower shall promptly
commence and diligently prosecute the Restoration of the Property and otherwise
comply with the provisions of in accordance with Section 4.4 of this Security
Instrument. If the Property is sold, through foreclosure or otherwise, prior to
the receipt by Lender of the award or payment, Lender shall have the right,
whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive the award or payment, or a portion thereof
sufficient to pay the Debt.
Section . Leases and Rents. () Except as otherwise consented
to by Lender, all Leases shall be written on a standard form of lease which
shall have been approved by Lender. Upon request, Borrower shall furnish Lender
with executed copies of all Leases. No material changes may be made to the
Lender-approved standard lease without the prior
<PAGE>
written consent of Lender, which consent shall not be unreasonably withheld or
delayed. All proposed leases shall be subject to the prior approval of Lender
except that all proposed leases which (i) are on the same form of lease which
has been approved by Lender, (ii) are the result of an arms-length transaction,
(iii) which provide for rental rates comparable to existing market rates, (iv)
where space to be leased does not exceed more than ten percent (10%) of total
rentable space of the Property, (v) where the proposed tenant is an independent
third party not affiliated with the Borrower, and (vi) do not contain any terms
which would materially affect Lender's rights under this Security Instrument,
the Note or the Other Security Documents, shall not be subject to the prior
approval of Lender. Notwithstanding subsections (ii), (iii) and (v) above,
Borrower may lease units to employees of Borrower, but the aggregate number of
units leased to such employees shall not exceed 1.5% of the total number of
units at the Property. Borrower (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases if the failure to perform
or observe the same would materially and adversely affect the value of the
Property taken as a whole and shall not do or permit to be done anything to
impair the value of the Leases as security for the Debt; (ii) shall promptly
send copies to Lender of all notices of default which Borrower shall send or
receive thereunder; (iii) shall enforce in a commercially reasonable manner all
of the terms, covenants and conditions contained in the Leases upon the part of
the lessee thereunder to be observed or performed; provided, however, with
respect to multifamily residential property, a residential Lease may be
terminated in the event of a default by the tenant thereunder; (iv) shall not
collect any of the Rents more than one (1) month in advance (provided that a
security deposit shall not be deemed rent collected in advance); (v) shall not
execute any other assignment of the lessor's interest in the Leases or the
Rents; (vi) shall not (A) materially alter, modify or change the terms of the
Leases without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed if the alteration, modification or change does
not materially and adversely affect the value of the Property taken as a whole
and provided further that such Lease, as altered, modified or changed, is
otherwise in compliance with the requirements of this Security Instrument, or
(B) cancel or terminate any Lease (except for defaults thereunder) of more than
ten (10%) percent of the rentable space of the Property or accept a surrender
thereof or convey or transfer or suffer or permit a conveyance or transfer of
the Land or of any interest therein so as to effect a merger of the estates and
rights of, or a termination or diminution of the obligations of, lessees
thereunder; (vii) shall not alter, modify or change the terms of any guaranty,
letter of credit or other credit support with respect to the Leases (the "Lease
Guaranty") or cancel or terminate such Lease Guaranty without the prior written
consent of Lender; and (viii) shall not consent to any assignment of or
subletting under the Leases not in accordance with their terms, without the
prior written consent of Lender. Notwithstanding the foregoing, subdivisions
(ii), (vi), (vii) and (viii) shall not apply to residential Leases for space in
a multifamily residential property.
Section . Maintenance of Property. Borrower shall cause the
Property to be maintained in a good and safe condition and repair. The
Improvements and the Personal Property shall not be removed, demolished or
altered if the costs of same would exceed
<PAGE>
$500,000 (except for normal replacement of the Personal Property) without the
consent of Lender. Subject to Section 4.4(c) hereof, Borrower shall promptly
repair, replace or rebuild any part of the Property which may be destroyed by
any casualty, or become damaged, worn or dilapidated or which may be affected by
any proceeding of the character referred to in Section 3.6 hereof and shall
complete and pay for any structure at any time in the process of construction or
repair on the Land. Borrower shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Property or any part thereof. If under applicable zoning provisions the
use of all or any portion of the Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use or Improvement to
be discontinued or abandoned without the express written consent of Lender.
Section . Waste. Borrower shall not commit or suffer any
waste of the Property or make any change in the use of the Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way materially impair the value of the Property or the
security of this Security Instrument. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of the
Land, regardless of the depth thereof or the method of mining or extraction
thereof.
Section . Compliance With Laws. () Borrower shall promptly
comply with all existing and future federal, state and local laws, orders,
ordinances, governmental rules and regulations or court orders affecting the
Property, or the use thereof including, but not limited to, the Americans with
Disabilities Act ("ADA") (collectively, "Applicable Law").
() Borrower shall from time to time, upon Lender's request,
provide Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
() Notwithstanding any provisions set forth herein or in any
document regarding Lender's approval of alterations of the Property, Borrower
shall not alter the Property in any manner which would materially increase
Borrower's responsibilities for compliance with Applicable Laws without the
prior written approval of Lender. Lender's approval of the plans,
specifications, or working drawings for alterations of the Property shall create
no responsibility or liability on behalf of Lender for their completeness,
design, sufficiency or their compliance with Applicable Laws. The foregoing
shall apply to tenant improvements constructed by Borrower or by any of its
tenants. Lender may condition any such approval upon receipt of a certificate of
compliance with Applicable Laws from an independent architect, engineer, or
other person acceptable to Lender.
<PAGE>
() Borrower shall give prompt notice to Lender of the receipt
by Borrower of any notice related to a violation of any Applicable Laws and of
the commencement of any proceedings or investigations which relate to compliance
with Applicable Laws.
() After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the Applicable Laws affecting
the Property, provided that (i) no Event of Default has occurred and is
continuing under the Note, this Security Instrument or any of the Other Security
Documents; (ii) Borrower is permitted to do so under the provisions of any other
mortgage, deed of trust or deed to secure debt affecting the Property; (iii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder; (iv) neither the Property nor any part thereof
or interest therein nor any of the tenants or occupants thereof shall be
affected in any material adverse way as a result of such proceeding; and (v)
Borrower shall have furnished to Lender all other items reasonably requested by
Lender.
Section . Books and Records. () Borrower and any Guarantors
and Indemnitors shall keep adequate books and records of account in accordance
with the methods utilized by them as of the date hereof, consistently applied
and furnish to Lender:
() quarterly certified rent rolls signed and dated by
Borrower, detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease, including the expiration
date, and any other information as is reasonably required by Lender, within
forty-five (45) days after the end of each fiscal quarter;
() a quarterly operating statement of the Property detailing
the total revenues received, total expenses incurred, total cost of all capital
improvements, total debt service and total cash flow, together with a balance
sheet for such quarter, to be prepared and certified by Borrower in the form
required by Lender, and if available (i.e., Borrower shall have no obligation to
deliver unless same is available to Borrower), any quarterly operating statement
and/or balance sheet prepared by an independent certified public accountant
within sixty (60) days after the close of each fiscal quarter.
() an annual balance sheet and profit and loss statement of
Borrower, any Guarantors and any Indemnitors, in the form required by Lender,
prepared and certified by the respective Borrower, Guarantor and/or Indemnitor,
as applicable, within ninety (90) days after the close of each fiscal year;
() an annual certified rent roll presented on a quarterly
basis consistent with the quarterly certified rent rolls described above within
ninety (90) days after the close of each fiscal year;
<PAGE>
() an annual operating budget presented on a monthly basis
consistent with the annual operating statement described above for the Property
and all proposed capital replacements and improvements at least thirty (30) days
prior to the start of each calendar year; and
() such other financial statements, including monthly
operating statements and rent rolls, as Lender may reasonably request.
() Upon reasonable request from Lender, Borrower and its
affiliates shall furnish to Lender:
() a property management report for the Property, showing the
number of inquiries made and/or rental applications received from tenants or
prospective tenants and deposits received from tenants and any other information
requested by Lender, in reasonable detail and certified by Borrower under
penalty of perjury to be true and complete, but no more frequently than
quarterly; and
() an accounting of all security deposits held in connection
with any Lease of any part of the Property, including the name and
identification number of the accounts in which such security deposits are held,
the name and address of the financial institutions in which such security
deposits are held and the name of the person to contact at such financial
institution, along with any authority or release necessary for Lender to obtain
information regarding such accounts directly from such financial institutions.
() Borrower and its affiliates and any Guarantor and
Indemnitor shall furnish Lender with such other additional financial or
management information as may, from time to time, be reasonably required by
Lender in form and substance satisfactory to Lender.
Section . Payment For Labor and Materials. Borrower will
promptly pay when due all bills and costs for labor, materials, and specifically
fabricated materials incurred in connection with the Property and never permit
to exist beyond the due date thereof in respect of the Property or any part
thereof any lien or security interest, even though inferior to the liens and the
security interests hereof, and in any event never permit to be created or exist
in respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section . Performance of Other Agreements. Borrower shall
observe and perform each and every term to be observed or performed by Borrower
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Property.
Section . Change of Name, Identity or Structure. Borrower
will not change Borrower's name, identity (including its trade name or names)
or, if not an individual, Borrower's corporate, partnership or other structure
without notifying the Lender of such change in writing at least thirty (30) days
prior to the effective date of such change and, in the case of a change in
Borrower's structure, without first obtaining the prior written consent of the
Lender.
Section . Existence. Borrower will continuously maintain (a)
its existence and shall not dissolve or permit its dissolution, (b) its rights
to do business in the state where the Property is located and (c) its franchises
and trade names.
<PAGE>
Article - SPECIAL COVENANTS
Borrower covenants and agrees with Lender that:
Section . Property Use. The Property shall be used only for
multifamily apartments, except for limited retail and other commercial use,
provided same does not exceed, in the aggregate, more than five percent (5%) of
the gross leaseable area of the Property, and for no other use without the prior
written consent of Lender, which consent may be withheld in Lender's discretion.
Section . ERISA. () It shall not engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Lender of any of its rights under the Note, this Security
Instrument and the Other Security Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
() Borrower further covenants and agrees to deliver to Lender
such certifications or other evidence from time to time throughout the term of
this Security Instrument, as requested by Lender in its sole discretion, that
(i) Borrower is not an "employee benefit plan" as defined in Section 3(32) of
ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(32) of ERISA; (ii) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances is
true:
(A) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. ss. 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of equity interests
in Borrower are held by "benefit plan investors" within the
meaning of 29 C.F.R. ss. 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29
C.F.R.ss.2510.3-101(c) or (e) or an investment company
registered under The Investment Company Act of 1940.
<PAGE>
Section . Intentionally Deleted.
Section . Restoration After Casualty/Condemnation. In the
event of a casualty or a taking by eminent domain, the following provisions
shall apply in connection with the Restoration of the Property:
() If (i) the Net Proceeds (defined below) do not exceed
$500,000 ("Casualty Amount"); (ii) the costs of completing the Restoration as
reasonably estimated by Borrower shall be less than or equal to the Casualty
Amount; (iii) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security Documents; (iv)
the Property and the use thereof after the Restoration will be in compliance
with, and permitted under, all applicable zoning laws, ordinances, rules and
regulations (including, without limitation, all applicable Environmental Laws
(defined in Section 12.1); and (v) such fire or other casualty or taking, as
applicable, does not materially impair access to the Property or the
Improvements, then the Net Proceeds will be disbursed directly to Borrower and
Borrower shall commence and diligently prosecute to completion, subject to Force
Majeure (defined herein), the Restoration of the Property to as nearly as
possible the condition it was in immediately prior to such fire or other
casualty or to such taking. Except upon the occurrence and continuance of an
Event of Default, Borrower shall settle any insurance claims with respect to the
Net Proceeds which in the aggregate are less than or equal to the Casualty
Amount. Lender shall have the right to participate in and reasonably approve any
settlement for insurance claims with respect to the Net Proceeds which in the
aggregate are equal to or greater than the Casualty Amount. If an Event of
Default shall have occurred and be continuing, Borrower hereby irrevocably
empowers Lender, in the name of Borrower as its true and lawful
attorney-in-fact, to file and prosecute such claim and to collect and to make
receipt for any such payment. If the Net Proceeds are received by Borrower, such
Net Proceeds shall, until the completion of the related work, be held in trust
for Lender and shall be segregated from other funds of Borrower to be used to
pay for the cost of the Restoration in accordance with the terms hereof.
() If the Net Proceeds are greater than the Casualty Amount,
such Net Proceeds shall, subject to the provisions of the Leases that are
superior to the lien of this Security Instrument or with respect to which
subordination, non-disturbance agreements binding upon Lender have entered into
concerning the deposits of Net Proceeds, be forthwith paid to Lender to be held
by Lender in a segregated account to be made available to Borrower for the
Restoration in accordance with the provisions of this Subsection 4.4(b). Subject
to Section 4.4(c) hereof, Borrower shall commence and diligently prosecute to
completion, subject to Force Majeure (defined below), the Restoration (in the
case of a taking, to the extent the Property is capable of being restored). The
term "Net Proceeds" for purposes of this Section 4.4 shall mean: (i) the net
<PAGE>
amount of all insurance proceeds received by Lender under the Policies carried
pursuant to Subsections 3.3(a)(i), (iv), (v), (vi) and (vii) of this Security
Instrument as a result of such damage or destruction, after deduction of its
reasonable costs and expenses (including, but not limited to reasonable counsel
fees), if any, in collecting the same, or (ii) the net amount of all awards and
payments received by Lender with respect to a taking referenced in Section 3.6
of this Security Instrument, after deduction of its reasonable costs and
expenses (including, but not limited to reasonable counsel fees), if any, in
collecting the same, whichever the case may be. The term "Force Majeure" for the
purpose of this Section 4.4 shall have the following meaning: Borrower shall be
excused for the period of any delay in the performance of any obligations
hereunder when prevented from so doing by cause or causes beyond Borrower's
control such as, without limitation, all labor disputes, civil commotion, war,
war-like operations, invasion, rebellion, hostilities, military or usurped
power, sabotage, governmental regulations or controls, fire or other casualty,
inability to obtain any materials or services, and acts of God.
() If the Net Proceeds are greater than the Casualty Amount,
the Net Proceeds shall be made available to Borrower for payment of, or
reimbursement of Borrower's expenses in connection with, the Restoration,
subject to the following conditions:
(A) no Event of Default shall have occurred and be continuing
under the Note, this Security Instrument or any of the
Other Security Documents;
(B) Lender shall, within a reasonable period of time prior to
request for initial disbursement, be furnished with an
estimate of the cost of the Restoration accompanied by
an independent architect's certification as to such
costs and appropriate plans and specifications for the
Restoration;
(C) the Net Proceeds, together with any cash or cash
equivalent deposited by Borrower with Lender, are
sufficient to cover the cost of the Restoration as
such costs are certified by the independent architect;
(D) (1) in the event that the Net Proceeds are insurance
proceeds, less than fifty percent (50%) of the total
floor area of the Improvements has been damaged or
destroyed, or rendered unusable as a result of such
fire or other casualty; or (2) in the event that the
Net Proceeds are condemnation awards, less than fifty
percent (50%) of the Land constituting the Property is
taken, such Land that is taken is located along the
perimeter or periphery of the Property and no portion
of the Improvements is located in such Lands;
(E) Lender shall be satisfied that any operating deficits,
including all scheduled payments of principal and
interest under the Note which will be incurred with
respect to the Property as a result of the occurrence
of any such fire or other casualty or taking,
whichever the case may be, will be covered out of (1)
the Net Proceeds, or (2) other funds of Borrower;
<PAGE>
(F) Lender shall be satisfied that, upon the completion of
the Restoration and related lease-up, if applicable,
the net cash flow of the Property will be restored to
a level sufficient to cover all carrying costs and
operating expenses of the Property, including, without
limitation, debt service on the Note at a coverage
ratio (on a "normalized" basis, i.e., after deducting
replacement reserve requirements and reserves for
tenant improvements and leasing commissions from net
operating income, whether or not such sums are
escrowed with Lender) of at least 1.30 : 1.0 (assuming
an interest rate equal to 9.0% per annum), or, if
lower, the coverage ratio which existed as of the date
immediately preceding such casualty or taking as the
case may be;
(G) the Restoration can reasonably be completed on or before
the earliest to occur of (1) six (6) months prior to
the Maturity Date (as defined in the Note), (2) the
earliest date required for such completion under the
terms of any Lease and (3) such time as may be
required under applicable zoning law, ordinance, rule
or regulation in order to repair and restore the
Property to as nearly as possible the condition it was
in immediately prior to such fire or other casualty or
to such taking, as applicable;
(H) the Property and the use thereof after the Restoration
will be in compliance with, and permitted under, all
applicable zoning laws, ordinances, rules and
regulations (including, without limitation, all
applicable Environmental Laws (defined in Section
12.1)); and
(I) such fire or other casualty or taking, as applicable,
does not materially impair access to the Property or
the Improvements.
() If the Net Proceeds exceed the Casualty Amount, the Net
Proceeds shall be held by Lender and, until disbursed in accordance with the
provisions of this Subsection 4.4(b), shall constitute additional security for
the Obligations. The Net Proceeds other than the Net Proceeds paid under the
Policy described in Subsection 3.3(a)(iv) shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the Restoration,
upon receipt of evidence satisfactory to Lender that (A) all materials installed
and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the Restoration have been
paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property arising out
of the Restoration which have not either been fully bonded and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company insuring the lien of this Security Instrument.
() If the Net Proceeds exceed the Casualty Amount, Lender
shall have the use of the plans and specifications and all permits, licenses and
<PAGE>
approvals required or obtained in connection with the Restoration. If the Net
Proceeds exceed the Casualty Amount, the identity of the contractors,
subcontractors and materialmen engaged in the Restoration, as well as the
contracts under which they have been engaged, shall be subject to prior review
and acceptance by Lender and an independent consulting engineer selected by
Lender (the "Casualty Consultant"), such acceptance not to be unreasonably
withheld or delayed. All costs and expenses incurred by Lender in connection
with making the Net Proceeds available for the Restoration including, without
limitation, reasonable counsel fees and disbursements and the Casualty
Consultant's fees, shall be paid by Borrower.
In no event shall Lender be obligated to make disbursements
of the Net Proceeds in excess of an amount equal to the costs actually incurred
from time to time for work in place as part of the Restoration, as certified by
the Casualty Consultant, minus the Casualty Retainage. The term "Casualty
Retainage" as used in this Subsection 4.4(b) shall mean an amount equal to 10%
of the costs actually incurred for work in place as part of the Restoration, as
certified by the Casualty Consultant, until such time as the Casualty Consultant
certifies to Lender that 50% of the required Restoration has been completed.
There shall be no Casualty Retainage with respect to costs actually incurred by
Borrower for work in place in completing the last 50% of the required
Restoration. The Casualty Retainage shall in no event, and notwithstanding
anything to the contrary set forth above in this Subsection 4.4(b), be less than
the amount actually held back by Borrower from contractors, subcontractors and
materialmen engaged in the Restoration. The Casualty Retainage shall not be
released until the Casualty Consultant certifies to Lender that the Restoration
has been completed in accordance with the provisions of this Subsection 4.4(b)
and that all approvals necessary for the re-occupancy and use of the Property
have been obtained from all appropriate governmental and quasi-governmental
authorities, and Lender receives evidence satisfactory to Lender that the costs
of the Restoration have been paid in full or will be paid in full out of the
Casualty Retainage, provided, however, that Lender will release the portion of
the Casualty Retainage being held with respect to any contractor, subcontractor
or materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor's, subcontractor's or
materialman's contract, and the contractor, subcontractor or materialman
delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by
Lender or by the title company insuring the lien of this Security Instrument. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
() Lender shall not be obligated to make disbursements of the
Net Proceeds more frequently than once every calendar month.
() If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Lender, be sufficient to pay in full the
<PAGE>
balance of the costs which are estimated by the Casualty Consultant to be
incurred in connection with the completion of the Restoration, Borrower shall
deposit the deficiency (the "Net Proceeds Deficiency") with Lender before any
further disbursement of the Net Proceeds shall be made. The Net Proceeds
Deficiency deposited with Lender shall be held by Lender and shall be disbursed
for costs actually incurred in connection with the Restoration on the same
conditions applicable to the disbursement of the Net Proceeds, and until so
disbursed pursuant to this Subsection 4.4(b) shall constitute additional
security for the Obligations.
() The excess, if any, of the Net Proceeds and the remaining
balance, if any, of the Net Proceeds Deficiency deposited with Lender after the
Casualty Consultant certifies to Lender that the Restoration has been completed
in accordance with the provisions of this Subsection 4.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other Security
Documents.
() All Net Proceeds not required (i) to be made available for
the Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to Subsection 4.4(b)(vi) shall be retained and applied by Lender toward
the payment of the Debt whether or not then due and payable in such order,
priority and proportions as Lender in its discretion shall deem proper or, at
the discretion of Lender, the same shall be paid, either in whole or in part, to
Borrower. If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount received and retained by
Lender, and notwithstanding anything to the contrary contained herein, Borrower
shall have no further obligation thereafter to commence or complete the
Restoration.
Article - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section . Warranty of Title. Borrower has good and marketable
title to the Property and has the right to mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey the same and Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of this Security Instrument (the "Permitted Exceptions"). The
Permitted Exceptions do not materially interfere with the use and operations of
the Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
<PAGE>
Section . Authority. Borrower (and the undersigned
representative of Borrower, if any) has full power, authority and legal right to
execute this Security Instrument, and to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the Property pursuant to the terms hereof
and to keep and observe all of the terms of this Security Instrument on
Borrower's part to be performed.
Section . Legal Status and Authority. Borrower (a) is duly
organized, validly existing and in good standing under the laws of its state of
organization; (b) is duly qualified to transact business and is in good standing
in the State where the Property is located; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own the Property and
carry on its business as now conducted and proposed to be conducted. Borrower
now has and shall continue to have the full right, power and authority to
operate and lease the Property, to encumber the Property as provided herein and
to perform all of the other obligations to be performed by Borrower under the
Note, this Security Instrument and the Other Security Documents.
Section . Validity of Documents. (a) The execution, delivery
and performance of the Note, this Security Instrument and the Other Security
Documents and the borrowing evidenced by the Note (i) are within the power and
authority of Borrower; (ii) have been authorized by all requisite organizational
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) to the best of Borrower's knowledge, will not
violate, conflict with, result in a breach of or constitute (with notice or
lapse of time, or both) a default under any provision of law (including, without
limitation, any usury laws), any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or operating
agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or any
of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest created
hereby; and (vi) to the best of Borrower's knowledge, will not require any
authorization or license from, or any filing with, any governmental or other
body (except for the recordation of this instrument in appropriate land records
in the State where the Property is located and except for Uniform Commercial
Code filings relating to the security interest created hereby), and (b) the
Note, this Security Instrument and the Other Security Documents constitute the
legal, valid and binding obligations of Borrower.
Section . Litigation. There is no action, suit or proceeding,
judicial, administrative or otherwise (including any condemnation or similar
proceeding), pending or, to the best of Borrower's knowledge, threatened or
contemplated against Borrower, any person guaranteeing the payment of the Debt
or any portion thereof or performance by Borrower of any terms of this Security
Instrument (a "Guarantor"), if any, an Indemnitor (defined in Subsection
10.1(c)), if any, or against or affecting the Property that (a) has not been
disclosed to Lender, and has a material, adverse effect on the Property or
Borrower's, any Guarantor's or any Indemnitor's ability to perform its
<PAGE>
obligations under the Note, this Security Instrument or the Other Security
Documents, or (b) is not adequately covered by insurance, each as determined by
Lender in its sole and absolute discretion.
Section . Status of Property. () No portion of the
Improvements is located in an area identified by the Secretary of Housing and
Urban Development or any successor thereto as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Protection Act of 1973, or the National Flood Insurance Reform Act of
1994, as each may be amended, or any successor law, or, if any portion of the
Improvements is now or at any time in the future located within any such area,
Borrower has obtained and will maintain the insurance prescribed in Section 3.3
hereof.
() Borrower has obtained all necessary certificates, licenses
and other approvals, governmental and otherwise, necessary for the operation of
the Property and the conduct of its business and all required zoning, building
code, land use, environmental and other similar permits or approvals, all of
which are in full force and effect as of the date hereof and, to the best of
Borrower's knowledge, not subject to revocation, suspension, forfeiture or
modification.
() To the best of Borrower's knowledge, and except as
expressly set forth in that certain Property Condition Survey of the Property,
dated April 1, 1999, by Environmental Management Group, and that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, the Property and the present and contemplated
use and occupancy thereof are in full compliance with all Applicable Laws,
including, without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited to,
the ADA) and other similar laws.
() The Property is served by all utilities required for the
current or contemplated use thereof. All utility service is provided by public
utilities and the Property has accepted or is equipped to accept such utility
service.
() To the best of Borrower's knowledge, all public roads and
streets necessary for service of and access to the Property for the current or
contemplated use thereof have been completed, are serviceable and all-weather
and are physically and legally open for use by the public.
() The Property is served by public water and sewer systems.
() The Property is free from damage caused by fire or other
casualty.
() All costs and expenses of any and all labor, materials,
supplies and equipment used in the construction of the Improvements have been
paid in full.
<PAGE>
() Borrower has paid in full for, and is the owner of, all
furnishings, fixtures and equipment (other than tenants' property) used in
connection with the operation of the Property, free and clear of any and all
security interests, liens or encumbrances, except the lien and security interest
created hereby.
() To the best of Borrower's knowledge, all liquid and solid
waste disposal, septic and sewer systems located on the Property are in a good
and safe condition and repair and in compliance with all Applicable Laws.
() All security deposits relating to the Leases reflected on
the certified rent roll delivered to Lender have been collected by Borrower
except as noted on the certified rent roll.
() Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
() All the Improvements lie within the boundaries of the
Property.
Section . No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code of
1986, as amended and the related Treasury Department regulations, including
temporary regulations.
Section . Separate Tax Lot. The Property is assessed for real
estate TAX purposes as one or more wholly independent Tax lot or lots, separate
from any adjoining land or improvements not constituting a part of such lot or
lots, and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
Section . ERISA Compliance. () As of the date hereof and
throughout the term of this Security Instrument, (i) Borrower is not and will
not be an "employee benefit plan" as defined in Section 3(32) of ERISA, which is
subject to Title I of ERISA, and (ii) the assets of Borrower do not and will not
constitute "plan assets" of one or more such plans for purposes of Title I of
ERISA; and
() As of the date hereof and throughout the term of this
Security Instrument, (i) Borrower is not and will not be a "governmental plan"
within the meaning of Section 3(32) of ERISA, and (ii) transactions by or with
Borrower are not and will not be subject to state statutes applicable to
Borrower regulating investments of and fiduciary obligations with respect to
governmental plans.
Section . Leases. Except as disclosed in the certified rent
roll for the Property delivered to and approved by Lender, or as otherwise set
forth on Exhibit B hereof, (a) Borrower is the sole owner of the entire lessor's
interest in the Leases; (b) the Leases are valid and enforceable; (c) the terms
<PAGE>
of all alterations, modifications and amendments to the Leases are reflected in
the certified rent roll delivered to and approved by Lender; (d) none of the
Rents reserved in the Leases have been assigned or otherwise pledged or
hypothecated (except to Lender); (e) none of the Rents have been collected for
more than one (1) month in advance (provided that a security deposit shall not
be deemed rent collected in advance); (f) the premises demised under the Leases
have been completed and the tenants under the Leases have accepted the same and
have taken possession of the same on a rent-paying basis; (g) to the best of
Borrower's knowledge, there exist no offsets or defenses to the payment of any
portion of the Rents; (h) Borrower has received no notice from any tenant
challenging the validity or enforceability of any Lease; (i) all payments due
under the Leases are current and are consistent with the certified rent roll for
the Property delivered to and approved by Lender; (j) to the best of Borrower's
knowledge, no tenant under any Lease is in default thereunder, or is a debtor in
any bankruptcy, reorganization, insolvency or similar proceeding, or has
demonstrated a history of payment problems which suggest financial difficulty;
(k) there are no agreements with the tenants under the Leases other than
expressly set forth in each Lease; (l) the Leases are valid and enforceable
against Borrower and, to the best of Borrower's knowledge, the tenants set forth
therein; (m) no Lease contains an option to purchase, right of first refusal to
purchase, or any other similar provision; (n) to the best of Borrower's
knowledge, no person or entity has any possessory interest in, or right to
occupy, the Property except under and pursuant to a Lease; (o) each Lease (other
than a residential Lease) is subordinate to this Security Instrument, either
pursuant to its terms or a recorded subordination agreement; and (p) to the best
of Borrower's knowledge, no brokerage commissions or finders fees are due and
payable regarding any Lease.
Section . Financial Condition. () Borrower is solvent, and no
bankruptcy, reorganization, insolvency or similar proceeding under any state or
federal law with respect to Borrower has been initiated, (b) it has received
reasonably equivalent value for the granting of this Security Instrument, and
(c) the granting of this Security Instrument does not constitute a fraudulent
conveyance.
Section . Business Purposes. The loan evidenced by the Note
is solely for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section . Taxes. Borrower, any Guarantor and any Indemnitor
have filed all federal, state, county, municipal, and city income and other TAX
returns required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any Indemnitor
knows of any basis for any additional assessment in respect of any such taxes
and related liabilities for prior years.
Section . Mailing Address. Borrower's mailing address, as set
forth in the opening paragraph hereof or as changed in accordance with Article
16, is true and correct.
<PAGE>
Section . No Change in Facts or Circumstances. All
information in the application for the loan submitted to Lender (the "Loan
Application") and in all financing statements, rent rolls, reports, certificates
and other documents submitted in connection with the Loan Application or in
satisfaction of the terms thereof, are accurate, complete and correct in all
material respects. There has been no adverse change in any condition, fact,
circumstance or event that would make any such information materially
inaccurate, incomplete or otherwise misleading.
Section . Disclosure. To the best of Borrower's knowledge,
Borrower has disclosed to Lender all material facts and has not failed to
disclose any material fact that could cause any representation or warranty made
herein to be materially misleading.
Section . Third Party Representations. To the best of
Borrower's knowledge, each of the representations and the warranties made by
each Guarantor and Indemnitor herein or in any Other Security Document(s) is
true and correct in all material respects.
Section . Illegal Activity. To the best of Borrower's
knowledge, no portion of the Property has been or will be purchased, improved,
fixtured, equipped or furnished with proceeds of any criminal or other illegal
activity and to the best of Borrower's knowledge, there are no illegal
activities or activities relating to controlled substance at the Property.
Section . FUNB Line of Credit. No more than five (5) Business
Days after the expiration or earlier termination of, or concurrently with the
giving of notice by PREIT Associates, L.P. to the public that an event of
default has occurred under, that certain Revolving Credit Loan Agreement between
PREIT Associates, L.P. and Corestates Bank, N.A., as agent
(predecessor-in-interest to First Union National Bank, as agent), and First
Trust Savings Bank, Fleet Bank, N.A. and PNC Bank, as lenders, dated September
30, 1997, Borrower shall notify Lender in writing of same.
Article - DEBTOR/CREDITOR RELATIONSHIP
Section . Relationship of Borrower and Lender. The
relationship between Borrower and Lender is solely that of debtor and creditor,
and Lender has no fiduciary or other special relationship with Borrower, and no
term or condition of any of the Note, this Security Instrument and the Other
Security Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.
Section . Servicing of the Loan. At the option of Lender, the
loan secured hereby may be serviced by a servicer/trustee (the "Servicer")
selected by Lender and Lender may delegate all or any portion of its
responsibilities under the Note, this Security Instrument, and the Other
Security Documents to the Servicer.
<PAGE>
Article - FURTHER ASSURANCES
Section . Recording of Security Instrument, Etc. Borrower
forthwith upon the execution and delivery of this Security Instrument and
thereafter, from time to time, will cause this Security Instrument and any of
the Other Security Documents creating a lien or security interest or evidencing
the lien hereof upon the Property and each instrument of further assurance to be
filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect and perfect the lien or security interest hereof upon, and the interest
of Lender in, the Property. Borrower will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, this Security Instrument, the Other
Security Documents, any note or mortgage supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and any modification or amendment of the foregoing documents, and all federal,
state, county and municipal taxes, duties, imposts, assessments and charges
arising out of or in connection with the execution and delivery of this Security
Instrument, any mortgage supplemental hereto, any security instrument with
respect to the Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except where prohibited by
law so to do.
Section . Further Acts, Etc. Borrower will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers and assurances as Lender shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender, the property and rights hereby
mortgaged, granted, bargained, sold, conveyed, confirmed, pledged, assigned,
warranted and transferred or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or
for carrying out the intention or facilitating the performance of the terms of
this Security Instrument or for filing, registering or recording this Security
Instrument, or for complying with all Applicable Laws. Borrower, on demand, will
execute and deliver and hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements, chattel mortgages or other instruments,
to evidence or perfect more effectively the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney coupled
with an interest for the purpose of exercising and perfecting any and all rights
and remedies available to Lender pursuant to this Section 7.2.
Section . Changes in TAX, Debt Credit and Documentary Stamp
Laws. () If any law is enacted or adopted or amended after the date of this
Security Instrument which deducts the Debt from the value of the Property for
the purpose of taxation or which imposes a TAX, either directly or indirectly,
on the Debt or Lender's interest in the Property, Borrower will pay the TAX,
<PAGE>
with interest and penalties thereon, if any. If Lender is advised by counsel
chosen by it that the payment of TAX by Borrower would be unlawful or taxable to
Lender or unenforceable or provide the basis for a defense of usury, then Lender
shall have the option by written notice of not less than ninety (90) days to
declare the Debt immediately due and payable.
() Borrower will not claim or demand or be entitled to any
credit or credits on account of the Debt for any part of the Taxes or Other
Charges assessed against the Property, or any part thereof, and no deduction
shall otherwise be made or claimed from the assessed value of the Property, or
any part thereof, for real estate TAX purposes by reason of this Security
Instrument or the Debt. If such claim, credit or deduction shall be required by
law, Lender shall have the option, by written notice of not less than ninety
(90) days, to declare the Debt immediately due and payable.
() If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or other
stamps to be affixed to the Note, this Security Instrument, or any of the Other
Security Documents or impose any other TAX or charge on the same, Borrower will
pay for the same, with interest and penalties thereon, if any.
Section . Estoppel Certificates. () After request by Lender,
Borrower, within twenty (20) days, shall furnish Lender or any proposed assignee
with a statement, duly acknowledged and certified, setting forth (i) the amount
of the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the rate of interest of the Note, (iv) the terms of payment
and maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (vi) that, except as provided in such statement, there
are no defaults or events which with the passage of time or the giving of notice
or both, would constitute an event of default under the Note or the Security
Instrument, (vii) that the Note and this Security Instrument are valid, legal
and binding obligations and have not been modified or if modified, giving
particulars of such modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases are in full force and effect
and (provided the Property is not a residential multifamily property) have not
been modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) whether
or not, to the best knowledge of Borrower, any of the lessees under the Leases
are in default under the Leases, and, if any of the lessees are in default,
setting forth the specific nature of all such defaults, (xii) the amount of
security deposits held by Borrower under each Lease and that such amounts are
consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or this Security
Instrument.
() Upon any transfer or proposed transfer contemplated by
Section 18.1 hereof, at Lender's request, Borrower, any Guarantors and any
Indemnitors shall provide an estoppel certificate to the Investor (defined in
<PAGE>
Section 18.1) or any prospective Investor confirming the accuracy of information
provided by such person to Lender under or in respect of this Security
Instrument.
() After written request by Borrower not more than twice
annually, Lender shall furnish Borrower a statement setting forth (i) the amount
of the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the rate of interest of the Note, (iv) the balance of the
sums in the Escrow Fund, if any, and (v) to the best of Lender's knowledge,
whether Borrower is currently in default.
Section . Flood Insurance. After Lender's request, Borrower
shall deliver evidence satisfactory to Lender that no portion of the
Improvements is situated in a federally designated "special flood hazard area"
or, if it is, that Borrower has obtained insurance meeting the requirements of
Section 3.3(a)(vi).
Section . Splitting of Security Instrument. This Security
Instrument and the Note shall, at any time until the same shall be fully paid
and satisfied, at the sole election of Lender, be split or divided into two or
more notes and two or more security instruments, each of which shall cover all
or a portion of the Property to be more particularly described therein. To that
end, Borrower, upon written request of Lender, shall execute, acknowledge and
deliver to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more than the then unpaid
principal amount secured by this Security Instrument, and containing terms,
provisions and clauses no less favorable to Borrower than those contained herein
and in the Note, and such other documents and instruments as may be required by
Lender to effect the splitting of the Note and this Security Instrument.
Section . Replacement Documents. Upon receipt of an affidavit
of an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any Other Security Document which is not of public record, and, in the
case of any such mutilation, upon surrender and cancellation of such Note or
Other Security Document, Borrower will issue, in lieu thereof, a replacement
Note or Other Security Document, dated the date of such lost, stolen, destroyed
or mutilated Note or Other Security Document in the same principal amount
thereof and otherwise of like tenor. Borrower shall not be responsible to Lender
for Lender's fees and expenses incurred in connection with the transactions
contemplated in this Section 7.7.
Section . Amended Financing Statements. Borrower will execute
and deliver to the Lender, prior to or contemporaneously with the effective date
of any such change, any financing statement or financing statement change
required by the Lender to establish or maintain the validity, perfection and
priority of the security interest granted herein. At the request of the Lender,
Borrower shall execute a certificate in form satisfactory to the Lender listing
the trade names under which Borrower intends to operate the Property, and
representing and warranting that Borrower does business under no other trade
name with respect to the Property.
<PAGE>
Article - DUE ON SALE/ENCUMBRANCE
Section . No Sale/Encumbrance. Borrower agrees that Borrower
shall not, without the prior written consent of Lender, sell, convey, mortgage,
grant, bargain, encumber, pledge, assign, or otherwise transfer the Property or
any part thereof or permit the Property or any part thereof to be sold,
conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred. Notwithstanding the foregoing, the Property may be
transferred with the prior written consent of Lender which consent shall not be
unreasonably withheld in the case of a proposed transferee whose entity status,
creditworthiness and management ability meet standards consistently applied by
Lender for approval of borrowers for similar properties under mortgage loans
secured by similar properties, provided that (i) only one such transfer shall be
permitted during the term of the Note, (ii) prior to the effective date of the
transfer, the transferee shall execute and deliver to Lender a written
assumption agreement in form and substance acceptable to Lender in its sole
discretion, (iii) a transfer fee equal to one quarter of one percent (.25%) of
the outstanding principal balance of the Note shall be paid by Borrower to
Lender upon notice being given to Borrower of approval of the proposed transfer
(unless the proposed transferee is an affiliate of Borrower, in which event no
transfer fee shall be due and payable), and (iv) no transfer shall be permitted
hereunder if an Event of Default, or an event which with the giving of notice or
lapse of time or both could become an Event of Default, has occurred and is
continuing. Borrower agrees that Borrower shall not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than the Debt and trade payables incurred in the ordinary course of business in
connection with the operation of the Property, provided same are paid when due.
Section . Sale/Encumbrance Defined. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 8 shall be deemed to include, but not be limited to
(a) an installment sales agreement wherein Borrower agrees to sell the Property
or any part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower or any general partner or
managing member (or if no managing member, any member) of Borrower is a
corporation, the voluntary or involuntary sale, conveyance, transfer or pledge
of such corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or otherwise) or the
creation or issuance of new stock by which an aggregate of more than 49% of such
corporation's stock shall be vested in a party or parties who are not now owners
<PAGE>
of more than 49% of such corporation's stock; (d) if Borrower or any general
partner or managing member (or if no managing member, any member) of Borrower is
a limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest or the transfer or pledge of any partnership interest of
any limited partner or any profits or proceeds relating to any such partnership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged, provided, however, no such transfer
or pledge of more than 49% of the beneficial interests in Borrower shall be
deemed to be a transfer within the meaning of this Article 8 provided that
Borrower (i) obtains the prior written consent of Lender, which consent shall
not be reasonably withheld, and (ii) delivers to Lender evidence in writing from
the applicable Ratings Agency that no such transfer shall result in a downgrade,
withdrawal or qualification of the ratings in effect for the securities issued
in connection with a Securitization (as defined in the Note) and (e) if Borrower
or any general partner or member of Borrower is a limited liability company, the
change, removal or resignation of a managing member or the transfer of the
membership interest of a managing member or any profits or proceeds relating to
such membership interest or the transfer or pledge of any membership interest of
any other member or any profits or proceeds relating to any such membership
interest, which, whether singly or in the aggregate, result in more than 49% of
the beneficial interests in Borrower, or the profits or proceeds relating
thereto, having been transferred or pledged. Notwithstanding the foregoing, the
following transfers shall not be deemed to be a sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment or transfer within the meaning
of this Article 8: (a) transfer by devise or descent or by operation of law upon
the death of a member, general partner or stockholder of Borrower, any Guarantor
or Indemnitor or any member or general partner thereof, (b) a sale, transfer or
hypothecation of a membership, partnership or shareholder interest in Borrower,
whichever the case may be, by a current member, general partner or shareholder,
as applicable, to an immediate family member (i.e., parents, spouses, siblings,
children or grandchildren) of such member, general partner or shareholder, or to
a trust for the benefit of an immediate family member of such member, general
partner or shareholder, and (c) a change in the form of organizational structure
or name of Borrower, provided that there is no transfer or change in the
ownership interests in Borrower, and provided further that Borrower shall remain
in full compliance with Section 4.3 of this Security Instrument.
Section . Lender's Rights. Lender reserves the right to
condition the consent required hereunder upon a modification of the terms hereof
and on assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's expenses incurred in connection with such transfer, or such
other conditions as Lender shall determine in its sole discretion to be in the
interest of Lender. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Borrower's sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer of the Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property regardless of whether voluntary or not,
<PAGE>
or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
Section . Right To Substitute Property. The terms and
conditions of this Article 8 shall be subject to Borrower's rights pursuant to
that certain letter dated the date hereof from Lender to Borrower regarding
Borrower's rights to substitute security for the Debt. Inquiries regarding the
aforementioned letter shall be made to Borrower at the address set forth in
Article 16 below.
Article - PREPAYMENT
Section . Prepayment Only in Accordance with Note. The Debt
may be prepaid only in strict accordance with the express terms and conditions
of the Note including, without limitation, payment of the Prepayment
Consideration if applicable.
Article - DEFAULT
Section . Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of Default":
() if any Event of Default (as defined in the Note, for
purposes of this Section 10.1(a) only) occurs under Section 4.01(a) of the Note;
() if Borrower violates or does not comply with any of the
provisions of Sections 3.7 or 8.1;
() if any representation or warranty of Borrower, Indemnitor
(as defined in that certain Environmental Indemnity Agreement dated as of the
date hereof (the "Environmental Indemnity") or any Guarantor, or any member,
general partner, principal or beneficial owner of any of the foregoing, made
herein or in the Environmental Indemnity or in any guaranty, or in any
certificate, report, financial statement or other instrument or document
furnished to Lender shall have been false or misleading in any material respect
when made;
() if any default occurs under any guaranty or indemnity
executed in connection herewith and such default continues after the expiration
of applicable grace periods, if any;
() except for the specific defaults set forth in this Section
10.1, any other default hereunder or any of the Other Security Documents by
<PAGE>
Borrower, which default is not cured (i) in the case of any default which can be
cured by the payment of a sum of money, within five (5) days after written
notice from Lender to Borrower, or (ii) in the case of any other default, within
thirty (30) days after written notice from Lender to Borrower; provided that if
such default cannot reasonably be cured within such thirty (30) day period and
Borrower shall have commenced to cure such default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the same,
such thirty (30) day period shall be extended for so long as it shall require
Borrower in the exercise of due diligence to cure such default, it being agreed
that no such extension shall be for a period in excess of one hundred twenty
(120) days, unless, only in the case of cures that require construction or
remedial work, such cure cannot with diligence be completed within such one
hundred twenty (120) day period, in which case such period shall be extended for
an additional one hundred twenty (120) days;
() if Borrower or any Guarantor or Indemnitor shall make an
assignment for the benefit of creditors or if Borrower shall generally not be
paying its debts as they become due; or
() if the Policies are not kept in full force and effect, or
Borrower has not delivered evidence of the renewal of the Policies ten (10) days
prior to their expiration as provided in Section 3.3(b); or
() if (i) Borrower or any Guarantor or Indemnitor shall
commence any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any Guarantor or Indemnitor
shall make a general assignment for the benefit of its creditors'; or (ii) there
shall be commenced against Borrower or any Guarantor or Indemnitor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
ninety (90) days; or (iii) there shall be commenced against the Borrower or any
Guarantor or Indemnitor any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within ninety (90) days from the entry thereof; or (iv)
the Borrower or any Guarantor or Indemnitor shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due.
<PAGE>
Article - RIGHTS AND REMEDIES
Section . Remedies. () Upon the occurrence of any Event of
Default, Borrower agrees that Lender, may take such action, without notice or
demand, as it deems advisable to protect and enforce the rights of Lender
against Borrower and in and to the Property, including, but not limited to the
following actions, each of which may be pursued concurrently or otherwise, at
such time and in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Lender:
() declare the entire unpaid Debt to be immediately due and
payable;
() institute proceedings, judicial or otherwise, for the
complete foreclosure of this Security Instrument under any applicable provision
of law in which case the Property or any interest therein may be sold for cash
or upon credit in one or more parcels or in several interests or portions and in
any order or manner;
() with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute proceedings for
the partial foreclosure of this Security Instrument for the portion of the Debt
then due and payable, subject to the continuing lien and security interest of
this Security Instrument for the balance of the Debt not then due, unimpaired
and without loss of priority;
() sell for cash or upon credit the Property or any part
thereof and all estate, claim, demand, right, title and interest of Borrower
therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, as an entity or in parcels, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law;
() subject to the provisions of Article 15, institute an
action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained herein, in the Note or in the Other
Security Documents;
() subject to the provisions of Article 15, recover judgment
on the Note either before, during or after any proceedings for the enforcement
of this Security Instrument or the Other Security Documents;
() apply for the appointment of a receiver, trustee,
liquidator or conservator of the Property, without notice and without regard for
the adequacy of the security for the Debt and without regard for the solvency of
Borrower, any Guarantor, Indemnitor or of any person, firm or other entity
liable for the payment of the Debt;
<PAGE>
() subject to any applicable law, the license granted to
Borrower under Section 1.2 shall automatically be revoked and Lender may enter
into or upon the Property, either personally or by its agents, nominees or
attorneys and dispossess Borrower and its agents and servants therefrom, without
liability for trespass, damages or otherwise and exclude Borrower and its agents
or servants wholly therefrom, and take possession of all books, records and
accounts relating thereto and Borrower agrees to surrender possession of the
Property and of such books, records and accounts to Lender upon demand, and
thereupon Lender may (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the Property and
conduct the business thereat; (B) complete any construction on the Property in
such manner and form as Lender deems advisable; (C) make alterations, additions,
renewals, replacements and improvements to or on the Property; (D) exercise all
rights and powers of Borrower with respect to the Property, whether in the name
of Borrower or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all Rents of the Property and every part thereof; (E)
require Borrower to pay monthly in advance to Lender, or any receiver appointed
to collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Property as may be occupied by Borrower; (F)
require Borrower to vacate and surrender possession of the Property to Lender or
to such receiver and, in default thereof, Borrower may be evicted by summary
proceedings or otherwise; and (G) apply the receipts from the Property to the
payment of the Debt, in such order, priority and proportions as Lender shall
deem appropriate in its sole discretion after deducting therefrom all expenses
(including reasonable attorneys' fees) incurred in connection with the aforesaid
operations and all amounts necessary to pay the Taxes, Other Charges, insurance
and other expenses in connection with the Property, as well as just and
reasonable compensation for the services of Lender, its counsel, agents and
employees;
() exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing: (A) the right to take possession of
the Collateral or any part thereof, and to take such other measures as Lender
may deem necessary for the care, protection and preservation of the Collateral,
and (B) request Borrower at its expense to assemble the Collateral and make it
available to Lender at a convenient place acceptable to Lender. Any notice of
sale, disposition or other intended action by Lender with respect to the
Collateral sent to Borrower in accordance with the provisions hereof at least
five (5) days prior to such action, shall constitute commercially reasonable
notice to Borrower;
() apply any sums then deposited in the Escrow Fund and any
other sums held in escrow or otherwise by Lender in accordance with the terms of
this Security Instrument or any Other Security Document to the payment of the
following items in any order in its sole and absolute discretion:
<PAGE>
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of the Note;
(D) amortization of the unpaid principal balance of the Note;
and all other sums payable pursuant to the Note, this
Security Instrument and Other Security Documents,
including, without limitation, advances made by
pursuant to the terms of this Security Instrument;
() surrender the Policies maintained pursuant to Article 3
hereof, collect the unearned Insurance Premiums and apply such sums as a credit
on the Debt in such priority and proportion as Lender in its discretion shall
deem proper, and in connection therewith, Borrower hereby appoints Lender as
agent and attorney-in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
() apply the undisbursed balance of any Net Proceeds or any
Net Proceeds Deficiency deposit, together with interest thereon, to the payment
of the Debt in such order, priority and proportions as Lender shall deem to be
appropriate in its discretion;
() prohibit Borrower and anyone claiming on behalf of or
through Borrower from making use of or withdrawing any sums from any lockbox or
similar account, if any;
() pursue such other remedies as Lender may have under
applicable law.
() In the event of a sale, by foreclosure, power of sale, or
otherwise, of less than all of the Property, this Security Instrument shall
continue as a lien and security interest on the remaining portion of the
Property unimpaired and without loss of priority. Notwithstanding the provisions
of this Section 11.1 to the contrary, if any Event of Default as described in
Subsection 10.1 (h)(i) or (ii) shall occur, the entire unpaid Debt shall be
automatically due and payable, without any further notice, demand or other
action by Lender.
() Lender may adjourn from time to time any sale by it to be
made under or by virtue of this Security Instrument by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
<PAGE>
() Upon any sale made under or by virtue of this Section
11.1, whether made under a power of sale or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Lender may bid
for and acquire the Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the Debt
the net sales price after deducting therefrom the expenses of the sale and costs
of the action and any other sums which Lender is authorized to deduct under this
Security Instrument.
Section . Application of Proceeds. The purchase money,
proceeds and avails of any disposition of the Property, or any part thereof, or
any other sums collected by Lender pursuant to the Note, this Security
Instrument or the Other Security Documents, may be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion
shall deem proper.
Section . Right to Cure Defaults. Upon the occurrence of any
Event of Default, Lender may, but without any obligation to do so and without
notice to or demand on Borrower and without releasing Borrower from any
obligation hereunder, cure the same in such manner and to such extent as Lender
may deem necessary to protect the security hereof. Lender is authorized to enter
upon the Property for such purposes, or appear in, defend, or bring any action
or proceeding to protect its interest in the Property or to foreclose this
Security Instrument or collect the Debt, and the cost and expense thereof
(including reasonable attorneys' fees to the extent permitted by law), with
interest as provided in this Section 11.3, shall constitute a portion of the
Debt and shall be due and payable to Lender upon demand. All such costs and
expenses incurred by Lender in remedying such Event of Default or in appearing
in, defending, or bringing any such action or proceeding shall bear interest at
the Default Rate (as defined in the Note), for the period after notice from
Lender that such cost or expense was incurred to the date of payment to Lender.
All such costs and expenses incurred by Lender together with interest thereon
calculated at the Default Rate shall be deemed to constitute a portion of the
Debt and be secured by this Security Instrument and the Other Security Documents
and shall be immediately due and payable upon demand by Lender therefor.
Section . Actions and Proceedings. After the occurrence and
during the continuance of an Event of Default, Lender has the right to appear in
and defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.
Section . Recovery of Sums Required To Be Paid. Lender shall
have the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
<PAGE>
Section . Examination of Books and Records. Lender, its
agents, accountants and attorneys shall have the right upon prior written notice
to examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during reasonable business hours at any office of Borrower, its affiliates or
any Guarantor or Indemnitor where the books and records are located.
Section . Other Rights, Etc. () The failure of Lender to
insist upon strict performance of any term hereof shall not be deemed to be a
waiver of any term of this Security Instrument. Borrower shall not be relieved
of Borrower's obligations hereunder by reason of (i) the failure of Lender to
comply with any request of Borrower, any Guarantor or any Indemnitor to take any
action to foreclose this Security Instrument or otherwise enforce any of the
provisions hereof or of the Note or the Other Security Documents, (ii) the
release, regardless of consideration, of the whole or any part of the Property,
or of any person liable for the Debt or any portion thereof, or (iii) any
agreement or stipulation by Lender extending the time of payment or otherwise
modifying or supplementing the terms of the Note, this Security Instrument or
the Other Security Documents.
() It is agreed that the risk of loss or damage to the
Property is on Borrower, and Lender shall have no liability whatsoever for
decline in value of the Property, for failure to maintain the Policies, or for
failure to determine whether insurance in force is adequate as to the amount of
risks insured. Possession by Lender shall not be deemed an election of judicial
relief, if any such possession is requested or obtained, with respect to any
Property or collateral not in Lender's possession.
() Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect. Lender may take action to recover the Debt, or any portion thereof,
or to enforce any covenant hereof without prejudice to the right of Lender
thereafter to foreclose this Security Instrument. The rights of Lender under
this Security Instrument shall be separate, distinct and cumulative and none
shall be given effect to the exclusion of the others. No act of Lender shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Lender shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity.
<PAGE>
Section . Right to Release Any Portion of the Property.
Lender, may release any portion of the Property for such consideration as Lender
may require without, as to the remainder of the Property, in any way impairing
or affecting the lien or priority of this Security Instrument, or improving the
position of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by the actual
monetary consideration, if any, received by Lender for such release, and may
accept by assignment, pledge or otherwise any other property in place thereof as
Lender may require without being accountable for so doing to any other
lienholder. This Security Instrument shall continue as a lien and security
interest in the remaining portion of the Property.
Section . Violation of Laws. If the Property is not in
compliance with Applicable Laws, Lender may impose additional requirements upon
Borrower in connection herewith including, without limitation, monetary reserves
or financial equivalents.
Section . Right of Entry. Lender and its agents shall have
the right upon prior written notice to enter and inspect the Property at all
reasonable times upon not less than five (5) Business Days' notice (except in
the case of emergencies when no notice shall be required) to Borrower.
Article - ENVIRONMENTAL HAZARDS
Section . Environmental Representations and Warranties.
Borrower represents and warrants, except as set forth in that certain Phase I
Environmental Site Assessment of the Property dated March 31, 1999, prepared by
Environmental Management Group, and information that Borrower knows, that: (a)
there are no Hazardous Substances (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) there is no past or present non-compliance with
Environmental Laws, or with permits issued pursuant thereto, in connection with
the Property except as described in the Environmental Report; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
<PAGE>
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to any reports relating to Hazardous
Substances in, on, under or from the Property and/or to the environmental
condition of the Property. "Environmental Law" means any present, and for the
purposes of Sections 12.2. 12.3 and 13.4 only, future, federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to protection of human health or the environment, relating to
Hazardous Substances, relating to liability for or costs of Remediation or
prevention of Releases of Hazardous Substances or relating to liability for or
costs of other actual or threatened danger to human health or the environment.
"Environmental Law" includes, but is not limited to, the following statutes, as
amended, any successor thereto, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations and the
like addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act; the Emergency Planning and Community
Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource
Conservation and Recovery Act (including, but not limited to Subtitle I relating
to underground storage tanks); the Solid Waste Disposal Act; the Clean Water
Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking
Water Act; the Occupational Safety and Health Act; the Federal Water Pollution
Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the
Endangered Species Act; the National Environmental Policy Act; and the River and
Harbors Appropriation Act. "Environmental Law" also includes, but is not limited
to, any present, and for the purposes of Sections 12.2, 12.3 and 13.4 only,
future, federal, state and local laws, statutes, ordinances, rules, regulations
and the like, as well as common law: conditioning transfer of property upon a
negative declaration or other approval of a governmental authority of the
environmental condition of the property; requiring notification or disclosure of
Releases of Hazardous Substances or other environmental condition of the
Property to any governmental authority or other person or entity, whether or not
in connection with transfer of title to or interest in property. "Hazardous
Substances" include but are not limited to any and all substances (whether
solid, liquid or gas) (i) defined, listed, or otherwise classified as
pollutants, hazardous wastes, hazardous substances, hazardous materials,
extremely hazardous wastes, or words of similar meaning or regulatory effect
under any present, or for the purposes of Sections 12.2. 12.3 and 13.4 only,
future, Environmental Laws or (ii) that may have a negative impact on human
health or the environment, including, but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives. "Release" of any
Hazardous Substance includes, but is not limited to any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping or disposing of Hazardous Substances.
"Remediation" includes, but is not limited to any response, remedial removal, or
corrective action, any activity to cleanup, detoxify, decontaminate, contain or
otherwise remediate any Hazardous Substance, any actions to prevent, cure or
mitigate any Release of any Hazardous Substance, any action to comply with any
Environmental Laws or with any permits issued pursuant thereto, any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous
Substances.
<PAGE>
Section . Environmental Covenants. Borrower covenants and
agrees that so long as the Borrower owns, manages, is in possession of, or
otherwise controls the operation of the Property: (a) all uses and operations on
or of the Property, whether by Borrower or any other person or entity, shall be
in compliance with all Environmental Laws and permits issued pursuant thereto;
(b) there shall be no Releases of Hazardous Substances in, on, under or from the
Property; (c) there shall be no Hazardous Substances in, on, or under the
Property, except those that are in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (d)
Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other person or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and expense, perform any environmental site assessment or other
investigation of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender after Lender has reason to
believe this Section 12.2 has been violated (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas), and share with Lender
the reports and other results thereof, and Lender and other Indemnified Parties
(defined in Section 13.1) shall be entitled to rely on such reports and other
results thereof; (g) Borrower shall, at its sole cost and expense, comply with
all reasonable written requests of Lender to (i) reasonably effectuate
Remediation of any condition (including, but not limited to a Release of a
Hazardous Substance) in, on, under or from the Property, (ii) comply with any
Environmental Law, (iii) comply with any directive from any governmental
authority, and (iv) take any other reasonable action necessary or appropriate
for protection of human health or the environment; (h) Borrower shall not do or
allow any tenant or other user of the Property to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Property), impairs
or may impair the value of the Property, is contrary to any requirement of any
insurer, constitutes a public or private nuisance, constitutes waste, or
violates any covenant, condition, agreement or easement applicable to the
Property; and (i) Borrower shall immediately notify Lender in writing promptly
after it has become aware of (A) any presence or Releases or threatened Releases
of Hazardous Substances in, on, under, from or migrating towards the Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting the Property, (C)
any required Remediation of environmental conditions relating to the Property,
and (D) any written or oral notice or other communication of which Borrower
becomes aware from any source whatsoever (including, but not limited to a
governmental entity) relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or threatened administrative or judicial proceedings in
connection with anything referred to in this Article 12.
<PAGE>
Section . Lender's Rights. Lender, its environmental
consultant, and any other person or entity designated by Lender, including, but
not limited to any receiver and any representative of a governmental entity,
shall have the right, but not the obligation, at intervals of not less than one
year, or more frequently if the Lender reasonably believes that a Hazardous
Substance or other environmental condition violates or threatens to violate any
Environmental Law, after notice to Borrower, to enter upon the Property at all
reasonable times to assess any and all aspects of the environmental condition of
the Property and its use, including, but not limited to conducting any
environmental assessment or audit of the Property or portions thereof to confirm
Borrower's compliance with the provisions of this Article 12, and Borrower shall
cooperate in all reasonable ways with Lender in connection with any such audit.
Such audit shall be performed in a manner so as to minimize interference with
the conduct of business at the Property. If such audit discloses that a
violation of or a liability under any Environmental Law exists or if such audit
was required or prescribed by law, regulation or governmental or
quasi-governmental authority, Borrower shall pay all costs and expenses incurred
in connection with such audit; otherwise, the costs and expenses of such audit
shall, notwithstanding anything to the contrary set forth in this Section, be
paid by Lender.
Article - INDEMNIFICATION
Section . General Indemnification. Borrower shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, or punitive damages, of whatever kind or nature (including, but not
limited to attorneys' fees and other costs of defense) (the "Losses") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (a) ownership of this Security Instrument, the Property or
any interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt, and the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender in
connection with the enforcement of the provisions of this Security Instrument or
the Note or any of the Other Security Documents, whether or not suit is filed in
connection with same, or in connection with Borrower, any Guarantor or
Indemnitor and/or any member, partner, joint venturer or shareholder thereof
becoming a party to a voluntary or involuntary federal or state bankruptcy,
insolvency or similar proceeding; (d) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or about the Property
<PAGE>
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (f) any failure on
the part of Borrower to perform or be in compliance with any of the terms of
this Security Instrument or the Other Security Documents; (g) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Property or any part thereof; (h) the failure of any person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Security Instrument,
or to supply a copy thereof in a timely fashion to the recipient of the proceeds
of the transaction in connection with which this Security Instrument is made;
(i) any failure of the Property to be in compliance with any Applicable Laws;
(j) the enforcement by any Indemnified Party of the provisions of this Article
13; (k) any and all claims and demands whatsoever which may be asserted against
Lender 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
Lease; (l) the payment of any commission, charge or brokerage fee to anyone
which may be payable in connection with the funding of the loan evidenced by the
Note and secured by this Security Instrument; or (m) any misrepresentation made
by Borrower in this Security Instrument, the Other Security Documents, or any
documents or information provided pursuant to Section 18.1 hereof. Any amounts
payable to Lender by reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the Default Rate from the
date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender and any person or entity
who is or will have been involved in the origination of this loan, any person or
entity who is or will have been involved in the servicing of this loan, any
person or entity in whose name the encumbrance created by this Security
Instrument is or will have been recorded, persons and entities who may hold or
acquire or will have held a full or partial interest in this loan (including,
but not limited to Investors or prospective Investors in the Securities, as well
as custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in this loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, members, partners, employees,
agents, servants, representatives, affiliates, subsidiaries, participants,
successors and assigns of any and all of the foregoing (including, but not
limited to any other person or entity who holds or acquires or will have held a
participation or other full or partial interest in this loan or the Property,
whether during the term of this loan or as a part of or following a foreclosure
of this loan and including, but not limited to any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's assets
and business).
Section . Mortgage and/or Intangible Tax. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and/or
recording of this Security Instrument, the Note or any of the Other Security
Documents or in connection with a transfer of all or a portion of the Property
pursuant to a foreclosure, deed in lieu of foreclosure or otherwise.
<PAGE>
Section . ERISA Indemnification. Borrower shall, at its sole
cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of Losses incurred in correcting any prohibited transaction or in
the sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Lender's sole
discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 4.2 or 5.9.
Section . Environmental Indemnification. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses and costs of
Remediation (whether or not performed voluntarily), reasonable engineers' fees,
reasonable environmental consultants' fees, and costs of investigation
(including, but not limited to sampling, testing and analysis of soil, water,
air, building materials and other materials and substances whether solid, liquid
or gas) imposed upon or incurred by or asserted against any Indemnified Parties,
and arising out of or in any way relating to any one or more of the following,
unless caused by the gross negligence or willful misconduct of any Indemnified
Party: (a) any presence of any Hazardous Substances in, on, above or under the
Property; (b) any past, present or threatened Release of Hazardous Substances
in, on, above, under or from the Property; (c) any activity by Borrower, any
person or entity affiliated with Borrower or tenant or other users of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management, abatement,
removal, handling, transfer or transportation to or from the Property of any
Hazardous Substances at any time located in, under, on or above the Property;
(d) any activity by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at any time located in, under, on or
above the Property, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including, but not limited to any removal,
remedial or corrective action; (e) any past, present or threatened violations of
any Environmental Laws (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including, but not limited
to any failure by Borrower, any person or entity affiliated with Borrower or
tenant or other users of the Property to comply with any order of any
governmental authority in connection with Environmental Laws; (f) the
imposition, recording or filing of any Environmental Lien encumbering the
Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
<PAGE>
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) any acts of Borrower or other users of the Property in arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Substances owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) any acts of Borrower or other users of the Property, in accepting
any Hazardous Substances for transport to disposal or treatment facilities,
incineration vessels or sites selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section . Duty to Defend; Attorneys' Fees and Other Fees and
Expenses. Upon written request by any Indemnified Party, Borrower shall defend
such Indemnified Party (if requested by any Indemnified Party, in the name of
the Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole and absolute discretion, engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of claim or proceeding.
Upon demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
Article - WAIVERS
Section . Waiver of Counterclaim. Borrower hereby waives the
right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Lender arising
out of or in any way connected with this Security Instrument, the Note, any of
the Other Security Documents, or the Obligations.
Section . Marshalling and Other Matters. Borrower hereby
waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, Borrower hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Security Instrument on behalf of Borrower, and on
behalf of each and every person acquiring any interest in or title to the
Property subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by Applicable Law.
Section . Waiver of Notice. To the extent permitted by
Applicable Law, Borrower shall not be entitled to any notices of any nature
<PAGE>
whatsoever from Lender except with respect to matters for which this Security
Instrument specifically and expressly provides for the giving of notice by
Lender to Borrower and except with respect to matters for which Lender is
required by Applicable Law to give notice, and Borrower hereby expressly waives
the right to receive any notice from Lender with respect to any matter for which
this Security Instrument does not specifically and expressly provide for the
giving of notice by Lender to Borrower.
Section . Waiver of Statute of Limitations. Borrower hereby
expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.
Section . Sole Discretion of Lender. Wherever pursuant to
this Security Instrument (a) Lender exercises any right given to it to approve
or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or
(c) any other decision or determination is to be made by Lender, the decision of
Lender to approve or disapprove all decisions that arrangements or terms are
satisfactory or not satisfactory, and all other decisions and determinations
made by Lender, shall be in the sole and absolute discretion of Lender and shall
be final and conclusive, except as may be otherwise expressly and specifically
provided herein.
Section . Survival. Except as hereinafter specifically set
forth below, the representations and warranties, covenants, and other
obligations arising under Article 12 shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment or
other transfer of all or any portion of this Security Instrument or Lender's
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender's rights and
remedies pursuant hereto including, but not limited to foreclosure or acceptance
of a deed in lieu of foreclosure, any exercise of any rights and remedies
pursuant to the Note or any of the Other Security Documents, any transfer of all
or any portion of the Property (whether by Borrower or by Lender, following
foreclosure or acceptance of a deed in lieu of foreclosure or at any other
time), any amendment to this Security Instrument, the Note or the Other Security
Documents, and any act or omission that might otherwise be construed as a
release or discharge of Borrower from the obligations pursuant hereto. All
obligations and liabilities of Borrower under Article 12 shall cease and
terminate on the first (1st) anniversary of the date of payment to Lender in
cash of the entire Debt, provided that contemporaneously with or subsequent to
such payment, Borrower, at its sole cost and expense, delivers to Lender an
environmental audit of the Property in form and substance, and prepared by a
qualified environmental consultant, reasonably satisfactory in all respects to
Lender and indicating the Property is in full compliance with all applicable
Environmental Laws.
Section . Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
<PAGE>
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH
Article - EXCULPATION .
Section . Exculpation. Notwithstanding anything to the
contrary contained in this Security Instrument or in any Other Security Document
(but subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note or this Security Instrument by any
action or proceeding to collect damages or wherein a money judgment or any
deficiency judgment or order or any judgment establishing any personal
obligation or liability shall be sought against Borrower or any principal
director, officer, employee, beneficiary, shareholder, partner, member, trustee,
agent or affiliate of Borrower or any person owning, directly or indirectly, any
legal or beneficial interest in Borrower, or any successors or assigns of any of
the foregoing (collectively, the "Exculpated Parties"). Lender may bring a
foreclosure action, action for specific performance or other appropriate action
or proceeding to enable Lender to enforce and realize upon this Security
Instrument, the Other Security Documents, and the interest in the Property, the
Rents and any other collateral given to Lender created by this Security
Instrument and the Other Security Documents; provided, however, subject to the
provisions of Sections 15.2, 15.3, 15.4 and 15.5, that any judgment in any
action or proceeding shall be enforceable against Borrower only to the extent of
Borrower's interest in the Property, in the Rents and in any other collateral
given to Lender in connection with the Note. Lender, by accepting the Note and
this Security Instrument, agrees that it shall not, except as otherwise provided
below, sue for or demand any deficiency judgment against Borrower or any of the
Exculpated Parties in any action or proceeding, under or by reason of or under
or in connection with the Note, the Other Security Documents or this Security
Instrument.
Section . Reservation of Certain Rights. The provisions of
Section 15.1 shall not (a) constitute a waiver, release or impairment of the
Obligations; (b) impair the right of Lender to name Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under this
Security Instrument; (c) affect the validity or enforceability of any indemnity,
guaranty, master lease or similar instrument made in connection with the Note,
this Security Instrument, or the Other Security Documents; (d) impair the
ability of Lender to obtain the appointment of a receiver; or (e) impair the
enforcement of the Assignment of Leases and Rents executed in connection
herewith.
Section . Exceptions to Exculpation. Notwithstanding the
provisions of Article 15.1 to the contrary, Borrower and Indemnitor shall be
<PAGE>
personally liable to Lender on a joint and several basis for the Losses Lender
incurs due to: (a) fraud or intentional misrepresentation by Borrower or any
other person or entity in connection with the execution and the delivery of the
Note, this Security Instrument or the Other Security Documents; (b) Borrower's
misapplication or misappropriation of Rents received by Borrower after the
occurrence and during the continuance of an Event of Default; (c) Borrower's
misapplication or misappropriation of tenant security deposits or Rents
collected in advance; (d) the misapplication or misappropriation of insurance
proceeds or condemnation awards after the occurrence and during the continuance
of an Event of Default; (e) any fees or commissions paid by Borrower after the
occurrence and during the continuance of an Event of Default to any principal,
affiliate or general partner of Borrower, Indemnitor or Guarantor in violation
of the terms of the Note, this Security Instrument or the Other Security
Documents; (f) gross negligence or criminal acts perpetrated by it resulting in
forfeiture, seizure or loss of any portion of the security; (g) any failure by
Borrower or Indemnitor to comply with the terms and provisions of Section 13.4
hereof or of the Environmental Indemnity; (h) any failure by Borrower or any
general partner or the SPE Member of Borrower to comply with the terms and
provisions of Section 4.3 hereof; or (i) any sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer of the Property or any part
thereof, within the meaning of Article 8 hereof, without the prior written
consent of Lender.
Section . Recourse. Notwithstanding the foregoing, the
agreement of Lender not to pursue recourse liability as set forth in Section
15.1 above SHALL BECOME NULL AND VOID and shall be of no further force and
effect in the event (i) Borrower fails to comply with the terms and conditions
of Section 8.1, 8.2 or 8.3, (ii) the Property or any part thereof shall become
an asset in (A) a voluntary bankruptcy or insolvency proceeding, or (B) an
involuntary bankruptcy or insolvency proceeding commenced by any Person (other
than Lender) and Borrower fails to use its best efforts to obtain a dismissal of
such proceedings, or (iii) Borrower or any Guarantor or Indemnitor fails to
comply with the terms and provisions of Section 3.11 hereof within thirty (30)
days after written notice from Lender to Borrower (which notice shall be a
second notice given after the expiration of any notice given pursuant to Section
10.1(e)); provided, however, so long as PREIT Associates, L.P., a Delaware
limited partnership, maintains that certain line of credit with First Union
National Bank, as agent, pursuant to that certain Revolving Credit Loan
Agreement with Corestates Bank, N.A. (predecessor-in-interest to First Union
National Bank), as agent, and First Trust Savings Bank, Fleet Bank, N.A. and PNC
Bank, as lenders, dated September 30, 1997 (or another credit arrangement
containing market standard financial covenants for net worth, leverage and
liquidity), the occurrence of any of the events referred to in subsections
(i)-(iii) above shall not create recourse liability against Borrower or any
Guarantor or Indemnitor.
Section . Bankruptcy Claims. Nothing herein shall be deemed
to be a waiver of any right which Lender may have under Sections 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for
the full amount of the Debt secured by this Security Instrument or to require
that all collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
<PAGE>
Article - NOTICES
Section . Notices. All notices or other written
communications hereunder shall be deemed to have been properly given (a) upon
delivery, if delivered in person or by facsimile transmission with receipt
acknowledged by the recipient thereof, (b) one (1) Business Day (defined below)
after having been deposited for overnight delivery with any reputable overnight
courier service, or (c) three (3) Business Days after having been deposited in
any post office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to Borrower: PREIT Associates, L.P.
Attn: Jeffrey A. Linn
The Bellevue, Suite 300
200 South Broad Street
Philadelphia, PA 19102
Fax: (215) 546-0240
with a copy to: Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attention: Clifford Swain, Esq.
Facsimile No. (215) 988-2757
If to Lender: GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19044-8015
Attention: Executive Vice President,
Commercial Loan Servicing
Facsimile No. (215) 328-3478
With a copy to: Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Sills Cummis Radin Tischman Epstein & Gross, P.A.
One Riverfront Plaza
Newark, New Jersey 07102-5400
Attention: Robert Hempstead, Esq.
Facsimile No. (973) 643-6500
<PAGE>
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a
day on which commercial banks are not authorized or required by law to close in
the State of New York.
Article - APPLICABLE LAW
Section . Choice of Law. THIS SECURITY INSTRUMENT SHALL BE
GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE WHERE THE LAND IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.
Section . Usury Laws. This Security Instrument and the Note
are subject to the express condition that at no time shall Borrower be obligated
or required to pay interest on the Debt at a rate which could subject the holder
of the Note to either civil or criminal liability as a result of being in excess
of the maximum interest rate which Borrower is permitted by applicable law to
contract or agree to pay. If by the terms of this Security Instrument or the
Note, Borrower is at any time required or obligated to pay interest on the Debt
at a rate in excess of such maximum rate, the rate of interest under the
Security Instrument and the Note shall be deemed to be immediately reduced to
such maximum rate and the interest payable shall be computed at such maximum
rate and all prior interest payments in excess of such maximum rate shall be
applied and shall be deemed to have been payments in reduction of the principal
balance of the Note. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.
Section . Provisions Subject to Applicable Law. All rights,
powers and remedies provided in this Security Instrument may be exercised only
to the extent that the exercise thereof does not violate any applicable
provisions of law and are intended to be limited to the extent necessary so that
they will not render this Security Instrument invalid, unenforceable or not
entitled to be recorded, registered or filed under the provisions of any
Applicable Law.
Section . Inapplicable Provision. If any term of this
Security Instrument or any application thereof shall be invalid or
unenforceable, the remainder of this Security Instrument and any other
application of the term shall not be affected thereby.
<PAGE>
Article - SECONDARY MARKET
Section . Dissemination of Information. If Lender determines
at any time to sell, transfer or assign the Note, this Security Instrument and
the Other Security Documents, and any or all servicing rights with respect
thereto, or to grant participations therein (the "Participations") or issue
mortgage pass-through certificates or other securities (such sale and/or
issuance, the "Securitization") evidencing a beneficial interest in a rated or
unrated public offering or private placement (the "Securities"), Lender may
forward to each purchaser, transferee, assignee, servicer, participant,
investor, or their respective successors in such Participations and/or
Securities (collectively, the "Investor") or any Rating Agency rating such
Securities and each prospective Investor, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower,
any Guarantor, any Indemnitors and the Property (including, without limitation,
all financial statements), which shall have been furnished by Borrower, any
Guarantor or any Indemnitors, as Lender determines necessary or desirable.
Borrower, any Guarantor and any Indemnitor agree to cooperate with Lender in
connection with any transfer made or any Securities created pursuant to this
Section, including, without limitation, the delivery of an estoppel certificate
required in accordance with Subsection 7.4(c) hereof and such other documents as
may be reasonably requested by Lender and, upon Lender's reasonable request,
meeting with any Rating Agency for due diligence purposes. Borrower shall also
furnish and Borrower, any Guarantor and any Indemnitor consent to Lender
furnishing to such Investors or such prospective Investors or any Rating Agency
any and all information concerning the Property, the Leases, the financial
condition of Borrower, any Guarantor and any Indemnitor as may be requested by
Lender, any Investor or any prospective Investor or Rating Agency in connection
with any sale, transfer or Participation, provided, however, PREIT Associates,
L.P. and Pennsylvania Real Estate Investment Trust shall only be required under
this Section 18.1 to disclose information that is deemed to be "public"
information. Borrower shall not be responsible for Lender's fees and expenses
incurred in connection with the transactions contemplated by this Section 18.1.
Lender shall reimburse Borrower for the reasonable actual out-of-pocket third
party costs incurred by Borrower in excess of $1,500.00 in connection with the
transactions contemplated by this Section 18.1. Borrower shall deliver on the
date hereof, at Borrower's sole cost and expense, a nonconsolidation opinion,
and within ten (10) Business Days after demand of Lender, an update of same
(which update Borrower will not be required to provide more than once), each in
form and substance and delivered by counsel acceptable to Lender and the Rating
Agency rating or proposed to rate the Securities, as may be required by Lender
and/or such Rating Agency. Borrower's failure to deliver the opinions required
hereby shall constitute an Event of Default hereunder.
<PAGE>
Article - COSTS
Section . Performance at Borrower's Expense. Borrower
acknowledges and confirms that Lender shall impose certain administrative
processing and/or commitment fees in connection with (a) the extension, renewal,
modification, amendment and termination of its loans, (b) the release or
substitution of collateral therefor, provided, however, no commitment fee shall
be imposed in connection with the substitution of collateral, (c) obtaining
certain consents, waivers and approvals with respect to the Property, or (d) the
review of any Lease or proposed Lease or the preparation or review of any
subordination, non-disturbance agreement (the occurrence of any of the above
shall be called an "Event"). Borrower further acknowledges and confirms that it
shall be responsible for the payment of all costs of reappraisal of the Property
or any part thereof, whether required by law, regulation, Lender or any
governmental or quasi-governmental authority. Borrower hereby acknowledges and
agrees to pay, immediately, with or without demand, all such fees (as the same
may be increased or decreased from time to time), and any additional fees of a
similar type or nature which may be imposed by Lender from time to time, upon
the occurrence of any Event or otherwise. Wherever it is provided for herein
that Borrower pay any costs and expenses, such costs and expenses shall include,
but not be limited to, all legal fees and disbursements of Lender (whether of
retained firms, the reimbursement for the expenses of in-house staff or
otherwise) and all costs and expenses of Lender, if any.
Section . Attorney's Fees for Enforcement. (a) Borrower shall
pay all legal fees incurred by Lender in connection with (i) the preparation of
the Note, this Security Instrument and the Other Security Documents; and (ii)
the items set forth in Section 19.1 above, and (b) Borrower shall pay to Lender
on demand any and all expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender in protecting its interest in the Property or the
Collateral or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property or the Collateral, whether or not
any legal proceeding is commenced hereunder or thereunder and whether or not any
default or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by Lender
until such expenses are paid by Borrower.
Article - DEFINITIONS
Section . General Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Security Instrument may be used interchangeably in singular
or plural form and the word "Borrower" shall mean "each Borrower and any
subsequent owner or owners of the Property or any part thereof or any interest
therein," the word "Lender" shall mean "Lender and any subsequent holder of the
Note," the word "Note" shall mean "the Note and any other evidence of
indebtedness secured by this Security Instrument," the word "person" shall
include an individual, corporation, limited liability company, partnership,
trust, unincorporated association, government, governmental authority, and any
other entity, the word "Property" shall include any portion of the Property and
any interest therein, and the phrases "attorneys' fees" and "counsel fees" shall
include any and all attorneys', paralegal and law clerk fees and disbursements,
<PAGE>
including, but not limited to fees and disbursements at the pre-trial, trial and
appellate levels incurred or paid by Lender in protecting its interest in the
Property, the Leases and the Rents and enforcing its rights under this Security
Instrument.
Section . Headings, Etc. The headings and captions of various
Sections of this Security Instrument are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof.
Article - MISCELLANEOUS PROVISIONS
Section . No Oral Change. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower, or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
Section . Liability. If Borrower consists of more than one
person, the obligations and liabilities of each such person hereunder shall be
joint and several. This Security Instrument shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns
forever.
Section . Duplicate Originals; Counterparts. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security Instrument
may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a
single Security Instrument.
Section . Number and Gender. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
Section . Subrogation. If any or all of the proceeds of the
Note have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Property, then, to the extent of the funds so used, Lender
shall be subrogated to all of the rights, claims, liens, titles, and interests
existing against the Property heretofore held by, or in favor of, the holder of
such indebtedness and such former rights, claims, liens, titles, and interests,
if any, are not waived but rather are continued in full force and effect in
favor of Lender and are merged with the lien and security interest created
herein as cumulative security for the repayment of the Debt, the performance and
discharge of Borrower's obligations hereunder, under the Note and the Other
Security Documents and the performance and discharge of the Other Obligations.
<PAGE>
Section . Entire Agreement. The Note, this Security
Instrument and the Other Security Documents constitute the entire understanding
and agreement between Borrower and Lender with respect to the transactions
arising in connection with the Debt and supersede all prior written or oral
understandings and agreements between Borrower and Lender with respect thereto.
Borrower hereby acknowledges that, except as incorporated in writing in the
Note, this Security Instrument and the Other Security Documents, there are not,
and were not, and no persons are or were authorized by Lender to make, any
representations, understandings, stipulations, agreements or promises, oral or
written, with respect to the transaction which is the subject of the Note, this
Security Instrument and the Other Security Documents.
<PAGE>
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been
executed by Borrower as of the date first above written.
BORROWER:
PREIT ASSOCIATES, L.P.
a Delaware limited partnership
By: Pennsylvania Real Estate Investment Trust,
its general partner
By: /s/ Jeffrey A. Linn
------------------------------------------
Name: Jeffrey A. Linn
Title: Authorized Signatory
<PAGE>
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the
buildings and improvements thereon, situate, lying and being
<PAGE>
Exhibit 99
Pennsylvania Real Estate Investment Trust
[GRAPHIC OMITTED] 200 South Broad Street
Philadelphia, PA 19102
www.preit.com
Phone: 215-875-0700
Fax: 215-546-7311
FOR FURTHER INFORMATION:
<TABLE>
<CAPTION>
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
<S> <C> <C> <C>
Edward A. Glickman Joe Calabrese Pamela King Judith Sylk-Siegel
Executive Vice President and CFO (General Info) (Analyst Info) (Media Info)
(215) 875-0700 (212) 661-8030 (212) 661-8030 (212) 661-8030
FOR IMMEDIATE RELEASE
May 13, 1999
</TABLE>
Pennsylvania Real Estate Investment Trust
Philadelphia, PA, May 13, 1999 -- Pennsylvania Real Estate Investment Trust
(NYSE:PEI) announced today the results of its operations for the first quarter
ended March 31, 1999.
First Quarter Highlights
o Increased FFO by 12.5% to $0.63 per share on 14.6 million shares/OP units
outstanding from $0.56 per share on 13.9 million shares/OP units outstanding
during the first quarter of 1998
o Funds from operations for the quarter increased 18.2% to $9.2 million from
$7.7 million in 1998
o Increased combined net operating income 41.2% to $18.3 million from $13.0
million in 1998
o Retail net operating income increased 68.7% from the 1998 first quarter
o Multifamily net operating income grew 17.8% from the 1998 first quarter
o Acquired an interest in Creekview shopping center, a 64-acre power center
site in Warrington, PA
First Quarter Results
Funds from operations (FFO) for the three months ended March 31, 1999 totaled
$9,155,000, an 18.2% increase over FFO of $7,744,000 for the comparable
three-month period ended March 31, 1998. The growth was driven by acquisitions
and development projects completed in 1998 and improved operating results in the
Company's portfolio. First quarter FFO was $0.63 per share on 14,582,000
weighted average share equivalents outstanding (including Operating Partnership
[OP] units), compared to $0.56 per share on 13,938,000 weighted average share
equivalents for the three months ended March 31, 1998. As calculated by NAREIT,
FFO is defined as net income excluding extraordinary and unusual items, gain (or
loss) on the sale of property, plus depreciation and amortization.
Net operating income from wholly-owned properties and the Company's
proportionate share of partnerships and joint venture properties increased 41.2%
to $18,316,000 for the three months
<PAGE>
PREIT Announces First Quarter 1999 Results
May 13, 1999
Page 2
ended March 31, 1999, from $12,971,000 for the three months ended March 31,
1998. The increase is mainly due to acquisitions completed in the second half of
1998 and the completion of two development properties in the fourth quarter of
1998.
Net income for the three months ended March 31, 1999 was $5,870,000, or $0.44
per basic share, on total weighted average shares outstanding of 13,309,000
compared to $4,593,000, or $0.35 per basic share, on 13,292,000 total weighted
average shares outstanding for the three months ended March 31, 1998. Net income
for the 1999 period included gains on sales of 135 Commerce Drive, Fort
Washington, PA and a land parcel at Crest Plaza, Allentown, PA, totaling
$1,346,000 or $0.10 per share.
Comments from Management
Ronald Rubin, Chief Executive Officer of PREIT, said, "We continue to be pleased
with our operating results, demonstrating the integration of several accretive
acquisitions over the past year, the recent completion of two development
projects and strong internal growth. During the 1999 first quarter we achieved
double digit increases in FFO, combined net operating income as well as solid
performance from our multifamily portfolio, reflecting the effectiveness of our
long-term growth strategies."
Mr. Rubin continued, "Our primary focus in early 1999 is maintaining the growth
of our development pipeline, and obtaining adequate funding for such purpose."
Same Store NOI Growth Continues - Multifamily & Shopping Center Portfolios
Same store net operating income for the Company's portfolio of multifamily
properties increased 4.7% over the first quarter of 1998, primarily driven by an
increase in revenues and improved occupancy. Same store net operating income for
the first quarter of 1999 for the Company's shopping center portfolio increased
by 0.5% over the comparable quarter. The Company's same store analysis of the
retail portfolio is negatively impacted by the Company's revised policy of not
accruing percentage rental income until all contingencies have been removed
(consistent with the Emerging Issues Task Force (EITF) 98-9). This policy causes
some percentage rental income to be recognized later in the calendar year when
compared with the policy in effect in the first quarter of 1998.
Portfolio Highlights
o Creekview (Warrington, PA) -- PREIT announced that it acquired a 64-acre
power center site in conjunction with the center's two major tenants,
Target and Lowe's. Ownership of the 387,000 square foot shopping center is
in the form of a retail condominium in which PREIT, Target and Lowe's own
100% of the condominium. PREIT, whose share of the purchase price was $1.3
million, plans to develop 100,000 square feet of stores complementary to
Target and Lowe's at a total cost of approximately $10 million.
o Development Pipeline - During the second quarter, the Company expects
construction will commence on two retail development projects, Paxton Towne
Center (582,000 square feet) in Harrisburg, PA and Blue Route Metroplex
(760,000 square feet) in Plymouth Meeting, PA. Funding for these projects
is expected to come from the Company's line of credit and construction
financing.
<PAGE>
PREIT Announces First Quarter 1999 Results
May 13, 1999
Page 3
o Dispositions - The Company sold a non-core asset from its industrial
portfolio (135 Commerce Drive in Fort Washington, PA) to the property's
tenant and a surplus land parcel at Crest Plaza in Allentown, PA for total
capital gains of $1,346,000, or $0.10 per share.
Jonathan B. Weller, President and Chief Operating Officer of PREIT, commented,
"We remain highly committed to our development efforts, providing PREIT with
opportunities to leverage its development expertise while offering the potential
for FFO growth. Currently, PREIT's development and redevelopment pipeline
includes five power centers, three strip centers and one enclosed mall," Mr.
Weller added. "Consistent with the Company's strategy of selling non-core
assets, PREIT sold one of its industrial properties as well as a surplus land
parcel at Crest Plaza during the quarter. Looking forward, we will continue to
prune our portfolio by selling properties that do not meet PREIT's long-term
ownership criteria."
Benefits of New Long-Term Financing
As previously announced in April, PREIT closed on the financing of eight
multifamily communities with $108 million of permanent, fixed-rate, long-term
debt. With the financing, PREIT replaced short-term floating rate debt with
mortgage debt with a 10 year maturity and a weighted average interest cost of
6.77%. A portion of the proceeds from the transaction were used to pay off a
short-term, floating rate loan of $17 million, which was secured by the recently
acquired Northeast Tower Center in Philadelphia, PA. The balance of the
proceeds, approximately $88 million, was used to pay down the Company's line of
credit. After the paydown, approximately $60 million was outstanding under the
Company's line of credit.
Edward Glickman, Chief Financial Officer of PREIT, added, "To position PREIT for
future growth, we recently took steps to strengthen our financial resources and
our capability to continue building our portfolio. Importantly, the proceeds
from the $108 million long-term financing provide the Company with additional
financial flexibility to facilitate its 1999 development projects and other high
value-added opportunities. We are confident of the Company's prospects for
continued profitable growth."
Quarterly Dividend Declared
The Company declared a quarterly dividend of $0.47 per share payable on June 15,
1999 to shareholders and unitholders of record as of May 28, 1999. The June 15,
1999 dividend payment will be PREIT's 89th consecutive distribution since its
initial dividend paid in August of 1962. Throughout its history, the Company has
never omitted or reduced a shareholder dividend.
<PAGE>
PREIT Announces First Quarter 1999 Results
May 13, 1999
Page 4
Pennsylvania Real Estate Investment Trust, founded in 1960 and one of the first
equity REITs in the U.S., has a primary investment focus on shopping centers
(8.0 million square feet) and apartment communities (7,241 units) located
primarily in the eastern United States. The Company's portfolio currently
consists of interests in 47 properties in 10 states. In addition, there are 5
retail properties under development. Pennsylvania Real Estate Investment Trust
is headquartered in Philadelphia, PA.
With the exception of the historical information contained in the release, the
matters described herein contain forward-looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve various risks and may cause actual
results to differ materially. These risks include, but are not limited to, the
ability of the Company to grow internally or by acquisition and to integrate
acquired businesses, the availability of adequate funds at reasonable cost,
changing industry and competitive conditions, and other risks outside the
control of the company referred to in the Company's registration statement and
periodic reports filed with the Securities and Exchange Commission.
[Financial Tables Follow]
# # #
** A supplemental quarterly financial package **
is available on the Company's web site at www.preit.com.
To receive additional information on Pennsylvania Real Estate Investment Trust
via fax at no charge, please dial 1-800-PRO-INFO
and enter the ticker symbol PEI.
<PAGE>
PREIT Announces First Quarter 1999 Results
May 13, 1999
Page 5
Pennsylvania Real Estate Investment Trust
Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FUNDS FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
----------------------------------------------------
March 31, 1999 March 31, 1998
----------------------------------------------------
<S> <C> <C>
Income before minority interest in operating partnership $ 6,432,000 $ 4,817,000
Less: Gains on sales of interests in real estate (1,346,000) -
Add: Wholly owned & consolidated partnership, net 3,156,000 2,088,000
Unconsolidated partnerships & joint ventures 1,059,000 998,000
Excess purchase price over net asset acquired 53,000 29,000
Less: Depreciation of non-real estate assets (60,000) (58,000)
Amortization of deferred financing assets (139,000) (130,000)
----------- -----------
FUNDS FROM OPERATIONS $ 9,155,000 (1) $ 7,744,000 (1)
=========== ===========
FUNDS FROM OPERATIONS PER SHARE AND OP UNITS $0.63 $0.56
=========== ===========
Weighted average number of shares outstanding 13,309,000 13,292,000
Weighted average effect of full conversion of OP units 1,273,000 646,000
----------- -----------
Total weighted average shares of outstanding including OP units 14,582,000 13,938,000
----------- -----------
(1) Includes the non-cash effect of straight-line rent of $295,000 and $225,000 for the 1st quarter of 1999 and 1998, respectively.
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
----------------------------------------------------
March 31, 1999 March 31, 1998
----------------------------------------------------
REVENUES
Gross revenues from real estate $21,100,000 $13,526,000
Interest and other income 163,000 121,000
----------- -----------
21,263,000 13,647,000
----------- -----------
EXPENSES
Property operating expenses 7,377,000 5,093,000
Depreciation and amortization 3,216,000 2,138,000
General & administrative expenses 853,000 738,000
Interest expense 5,105,000 1,978,000
----------- -----------
16,551,000 9,947,000
----------- -----------
Income before equity in unconsolidated entities,
gains on sales of interests in real estate and
minority interest in operating partnership 4,712,000 3,700,000
Equity in loss of PREIT-RUBIN, Inc. (1,092,000) (358,000)
Equity in income of partnerships and joint ventures 1,466,000 1,475,000
Gains on sales of interests in real estate (2) 1,346,000 -
----------- -----------
Income before minority interest in operating partnership 6,432,000 4,817,000
Minority interest in operating partnership (562,000) (224,000)
----------- -----------
NET INCOME $5,870,000 $ 4,593,000
=========== ===========
PER SHARE DATA
Net income before gains on sales of interests in real estate $0.34 $0.35
Gains on sales of interests in real estate 0.10 -
----------- -----------
BASIC INCOME PER SHARE $0.44 $0.35
=========== ===========
DILUTED INCOME PER SHARE $0.44 $0.34
=========== ===========
Weighted average number of shares outstanding 13,309,000 13,292,000
----------- -----------
(2) Gains on sales of 135 Commerce Drive, Fort Washington, PA and land parcel at Crest Plaza, Allentown, PA.
</TABLE>
<PAGE>
PREIT Announces First Quarter 1999 Results
May 13, 1999
Page 6
Pennsylvania Real Estate Investment Trust
Selected Financial Data
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
----------------------------------------------------
March 31, 1999 March 31, 1998
----------------------------------------------------
<S> <C> <C>
Gross revenues from real estate 14,158,000 $14,737,000
============ ===========
Expenses:
Property operating expenses 4,852,000 5,403,000
Mortgage and bank loan interest 4,188,000 4,233,000
Depreciation and amortization 2,154,000 2,071,000
------------ -----------
11,194,000 11,707,000
------------ -----------
2,964,000 3,030,000
Partner's Share (1,498,000) (1,555,000)
------------ -----------
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES $ 1,466,000 $ 1,475,000
============ ===========
Supplemental Information for Wholly Owned Properties
and the Company's Proportionate Share of Partnerships and Joint Ventures
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
AND AMORTIZATIONS ("EBITDA")
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
----------------------------------------------------
March 31, 1999 March 31, 1998
----------------------------------------------------
Gross Revenues $ 21,100,000 $ 13,526,000
Operating expenses (7,377,000) (5,093,000)
------------ ------------
Net operating income: Wholly-owned properties 13,723,000 8,433,000
Company's proportionate share of partnerships and
joint ventures net operating income 4,593,000 4,538,000
------------ ------------
Combined net operating income 18,316,000 12,971,000
Interest income 163,000 121,000
Company's proportionate share of PREIT-RUBIN, Inc.
net operating loss (800,000) (221,000)
General and administrative expenses (853,000) (738,000)
------------ ------------
EBITDA $ 16,826,000 $ 12,133,000
============ ============
MORTGAGE NOTES AND BANK LOANS PAYABLE
Wholly-Owned Properties
Mortgage notes payable $166,274,000 $ 65,121,000
Bank Loans payable 142,973,000 49,526,000
------------ ------------
309,247,000 114,647,000
Company's Proportionate Share of
Partnerships and Joint Ventures
Mortgage notes payable 108,861,000 102,704,000
Bank loans payable 2,482,000 4,154,000
------------ ------------
Total mortgage notes and bank loans payable $420,590,000 $221,505,000
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000077281
<NAME> PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
<CURRENCY> DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 2,998,000
<SECURITIES> 0
<RECEIVABLES> 43,723,000
<ALLOWANCES> 1,536,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 515,840,000
<DEPRECIATION> 74,186,000
<TOTAL-ASSETS> 486,839,000
<CURRENT-LIABILITIES> 40,558,000
<BONDS> 309,247,000
0
0
<COMMON> 13,314,000
<OTHER-SE> 123,720,000
<TOTAL-LIABILITY-AND-EQUITY> 486,839,000
<SALES> 21,100,000
<TOTAL-REVENUES> 22,421,000
<CGS> 11,446,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,105,000
<INCOME-PRETAX> 5,870,000
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<INCOME-CONTINUING> 5,870,000
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<CHANGES> 0
<NET-INCOME> 5,870,000
<EPS-PRIMARY> .44
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</TABLE>
