Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number
0-17633
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its Certificate
of Limited Partnership)
Maryland 75-2228850
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6225 Centennial Avenue
FB0101
Baltimore, Maryland 21209
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 205-6900
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 and 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 over the past 90 days.
Yes X No _____
-----------
<PAGE>
INDEX
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -- September 30, 1997 and
December 31, 1996
Statements of Operations -- For the three months
ended September 30, 1997 and September 30, 1996 and
for the nine months ended September 30, 1997 and
September 30, 1996
Statements of Cash Flows -- For the nine months ended
September 30, 1997 and September 30, 1996
Notes to Financial Statements -- September 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Partnership did not file any reports on Form 8-K
during the nine months ended September 30, 1997.
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
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USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
BALANCE SHEETS
(Unaudited)
<S> <C> <C>
September 30, 1997 December 31, 1996
------------------ -----------------
Assets
Real Estate Investments:
Income Producing Properties - Note B $27,338,259 $27,801,201
Cash and Cash Equivalents (including temporary
investments at September 30, 1997 and December 31,
1996 of $648,799 and $232,850, respectively) - Note C 1,280,200 780,727
Restricted Cash Escrow - Note E 51,388 130,356
Accounts Receivable, Net 153,215 108,082
St. Andrews Recovery Receivables - Note J 0 1,525,000
Other Assets 493,447 265,668
----------- -----------
Total Assets $29,316,509 $30,611,034
=========== ===========
Liabilities
Mortgages Payable - Note E $21,452,351 $20,529,488
Accounts Payable and Other Liabilities 904,875 1,262,790
St. Andrews Construction Loan - Note J 1,257,000 2,790,000
Due to General Partners and Affiliates - Note D 2,444,338 2,249,346
Cash Flow Protector Loan - Note G 4,849,734 4,849,734
----------- -----------
$30,908,298 $31,681,358
Partners' (Deficit) Equity
General Partners $ (260,330) $ (255,116)
Assignor and Assignee Limited Partners,
1,094,283 Units Issued and Outstanding (1,331,459) (815,208)
------------ -----------
(1,591,789) (1,070,324)
------------ -----------
Total Liabilities and Partners' (Deficit) Equity $29,316,509 $30,611,034
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
<TABLE>
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USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
<S> <C> <C> <C> <C>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
-------------- -------------- -------------- --------------
REVENUE:
Rental $ 1,316,966 $ 1,189,896 $ 3,824,298 $ 3,512,747
Interest 11,946 4,040 28,231 15,712
----------- ----------- ----------- -----------
Total Revenue $ 1,328,912 $ 1,193,936 $ 3,852,529 $ 3,528,459
EXPENSES:
Property Operating - Note D 500,108 516,046 1,502,512 1,522,519
St. Andrews Repair and Legal Costs,
Net of Recoveries - Note J 2,272 117,759 30,848 2,802,706
General and Administrative 35,127 35,132 100,219 102,462
Interest - Notes D and E 563,602 594,627 1,732,932 1,704,139
Depreciation and Amortization 348,938 314,662 1,007,483 930,848
----------- ----------- ----------- ----------
Total Expenses 1,450,047 1,578,226 4,373,994 7,062,674
----------- ----------- ----------- ----------
NET LOSS $ (121,135) $ (384,290) $ (521,465) $(3,534,215)
=========== =========== =========== ===========
Net Loss Allocated to:
General Partners $ (1,211) $ (3,843) $ (5,215) $ (35,342)
Assignor and Assignee Limited
Partners (119,924) (380,447) (516,250) (3,498,873)
----------- ----------- ----------- -----------
$ (121,135) $ (384,290) $ (521,465) $(3,534,215)
=========== =========== =========== ===========
Net Loss per Unit -- Note A $ (0.11) $ (.35) $ (0.47) $ (3.20)
=========== =========== =========== ===========
Weighted Average Number of Units 1,094,283 1,094,283 1,094,283 1,094,283
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
<TABLE>
<CAPTION>
USF&G LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
For the Nine For the Nine
Months Ended Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
Operating Activities
Net Loss $ (521,465) $(3,534,215)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,007,483 930,848
Change in net assets and liabilities related to
operating activities:
Decrease in restricted cash escrow 78,968 106,912
Increase in due to general partners and affiliates 194,992 255,832
Decrease in accounts payable and other
liabilities (357,915) (101,090)
Increase in accounts receivable (45,133) (3,230)
Decrease in St. Andrews recovery receivables 1,525,000 0
Increase in other assets (323,533) (58,682)
---------- ----------
Net Cash Provided by (Used in) Operating Activities 1,558,397 (2,403,625)
---------- ----------
Investing Activities
Investment in income producing properties (448,787) (229,555)
---------- ----------
Net Cash Used in Investing Activities (448,787) (229,555)
---------- ----------
Financing Activities
Mortgage Loan Advances 13,500,000 0
Mortgage Principal Payments (12,577,137) (48,950)
St. Andrews Construction Loan Advances 215,000 2,790,000
St. Andrews Construction Loan Payments (1,748,000) 0
---------- ----------
Net Cash (Used in) Provided by Financing Activities (610,137) 2,741,050
---------- ----------
Increase in Cash and Cash Equivalents 499,473 107,870
Cash and Cash Equivalents, Beginning of Period 780,727 887,555
---------- -----------
Cash and Cash Equivalents, End of Period $1,280,200 $ 995,425
========= ===========
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 1997
(Unaudited)
NOTE A - Organization, Basis of Presentation and Summary of Significant
Accounting Policies
USF&G/Legg Mason Realty Partners Limited Partnership (the "Partnership") was
organized under the laws of the State of Maryland on April 12, 1988. The
Partnership was formed to acquire, hold, lease and ultimately dispose of income
producing commercial and multi-family residential properties located primarily
in the Eastern half of the United States.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-K
for the year ended December 31, 1996.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which is required to be adopted for periods ending after December 15,
1997. The standard was issued to change the current method used by public
companies to compute earnings per share. SFAS No. 128 will have no effect on the
Partnership's computation of net earnings or loss per share.
Allocation of Net (Loss) Income from Operations
Net (loss) income from operations is allocated first among the partners in
proportion to cash distributions and second, if there have been no cash
distributions, 99% to the assignee limited partners ("Unitholders") and 1% to
General Partners. Net (loss) income and cash distributions per Unit were
computed based upon net (loss) income allocated to and cash distributions paid
to Unitholders divided by the weighted average number of Units outstanding
during the periods indicated. The allocated 1% net (loss) income from operations
to the General Partners is prorated for net (loss) on the basis of 80% to USF&G
Realty Partners, Inc. (the "USF&G General Partner") and 20% to Legg Mason Realty
Partners, Inc. (collectively, the "General Partners") while net income is
allocable on the basis of 50% to the USF&G General Partner and 50% to Legg Mason
Realty Partners, Inc.
<PAGE>
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
Notes to Financial Statements (Continued)
September 30, 1997
(Unaudited)
NOTE B - Income Producing Properties
The following table sets forth summarized financial information for Northeast
Business Campus, St. Andrews Apartments at Westwood and Shadeland Retail Center,
the three properties owned directly by the Partnership, as of the dates
indicated:
September 30, 1997 December 31, 1996
------------------ -----------------
Buildings and improvements $29,855,129 $29,406,342
Land 5,444,913 5,444,913
---------- ----------
35,300,042 34,851,255
Less: Accumulated depreciation (7,961,783) (7,050,054)
---------- ----------
$27,338,259 $27,801,201
========== ==========
NOTE C - Cash and Cash Equivalents
Cash and cash equivalents include temporary investments in money market funds
with maturities of three months or less.
NOTE D - Related Party Transactions
The following is a summary of compensation and reimbursements of expenses
incurred to the General Partners and their affiliates for the periods indicated:
For the Three Months Ended For the Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
-------------- -------------- -------------- --------------
Charged to expenses:
Interest Expense $109,502 $138,106 $368,278 $333,429
Operating Expenses 22,237 22,028 67,955 65,958
<PAGE>
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
Notes to Financial Statements (Continued)
September 30, 1997
(Unaudited)
NOTE D - Related Party Transactions (Continued)
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<CAPTION>
Due to General Partners and affiliates consists of the following as of the dates
indicated:
<S> <C> <C>
September 30, 1997 December 31, 1996
------------------ -----------------
General Partner Loans $ 200,000 $ 200,000
Accrued Interest on General Partner Loans 48,672 36,045
Accrued Interest on the St. Andrews Construction Loan 0 42,548
Operating Expenses 29,000 21,727
--------- ---------
277,672 300,320
--------- ---------
Asset Management Fees 423,990 423,990
Accrued Interest on the Cash Flow Protector Loan 1,742,676 1,525,036
--------- ---------
Amounts Subordinate to the return of Unitholder
contributions 2,166,666 1,949,026
--------- ---------
$2,444,338 $2,249,346
========= =========
</TABLE>
In connection with the loan modification at NEBC executed in the fourth quarter
of 1994 discussed in Note E, the General Partners provided equally a total of
$200,000 to the Partnership toward establishing the required reserves and
escrows at NEBC. The amounts provided by the General Partners are in the form of
loans from each General Partner which accrue interest at the prime rate and
mature on August 15, 1999. The Partnership's obligation to make interest and
principal payments under the loans is limited to the extent of available NEBC
reserves and escrows and sale or refinancing proceeds (as defined in the
Partnership Agreement) attributable to the NEBC property.
See Note J - St. Andrews Repair and Legal Costs for a discussion of the St.
Andrews Construction Loan and Note G - Cash Flow Protector Loan for a discussion
of the Cash Flow Protector Loan from the USF&G General Partner.
The subordinated amount identified above is subordinate under Section 4.4 of the
Partnership Agreement.
<PAGE>
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
Notes to Financial Statements (Continued)
September 30, 1997
(Unaudited)
NOTE E - Mortgages Payable
Mortgages payable consists of the following as of the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 1997 December 31, 1996
------------------- -----------------
Mortgage loan, secured by Northeast Business Campus,
due August 15, 1999, interest at 8.00% $ 7,975,000 $ 7,975,000
Mortgage loan, secured by St. Andrews at Westwood,
due October 2, 2000, floating rate 8,500,000 8,500,000
Mortgage loan, secured by a portion of Shadeland Retail
Center, due May, 2002, interest at 7.60% 4,977,351 4,054,488
---------- ----------
$21,452,351 $20,529,488
========== ==========
</TABLE>
The mortgage loans are non-recourse obligations except under certain defined
circumstances. Interest expense of $1,364,654 and $1,370,710 was incurred on
these mortgages for the nine months ended September 30, 1997, and 1996,
respectively. Interest payments of $1,440,889 and $1,381,906 were made for the
nine months ended September 30, 1997, and 1996, respectively.
In connection with the 1994 NEBC loan modification, the Partnership was required
to establish with the lender a reserve for future tenant improvements and lease
commissions and escrows for taxes and insurance. At September 30, 1997, the
lender held a total of $51,388 of restricted cash escrow which included $8,528
in reserves and $42,860 in tax and insurance escrows. All future cash flow
generated by the NEBC property will be held in a reserve account which may be
used only for the benefit of NEBC or to meet obligations to the lender. The
Partnership held $342,007 in segregated funds for such purposes and this amount
was included in the Partnership's cash and cash equivalents balance at September
30, 1997. See Note D - Related Party Transactions and Note I Commitments and
Contingencies.
The Shadeland Retail Center mortgage loan, originally due January 1, 1997 and
subsequently extended to May 31, 1997, was refinanced in May 1997 with an
unaffiliated lender. The Partnership obtained a $5,000,000, five-year, 7.60%
fixed interest rate loan with a 25-year amortization due May 2002. The lender
required a $150,000 cash hold-back to be used for expenses relating to parking
lot resurfacing. The resurfacing of the parking lot was completed in July 1997
and the escrow reserve was distributed to the Partnership in August 1997.
The St. Andrews mortgage loan, originally due September 1, 1997 and subsequently
extended to October 1, 1997, was refinanced in September 1997 with an
unaffiliated lender. The new loan is an $8,500,000, three-year, floating
interest rate loan with a 30-year amortization due October 2, 2000. The interest
rate on the new loan resets every 90 days at the 90 day London Interbank
Offering Rate plus 1.30%. The interest rate at September 30, 1997 was 7.02%
<PAGE>
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
Notes to Financial Statements (Continued)
September 30, 1997
(Unaudited)
NOTE F - Distributions to Partners
The Partnership Agreement provides for quarterly cash distributions to the
partners no later than 45 days after the close of each quarter. The quarterly
cash distributions are allocated 99% to Unitholders and 1% to the General
Partners.
As of September 30, 1997, cumulative cash distributions of $10,545,983 and
$106,517 had been made to the Unitholders and General Partners, respectively.
These cash distributions represent a cumulative return of 2% per quarter on
invested capital through the period ended July 13, 1993. The last distribution
to Unitholders was made November 12, 1993.
NOTE G - Cash Flow Protector Loan
Pursuant to the Cash Flow Protector Loan, the USF&G General Partner agreed to
lend to the Partnership an amount up to $5,471,415, representing 20% of the
gross proceeds of the offering, to the extent that the Partnership's
distributable cash flow was insufficient to pay a 2% cumulative quarterly return
(8% annual return) to Unitholders. In connection with cumulative cash
distributions, as of September 30, 1997, the USF&G General Partner had funded
$4,849,734 pursuant to the Cash Flow Protector Loan. The last distribution to
Unitholders was made November 12, 1993.
The USF&G General Partner's commitment to lend amounts pursuant to the Cash Flow
Protector Loan expired on July 13, 1993. The Cash Flow Protector Loan currently
accrues interest at an annual simple rate of 6%, a reduction in the rate from 8%
by the USF&G General Partner effective January 1, 1993. The Cash Flow Protector
Loan is due and payable on December 31, 2003 or earlier, from sale or
refinancing proceeds. The related aggregate accrued interest of $1,742,676 as of
September 30, 1997 is subordinate to the return of Unitholder capital
contributions as discussed in Note D.
NOTE H - Right of Presentment
The Right of Presentment provisions of the Partnership's Partnership Agreement
now provide that if in a year Units are presented in excess of the amount
required to be purchased by the USF&G General Partner then the General Partners
may elect to purchase such excess presented Units, provided that the total
number of Units repurchased shall not exceed 50% of the Units outstanding. As of
September 30, 1997, the General Partners have repurchased 185,774 Units under
the Right of Presentment Program.
On June 30, 1997, the General Partners purchased all of the 16,916 Units
presented under the 1997 Right of Presentment Program. The Units were purchased
at a price per unit of $3.48 from all Unitholders that presented. The USF&G
General Partner purchased 13,886 of the Units. The remaining 3,030 Units were
purchased by Legg Mason Realty Partners, Inc.
<PAGE>
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
Notes to Financial Statements (Continued)
September 30, 1997
(Unaudited)
NOTE I - Commitments and Contingencies
In order to obtain the NEBC loan modification during 1994 discussed in Note E,
the Partnership agreed to permit the NEBC mortgage lender to participate in the
NEBC sales proceeds above the outstanding debt and closing costs. Upon sale of
NEBC, the lender will be entitled to receive 60% of the first $1,500,000, 40% of
the next $500,000 and 10% thereafter of the remaining proceeds.
NOTE J - St. Andrews Repair and Legal Costs
During the second quarter of 1995, the Partnership entered into a $3,000,000
contract to complete the necessary repairs at St. Andrews. Certain modifications
were made to the original construction contract and the total completed contract
cost was approximately $3,700,000. Contract repairs began during the third
quarter of 1995 and were complete by the end of 1996. The Partnership recognized
cumulative costs of $4,549,000 and $699,000 related to assessing and repairing
the construction problems and pursuing legal remedies, respectively, through the
three year period ended December 31, 1996. These costs were offset by cumulative
settlement and insurance recoveries of $2,732,500. The Partnership incurred
approximately $19,170 and $11,678 of St. Andrews repair and legal costs,
respectively, during 1997.
The Partnership received payment of $30,000 from responsible parties during
October 1997. The Partnership continues to assert its claims against the
remaining potentially responsible parties, and accordingly, will incur future
legal costs. During 1997, the Partnership obtained, through settlement, the
right to pursue the general contractor's claims for indemnity and contribution
from the subcontractors who worked on the St. Andrews project. The Partnership
is continuing to pursue these claims against the subcontractors. There can be no
assurance as to the outcome of such litigation.
The Partnership executed an agreement for a construction loan with the USF&G
General Partner during the third quarter of 1995 which permitted the Partnership
to borrow up to $3,500,000 to complete the necessary repairs. Under its original
terms, the loan matured September 1, 1997. The USF&G General Partner extended
the construction loan on November 7, 1997, effective as of September 1, 1997,
until October 2, 2000. The construction loan was extended to coincide with the
maturity of the new St. Andrews mortgage loan. The terms continue to require
monthly interest payments on advanced funds at 9.0% and also provide for early
repayment from additional recoveries from the Partnership's lawsuit, net
operating income after reserves or sales or refinancing proceeds. As of
September 30, 1997, the outstanding balance of the construction loan was
$1,257,000 and no further advances on the loan are expected. Interest expense of
$138,011 and $102,575 was incurred and interest payments totaling $180,559 and
$81,537 were made on this loan for the nine months ended September 30, 1997, and
1996, respectively (see Note D).
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership cautions readers that certain forward-looking statements are
contained in the following discussion and elsewhere in the Form 10-Q and may be
contained in future filings with the Securities and Exchange Commission.
Forward-looking statements are statements which relate to future operations,
strategies, financial results, or other developments. Forward-looking statements
are necessarily based upon estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Partnership's control and many of
which, with respect to future business decisions, are subject to change. These
uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward-looking
statements made by the Partnership. The Partnership wishes to caution readers
not to place undue reliance upon any such forward-looking statements, which are
made pursuant to Private Securities Litigation Reform Act of 1995, and as such,
speak only as of the date made. The Partnership disclaims any duty or obligation
to update any such forward-looking statements.
General
On June 28, 1988, the Partnership's Registration Statement registering 1,400,000
Units at an offering price of $25 per Unit was declared effective by the
Securities and Exchange Commission. As of December 31, 1989, at the termination
of the offering, 1,094,283 Units had been sold for aggregate gross proceeds of
$27,357,075.
After deducting rebates to Unitholders of $835,001 and offering and
organizational costs and selling commissions totaling $2,174,276, approximately
$24,348,000 was available for investment in income producing properties.
Substantially all of the proceeds available for investment were invested in four
income producing properties meeting the investment criteria of the Partnership.
Northeast Business Campus ("NEBC"), St. Andrews Apartments at Westwood ("St.
Andrews"), and Shadeland Retail Center ("Shadeland") are owned directly by the
Partnership (collectively, the "Properties") and the Partnership owned a fifty
percent general partnership interest in the Greenbrier Towers General
Partnership (the "Joint Venture"). The Joint Venture's sole property, Greenbrier
Towers, was purchased by the lender at foreclosure on April 26, 1995.
Liquidity and Capital Resources
The cash and cash equivalents position of the Partnership at September 30, 1997
increased $499,473 from December 31, 1996. The increase was primarily due to
excess cash proceeds from the Shadeland mortgage loan refinancing and St.
Andrews settlements received during the period offset in part by the net
principal repayment on the St. Andrews construction loan and investment in
capital additions. The Partnership's cash and cash equivalents position will
continue to fluctuate during each quarter as follows: (1) decreasing with the
funding of lease-up costs and capital improvements at Shadeland and St. Andrews;
(2) increasing as net rental income and interest income are received; and (3)
decreasing as expenses (including debt service requirements and construction
loan repayments) are paid. Under the 1994 NEBC loan modification, all future
cash flow generated by the NEBC property must be used only for the benefit of
NEBC or to meet obligations to the lender. At September 30, 1997, the lender
held $51,388 in reserves and escrows and the Partnership held $342,007 in
segregated funds subject to the lien, for the benefit of the lender which was
included in the Partnership's cash and cash equivalents balance.
<PAGE>
The Partnership's ability to compete in each market is affected by the level of
cash provided by operations since the level of tenant improvements are limited
to the cash available for investment in income producing properties. In
connection with the acquisition of the Properties, the Partnership established
cumulative working capital reserves of approximately 3% of gross offering
proceeds. For the foreseeable future, the Partnership expects to apply cash flow
from operations to increase Partnership working capital reserves, to pay down
the St. Andrews construction loan, and to provide for St. Andrews and Shadeland
maintenance and improvements, and consequently, there is no expectation that
Distributable Cash Flow will be available to make distributions to Unitholders.
This policy reflects the commitment by the General Partners to maintain adequate
working capital reserves. The General Partners believe that such a policy is
prudent and is consistent with the Partnership's objective to maintain and
increase the value of the Properties.
Occupancy at Shadeland was 88% as of September 30, 1997 and June 30, 1997. The
Partnership obtained a mortgage loan during May 1997 from an unaffiliated lender
to refinance the existing Shadeland mortgage loan. The new loan is a $5,000,000,
five-year, 7.60% fixed interest rate loan with a 25-year amortization. The
lender required a $150,000 cash hold-back to be used for expenses relating to
parking lot resurfacing. The resurfacing of the parking lot was completed in
July 1997 and the escrow reserve was distributed to the Partnership in August
1997. The loan provided total cash proceeds in excess of the prior mortgage and
closing costs of approximately $945,000. Approximately $250,000 of the excess
proceeds may be used to fund certain future additional capital improvement costs
and leasing commissions at Shadeland. Of the remaining proceeds of approximately
$695,000, the Partnership applied $475,000 to the repayment of the St. Andrews
construction loan discussed below and the balance of $220,000 to increase
working capital reserves.
At September 30, 1997, occupancy at St. Andrews was 99%. The apartment market in
the area continues to be very strong and occupancies of St. Andrews' main
competitors range from 93% to 99%. Leasing activity at St. Andrews has remained
strong due to the strength of the market and the high number of corporate leases
in place. The St. Andrews mortgage loan, originally due September 1, 1997 and
subsequently extended to October 1, 1997, was refinanced in September 1997 with
an unaffiliated lender. The new loan is an $8,500,000, three-year, floating
interest rate loan with a 30-year amortization due October 2, 2000. The interest
rate on the new loan resets every 90 days at the 90 day London Interbank
Offering Rate plus 1.30%. The interest rate at September 30, 1997 was 7.02%.
During the fourth quarter of 1997, the Partnership intends to begin gathering
information necessary to market the St. Andrews property for sale in 1998.
During the second quarter of 1995, the Partnership entered into a $3,000,000
contract to complete the necessary repairs at St. Andrews. Certain modifications
were made to the original construction contract and the total completed contract
cost was approximately $3,700,000. Contract repairs began during the third
quarter of 1995 and were complete by the end of 1996. The Partnership recognized
cumulative costs of $4,549,000 and $699,000 related to assessing and repairing
the construction problems and pursuing legal remedies, respectively, through the
three year period ended December 31, 1996. These costs were offset by cumulative
settlement and insurance recoveries of $2,732,500. During the first nine months
of 1997, the Partnership incurred approximately $19,170 and $11,678 of St.
Andrews repair and legal costs, respectively. The 1997 repair costs relate to
engineering fees necessary to assess additional repairs during the warranty
period related to the original construction contract. The Partnership may incur
additional engineering costs related to the construction repairs during the
warranty period through the remainder of 1997. The Partnership received payment
of settlement recoveries in the amount of $30,000 from responsible parties
during October 1997. The Partnership continues to assert its claims against the
<PAGE>
remaining potentially responsible parties, and accordingly, will incur future
legal costs. During 1997, the Partnership obtained, through settlement, the
right to pursue the general contractor's claims for indemnity and contribution
from the subcontractors who worked on the St. Andrews project. The Partnership
is continuing to pursue these claims against the subcontractors. There can be no
assurance as to the outcome of such litigation. Accordingly, none of these
amounts have been recorded on the Partnership's financial statements.
The Partnership executed an agreement for a construction loan with the USF&G
General Partner during the third quarter of 1995 which permits the Partnership
to borrow up to $3,500,000 to complete the necessary repairs. Under its original
terms, the loan matured September 1, 1997. The USF&G General Partner extended
the construction loan on November 7, 1997, effective as of September 1, 1997,
until October 2, 2000. The construction loan was extended to coincide with the
maturity of the new St. Andrews mortgage loan. The terms continue to require
monthly interest payments on advanced funds at 9.0% and also provide for early
repayment from additional recoveries from the Partnership's lawsuit, net
operating income after reserves or sales or refinancing proceeds. As of
September 30, 1997, the outstanding balance of the construction loan was
$1,257,000. This balance reflected a February 1997 advance of $215,000 and 1997
principal repayments of $1,748,000 from settlement recoveries and excess
refinancing proceeds. No further advances on the loan are expected. The
Partnership anticipates additional principal repayments prior to maturity from
excess operating cash flow.
Results of Operations
Net Income (Loss) Net Income (Loss)
for the Nine Months for the Nine Months
Ended Sept. 30, 1997 Ended Sept. 30, 1996
-------------------- --------------------
NEBC $ (99,447) $ (82,677)
St. Andrews (54,706) (283,619)
St. Andrews Repair and Legal Costs, Net (30,848) (2,802,706)
Shadeland 107,670 59,919
--------- ----------
$ (77,331) $(3,109,083)
Partnership Expense (444,134) (425,132)
--------- ----------
$ (521,465) $(3,534,215)
========= ==========
Nine Months Ended September 30, 1997 ("Current Period")
as compared to September 30, 1996 ("Comparable Period")
The Partnership incurred a net loss of $521,465 for the nine months ended
September 30, 1997 ("the current period"). The decreased net loss was due
primarily to the significant St. Andrews repair and legal costs incurred in
1996. These costs were $30,848 during the current period and $2,802,706 during
the comparable period. Rental revenue increased $311,551 to $3,824,298 for the
current period as compared to $3,512,747 for the nine month period ended
September 30, 1996 ("the comparable period"). The increased rental revenue was
primarily due to higher occupancy and rental rates and more corporate leases in
place at St. Andrews during 1997. Property operating expenses decreased $20,007
to $1,502,512 for the current period from $1,522,519 for the comparable period.
The decreased operating expenses were due primarily to lower operating expenses
at Shadeland, offset in part by increased operating expenses at NEBC.
<PAGE>
Rental revenue at NEBC increased $67,172 to $1,371,933 for the current period as
compared to $1,304,761 for the comparable period. The increase in rental revenue
is due primarily to higher occupancy and greater expense reimbursements from
Express Med's expansion into Building 1 during the fourth quarter of 1996,
offset in part by lease termination fees in the comparable period. The occupancy
at NEBC increased to 99% as of September 30, 1997 as compared to 86% as of
September 30, 1996. The occupancy for NEBC's office and service center space at
September 30, 1997 was 99% and 100% respectively, as compared to 82% and 100%
respectively, at September 30, 1996. The increased occupancy in office space was
due primarily to Express Med's expansion into Building 1 during the fourth
quarter of 1996 and the addition of a new tenant and the expansion of an
existing tenant in Building 5 during the second quarter of 1997. The average
net rental rate at September 30, 1997 decreased to $7.98 per square foot for
office space, excluding free-rent allowances, and increased to $7.07 per square
foot for service center space as compared to $8.64 and $6.96, respectively, at
September 30, 1996. The decrease in the office space average rental rate is due
to the Express Med expansion into Building 1 at a lower rental rate than prior
leases. The increase in the service center average rental rate is due to several
tenant renewals and expansions at higher rental rates.
Operating expenses at NEBC increased $38,621 to $599,623 for the current period
as compared to $561,002 for the comparable period. The increase was primarily
due to higher maintenance costs, offset in part by lower grounds and landscaping
costs. Maintenance costs are higher due to power-washing and painting of
Buildings 3 and 4 and increased HVAC repairs. Grounds and landscaping costs are
lower due to higher parking lot surface repairs and snow removal costs
associated with severe winter weather in the comparable period.
Rental revenue at St. Andrews increased $231,247 to $1,586,464 for the current
period as compared to $1,355,217 for the comparable period. The increase in
rental revenue was due to higher occupancy and rental rates and an increased
number of corporate leases in the current period. The average occupancy at St.
Andrews was 97% and 94% for the current and comparable periods, respectively.
The average monthly rental rate during the current period increased to $656 per
unit as compared to $600 during the comparable period due to the strength of the
rental market which has resulted in a decline in rental concessions offered to
prospective tenants in the current period. The number of corporate units
increased to sixty-one at September 30, 1997 from thirty at September 30, 1996.
Corporate unit leases at St. Andrews include a corporate unit premium fee to
compensate for the additional services provided to the tenants. The corporate
unit premium fee was $71,684 and $22,926 for the current and comparable periods,
respectively. Operating expenses at St. Andrews decreased $8,188 to $677,282 for
the current period as compared to $685,470 for the comparable period.
The Partnership incurred significant engineering, construction and legal costs
at St. Andrews related to assessing and repairing the construction problems and
pursuing legal remedies against responsible parties during the comparable
period. The costs included approximately $3,097,000 and $251,000 of St. Andrews
repair and legal costs, respectively, which were offset in part by settlement
payments and insurance recoveries received of $45,000 and $500,000,
respectively. The Partnership incurred approximately $19,170 and $11,678 of St.
Andrews repair and legal costs, respectively, during the current period. No
insurance recoveries or settlement payments were netted against these costs in
1997.
<PAGE>
Rental revenue at Shadeland increased $13,132 to $865,901 for the current period
as compared to $852,769 for the comparable period. The increase was primarily
due to higher expense reimbursements in the current period. The increase in
expense reimbursements was due primarily to collecting the higher reimbursable
real estate taxes from tenants for 1996 in the current period. The average
rental rate was $10.73 per square foot at September 30, 1997 and $10.44 per
square foot at September 30, 1996. Occupancy at Shadeland declined slightly to
88% as of September 30, 1997 as compared to 89% as of September 30, 1996.
Operating expenses at Shadeland decreased $50,440 to $225,607 for the current
period as compared to $276,047 for the comparable period. The decrease was
primarily due to lower real estate taxes, grounds and landscaping costs and
maintenance costs offset in part by higher legal costs. The comparable period
included tax expenses for an increased 1995 assessment which was paid during the
comparable period. Grounds and landscaping costs decreased due to higher snow
removal costs associated with the severe winter in 1996. Maintenance costs
decreased due to unanticipated canopy repairs required in the comparable period.
Legal costs increased due to an increased number of prospective leases.
Partnership expense is comprised of general and administrative expenses and the
interest expense related to the Cash Flow Protector Loan, General Partner loans,
and St. Andrews construction loan offset in part by interest earned on temporary
investments. The increase in Partnership expense of $19,002 to $444,134 for the
current period as compared to $425,132 was primarily due to higher interest
expense offset in part by higher interest income. The increase in interest
expense is related to the increased advances under the St. Andrews construction
loan from the USF&G General Partner which was initially funded in February 1996.
The increase in interest income is due to higher average working capital
balances primarily as a result of excess proceeds from the Shadeland mortgage
loan refinance.
Total general and administrative expenses decreased by $2,243 to $100,219 for
the current period as compared to $102,462 for the comparable period. General
and administrative expenses include various costs required for the
administration of the Partnership. The decrease is due to lower overall
administrative costs.
Interest expense includes interest incurred in connection with the mortgages
secured by NEBC, St. Andrews and Shadeland and interest on the Cash Flow
Protector Loan from the USF&G General Partner, the General Partner loans, and
the St. Andrews construction loan. Interest expense increased $28,793 to
$1,732,932 for the current period as compared to $1,704,139 for the comparable
period. The increase was related to the increased advances under the St.
Andrews construction loan which was initially funded in February 1996.
Depreciation and amortization expense increased by $76,635 to $1,007,483 for the
current period as compared to $930,848 for the comparable period primarily due
to the depreciation of tenant improvement additions at NEBC, Shadeland and St.
Andrews and due to leasing commission additions at NEBC in 1997.
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
<S> <C> <C>
Net Income (Loss) Net Income (Loss)
for the Three Months for the Three Months
Ended September 30, 1997 Ended September 30, 1996
------------------------ ------------------------
NEBC $ (16,790) $ (32,634)
St. Andrews (5,626) (104,676)
St. Andrews Repair and Legal Costs, Net (2,272) (117,759)
Shadeland 38,130 40,948
--------- --------
$ 13,442 $(214,121)
Partnership Expense (134,577) (170,169)
--------- --------
$ (121,135) $(384,290)
========= ========
</TABLE>
Three Months Ended September 30, 1997 ("Current Period")
as compared to September 30, 1996 ("Comparable Period")
The Partnership incurred a net loss of $121,135 for the three months ended
September 30, 1997 ("the current period"). The decreased net loss was due
primarily to the significant St. Andrews repair and legal costs incurred in 1996
and the improved property performance of St. Andrews in 1997. These repair and
legal costs were $2,272 during the current period and $117,759 during the
comparable period. Rental revenue increased $127,070 to $1,316,966 for the
current period as compared to $1,189,896 for the three month period ended
September 30, 1996 ("the comparable period"). The increased rental revenue was
primarily due to higher occupancy and rental rates and more corporate leases in
place at St. Andrews during 1997, as well as higher occupancy and expense
reimbursements at NEBC. Property operating expenses decreased $15,938 to
$500,108 for the current period from $516,046 for the comparable period. The
decreased operating expenses were due to lower operating expenses at St. Andrews
in the current period offset in part by higher operating expenses at NEBC.
Rental revenue at NEBC increased $41,887 to $492,925 for the current period as
compared to $451,038 for the comparable period. The increase in rental revenue
is due primarily to increased office space occupancy in Buildings 1 and 5 and
greater expense reimbursements from Express Med's expansion into Building 1
during the fourth quarter of 1996 offset in part by lease termination fees in
the comparable period. The occupancy at NEBC increased to 99% as of September
30, 1997 as compared to 86% as of September 30, 1996 due primarily to increased
office space occupancy. The occupancy for NEBC's office and service center space
at September 30, 1997 was 99% and 100% respectively, as compared to 82% and 100%
respectively, at September 30, 1996. The increased occupancy in office space was
due primarily to Express Med's expansion into Building 1 during the fourth
quarter of 1996 and to the addition of a new tenant and the expansion of an
existing tenant in Building 5 during the second quarter of 1997. The average net
rental rate at September 30, 1997, decreased to $7.98 per square foot for office
space, excluding free-rent allowances, and increased to $7.07 per square foot
for service center space as compared to $8.64 and $6.96, respectively, at
September 30, 1996. The decrease in the office space average rental rate is due
to the Express Med expansion into Building 1 at a lower rental rate than prior
leases. The increase in the service center average rental rate is due to several
tenant renewals and expansions at higher rental rates. Operating expenses at
NEBC increased $7,929 to $213,070 for the current period as
<PAGE>
compared to $205,141 for the comparable period. Overall, operating expenses were
higher at the property as a result of increased occupancy. There was a
significant increase in maintenance costs as well as a significant decrease in
grounds and landscaping costs and a decrease in real estate taxes. Maintenance
costs are higher due to the power-washing and painting of Buildings 3 and 4 and
increased HVAC repairs. Grounds and landscaping costs are lower due to parking
lot surface repair costs incurred in the comparable period. Real estate taxes
are lower due to an anticipated lower tax assessment in the current period.
Rental revenue at St. Andrews increased $76,264 to $537,566 for the current
period as compared to $461,302 for the comparable period. The increase in rental
revenue was due to higher occupancy and rental rates and an increased number of
corporate leases in the current period. The average occupancy at St. Andrews was
98% and 96% for the current and comparable periods, respectively. The average
monthly rental rate during the current period increased to $673 per unit as
compared to $607 during the comparable period due to the strength of the rental
market which has resulted in a decline in rental concessions offered to
prospective tenants in the current period. The number of corporate units
increased to sixty-one at September 30, 1997 from thirty at September 30, 1996.
Corporate unit leases at St. Andrews include a corporate unit premium fee to
compensate for the additional services provided to the tenants. The corporate
unit premium fee was $23,326 and $4,953 for the current and comparable periods,
respectively. Operating expenses at St. Andrews decreased $25,408 to $221,559
for the current period as compared to $246,967 for the comparable period. The
decrease in operating expenses was primarily due to a decrease in real estate
taxes, bad debt expense and utilities offset in part by an increase in corporate
unit expense. Real estate taxes were lower due to a successful tax appeal in
1996 which resulted in a lower tax assessment in the current period. Bad debt
expense was lower due to a higher level of collected rent in the current period.
Utilities were lower due to greater occupancy since tenants are responsible for
their utility costs. Corporate unit expenses which may include furnishings,
cable and utilities were higher due to increased corporate unit rentals.
The Partnership incurred approximately $25,000 and $93,000 of St. Andrews repair
and legal costs, respectively during the comparable period. The Partnership
incurred approximately $2,272 of legal and no repair costs at St. Andrews during
the current period since substantially all of the repairs were completed by the
end of 1996.
Rental revenue at Shadeland increased $8,919 to $286,475 for the current period
as compared to $277,556 for the comparable period. The increase was primarily
due to a higher average rental rate in the current period. The average rental
rate was $10.73 per square foot at September 30, 1997 and $10.44 per square foot
at September 30, 1996. The increase in average rental rate is due to lease
renewals and new leases at higher rental rates than prior leases. Occupancy at
Shadeland declined slightly to 88% as of September 30, 1997 as compared to 89%
as of September 30, 1996. Operating expenses at Shadeland increased $1,541 to
$65,479 for the current period as compared to $63,938 for the comparable period.
Partnership expense is comprised of general and administrative expenses and the
interest expense related to the Cash Flow Protector Loan, General Partner loans,
and St. Andrews construction loan offset in part by interest earned on temporary
investments. The decrease in Partnership expense of $35,592 to $134,577 for the
current period as compared to $170,169 was primarily due to lower interest
expense and higher interest income. The decrease in interest expense was related
to lower outstanding principal balances on the St. Andrews construction loan in
the current period. The increase in interest income is due to greater working
capital reserve balances in the current period from the excess Shadeland
refinancing proceeds.
<PAGE>
Total general and administrative expenses decreased by $5 to $35,127 for the
current period as compared to $35,132 for the comparable period. General and
administrative expenses include various costs required for the administration of
the Partnership.
Interest expense includes interest incurred in connection with the mortgages
secured by NEBC, St. Andrews and Shadeland and interest on the Cash Flow
Protector Loan from the USF&G General Partner, the General Partner loans, and
the St. Andrews construction loan. Interest expense decreased $31,025 to
$563,602 for the current period as compared to $594,627 for the comparable
period. The decrease in interest expense was related to lower outstanding
principal balances on the St. Andrews construction loan in the current period.
Depreciation and amortization expense increased by $34,276 to $348,938 for the
current period as compared to $314,662 for the comparable period primarily due
to the depreciation of tenant improvement additions at NEBC and Shadeland in
1997.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits
(a) 10.52 Promissory Note between USF&G/Legg Mason Realty Partners Limited
Partnership and The Prudential Insurance Company of America
dated as of April 3, 1997
10.53 Mortgage, Security Agreement and Fixture Filing between
USF&G/Legg Mason Realty Partnes Limited Partnership and The
Prudential Insurance Company of America dated as of April 3,
1997
10.54 Promissory Note Modification Agreement between USF&G/Legg Mason
Realty Partners Limited Partnership and USF&G Realty Partners,
Inc. dated as of November 7, 1997
10.55 Renewal Promissory Note between USF&G/Legg Mason Realty Partners
Limited Partnership and The Prudential Insurance Company of
America dated as of September 29, 1997
10.56 Amended and Restated Mortgage and Security Agreement between
USF&G/Legg Mason Realty Partners Limited Partnership and The
Prudential Insurance Company of America dated as of September
29, 1997
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, and in the capacity and on the date
indicated.
USF&G/LEGG MASON REALTY PARTNERS
LIMITED PARTNERSHIP
(Registrant)
By: USF&G Realty Partners, Inc.,
A General Partner
Date: __________ /s/ Joseph A. Wesolowski
Joseph A. Wesolowski
Vice President and
Chief Accounting Officer
PROMISSORY NOTE
$5,000,000.00 April 3, 1997
FOR VALUE RECEIVED, the undersigned, USF&G/LEGG MASON REALTY PARTNERS
LIMITED PARTNERSHIP, a Maryland limited partnership ("Maker") hereby promises to
pay to the order of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation, its successor or assigns ("Noteholder") the principal sum of Five
Million and 00/100 Dollars ($5,000,000.00), with interest on the unpaid
principal balance thereof from the date of disbursement until maturity at the
rate of seven and six tenths percent (7.6%) per annum ("Interest Rate"), both
principal and interest being payable as hereinafter provided in lawful money of
the United States of America at 751 Broad Street, Newark, New Jersey 07102-3777,
or at such other place as from time to time may be designated by Noteholder.
Interest shall be calculated and paid on the basis of a 30-day month and 360-day
year.
1. Payments. Maker agrees to pay Noteholder monthly as follows:
(a) interest only from the date of disbursement through June
15, 1997 and principal in the amount of Five Thousand Six Hundred Eight
and 73/100 Dollars ($5,608.73) shall be due and payable on June 15,
1997. The first month's payment is an adjusted payment; and
(b) monthly installment payments of Thirty-Seven Thousand Two
Hundred Seventy-Five and 40/100 Dollars ($37,275.40) of principal and
interest on the 15th day of July, 1997 and on the same day of each
succeeding month (the "Monthly Due Date") through and including the
15th day of May, 2002 (the "Maturity Date") on which date all unpaid
principal and interest, together with any other sums due under the
terms of this Note, shall be due and payable.
2. Treatment of Payments. All payments of principal, interest, late
charges (as described below), and Prepayment Premium (as described below), if
any, due under this Note, shall be paid in lawful money of the United States of
America to Noteholder at Noteholders' address as set forth above, or at such
other place, as Noteholder shall designate. Each installment payment under this
Note shall be applied first to the payment of any unpaid late charge, then to
accrued interest and the remainder to the reduction of unpaid principal. As to
all installment payments, time is of the essence.
<PAGE>
3. Late Charges. If any monthly installment of principal and/or
interest is not paid in full on or before the Monthly Due Date, then a charge
for late payment ("Late Charge") of $24.85 per day (the Per Diem Late Charge")
shall be assessed by Noteholder and paid by Maker for each day that such payment
is not paid from (and including) the first day after such Monthly Due Date to
(and including) the date upon which such payment is made; provided, however,
that if any such monthly principal and/or interest payment, together with all
accrued Per Diem Late Charges, is not made in full on or before the fourteenth
day immediately following such Monthly Due Date, a Late Charge equal to 4% of
the monthly principal and/or interest payment (the "Monthly Late Charge") shall
be deemed to be immediately assessed and shall be immediately due and payable by
Maker. The Monthly Late Charge shall be payable in lieu of and not in addition
to any Per Diem Late Charges that shall have accrued during the two-week period
immediately preceding the assessment of the Monthly Late Charge. The Per Diem
Late Charge and Monthly Late Charge shall be in addition to all other rights and
remedies available to Noteholder upon the occurrence of a default under the Loan
Documents.
4. Default Interest. In the event of (a) a default under this Note, the
Mortgage or any other Loan Documents, or (b) maturity of this Note, interest
shall accrue hereunder at the greater of (i) the Prime Rate plus five percent
per annum or (ii) the Interest Rate plus five percent (5%) per annum, but not in
excess of that permitted by law ("Default Rate"). "Prime Rate" shall mean the
prime rate published in the Wall Street Journal on the date the default occurs.
5. Security. This Note is secured by a Mortgage, Security Agreement and
Fixture Filing (hereinafter called the "Mortgage") of even date herewith in
favor of Noteholder evidencing a lien on certain real property in Marion County,
Indiana, described therein, and evidencing a security interest in certain
personal property, fixtures and equipment described therein and by other
documents to which reference is hereby made for a description of the property
covered thereby, the nature and extent of the security and the rights and powers
of Noteholder in respect to such security, and for certain terms used in this
Note. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Mortgage.
6. Event of Default. Upon the failure to pay any installment of
principal and/or interest due on this Note as above promised (provided, however,
Noteholder shall provide written notice to Maker of Maker's failure to pay any
installment of principal and/or interest due on this Note as above promised one
(1) time in any twelve (12) month period in which event Maker shall have five
(5) days from delivery of such notice to pay such installment) or upon the
occurrence of a default specified in any of the Loan Documents, Noteholder shall
have the option of declaring the Indebtedness to be immediately due and payable
("the Loan Acceleration"). After Loan Acceleration, Noteholder shall have the
option of applying any payments received to principal or interest or any other
costs due pursuant to the terms of this Note or the Loan Documents.
<PAGE>
7. Prepayment. Subject to Maker's payment of the premium for early
repayment referred to below and all accrued interest and other sums due under
this Note, the Mortgage and any other Loan Documents, if any, Maker shall have
the right to prepay all or part of the outstanding principal balance of this
Note on any date upon giving not less than thirty (30) days prior written notice
to Noteholder of Maker's intention to prepay. If the principal of this Note is
prepaid for any reason, whether voluntarily or involuntarily, or after Loan
Acceleration, Maker shall pay a premium for prepayment (the "Prepayment
Premium") in an amount equal to the Present Value of this Note (as hereinafter
defined) less the amount of principal being prepaid, including accrued interest,
if any, calculated as of the Prepayment Date. Noteholder shall notify Maker of
the amount and basis of determination of the Prepayment Premium. On or before
the Prepayment Date, Maker shall pay to Noteholder the Prepayment Premium
together with the amount of the principal being prepaid and all accrued interest
and other sums due under this Note and the Loan Documents. Noteholder shall not
be obligated to accept any prepayment of the principal balance of this Note
unless such prepayment is accompanied by the Prepayment Premium and all accrued
interest and other sums due under this Note and the Loan Documents. For purposes
of determining the Prepayment Premium, the following terms shall have the
following meanings:
(a) The "Treasury Rate" is the sum of (x) the
semi-annual yield on the Treasury Constant Maturity Series
with maturity equal to the remaining weighted average life of
the payments due on this Note, for the week prior to the
Prepayment Date, as reported in Federal Reserve Statistical
Release H.15 Selected Interest Rates, conclusively determined
by Noteholder on the Prepayment Date, and (y) one percent
(1%). The rate will be determined by linear interpolation
between the yields reported in Release H.15, if necessary. In
the event Release H.15 is no longer published, Noteholder
shall select a comparable publication to determine the
Treasury Rate.
(b) The "Discount Rate" is the rate which, when
compounded monthly, is equivalent to the Treasury Rate, when
compounded semi-annually.
(c) The "Present Value of this Note" shall be
determined by discounting all scheduled payments of principal
and interest remaining to maturity of this Note, attributed to
the amount being prepaid, at the Discount Rate. If prepayment
occurs on a date other than a regularly scheduled payment
date, the actual number of days remaining from the Prepayment
Date to the next regularly scheduled payment date will be used
to discount within this period.
Maker agrees that Noteholder shall not be obligated to actually reinvest the
amount prepaid in any Treasury obligations as a condition precedent to receiving
the Prepayment Premium.
Notwithstanding the foregoing, no Prepayment Premium will be due if
this Note is prepaid on or after January 15, 2002.
<PAGE>
8. Limitation on Personal Liability. Except as hereinafter provided, in
the event of Loan Acceleration due to an event of default described in paragraph
6 of this Note, Lender shall not enforce any deficiency judgment against Maker
or the general partners of Maker (hereinafter referred to singularly or
collectively as the "Exculpated Parties") with respect to any and all
obligations secured by the Mortgage in excess of the amount realized upon
foreclosure against (or sale, pursuant to power of sale, of) any and all
Property therefor; provided, however, that nothing contained herein or in any
Loan Document shall:
(a) limit Noteholder's other rights and remedies against the
Exculpated Parties hereunder or thereunder, either at law or in equity;
(b) limit the enforceability of, or Noteholder's recourse
under, any certificate, indemnity, guaranty, master lease or similar
instrument furnished in connection with the Loan (including, without
limitation, the Hazardous Substances Remediation and Indemnification
Agreement, the ERISA Certificate and Indemnification Agreement, the
Certificate of Representation and Warranties, and the brokerage
indemnity); or
(c) relieve the Exculpated Parties from personal liability or
responsibility for:
(i) waste with respect to the Property;
(ii) any security deposits of tenants (i) not turned
over to Noteholder upon foreclosure, sale (pursuant to power
of sale), or conveyance in lieu thereof or (ii) not turned
over to a receiver or trustee for the Property after
appointment thereof;
(iii) any insurance proceeds or condemnation awards
received by any of the Exculpated Parties and not turned over
to Noteholder nor used in compliance with the Loan Documents;
(iv) the greater of the amounts set forth below in
8(c)(iv)(1) and (2), if any of the Exculpated Parties executes
an amendment or termination of any lease at the Property
(other than a lease with a Major Tenant (as defined in the
Mortgage) which is addressed in subsection 8(D) below) without
Noteholder's prior written consent, if such consent is
required under the Loan Documents:
(1) the present value (calculated at the
Discount Rate) of the aggregate total dollar amount
(if any) by which (A) rental income and/or other
tenant obligations prior to the amendment of such
lease exceeds (B) rental income and/or other tenant
obligations after the amendment of such lease; or
(2) any termination fee or other
consideration paid;
<PAGE>
(v) any rents and other income from the Property
received by any of the Exculpated Parties after a default
under the Loan Documents and not otherwise applied to the
current (not deferred) fixed and operating expenses of the
Property or to the Indebtedness under this Note; provided,
however, the Exculpated Parties shall be personally liable for
any such amounts paid as management, maintenance, repair or
janitorial fees, costs, expenses or any other charges to any
of the Exculpated Parties or to a person or entity related to
or affiliated with any of the Exculpated Parties;
(vi) any assessments and taxes (accrued and/or
payable) with respect to the Property;
(vii) any sums expended by Noteholder in fulfilling
the obligations of Maker, as lessor, under any Leases of the
Property; or
(viii) all legal fees, including allocated cost of
Noteholder's staff attorneys, and other expenses incurred by
Noteholder in enforcing the Loan Documents if Maker contests,
delays, or otherwise hinders or opposes (including, without
limitation, the filing of a bankruptcy) any of Noteholder's
enforcement actions.
Notwithstanding the foregoing, this agreement by Noteholder not to
pursue recourse liability SHALL BECOME NULL AND VOID and shall be of no
further force and effect in the event:
(A) that there shall be any breach or violation of
the Due on Sale or Encumbrance section of the Mortgage; or
(B) of any fraud or material misrepresentation by any
of the Exculpated Parties in connection with the Property, the
Loan Documents, the Loan Application, or any other aspect of
the Loan; or
(C) that the Premises or any part thereof shall
become an asset in (i) an involuntary bankruptcy or insolvency
proceeding, filed by a Person other than Noteholder, which is
not dismissed within ninety (90) days of filing, or (ii) a
voluntary bankruptcy or insolvency proceeding; or
(D) that any of the Exculpated Parties executes an
amendment or termination of any lease with a Major Tenant
assigned to Noteholder under the Loan Documents, without the
prior written consent of Noteholder, if such consent is
required under the Loan Documents.
<PAGE>
9. Non-Usurious Loan. It is the intent of Noteholder and Maker in this
Note and all other Loan Documents now or hereafter securing this Note to
contract in strict compliance with applicable usury law. In furtherance thereof,
Noteholder and Maker stipulate and agree that none of the terms and provisions
contained in this Note, or in any other instrument executed in connection
herewith including but not limited to the Loan Documents, shall ever be
construed to create a contract to pay for the use, forbearance or detention of
money, interest at a rate in excess of the maximum interest rate permitted to be
charged by applicable law. Neither Maker nor any guarantors, endorsers or other
parties now or hereafter becoming liable for payment of this Note shall ever be
required to pay interest on this Note at a rate in excess of the maximum
interest that may be lawfully charged under applicable law, and the provisions
of this paragraph shall control over all other provisions of this Note, the Loan
Documents and any other instruments now or hereafter executed in connection
herewith which may be in apparent conflict herewith. Noteholder expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of this Note is accelerated. If the
maturity of this Note is accelerated for any reason or if the principal of this
Note is paid prior to the end of the term of this Note, and as a result thereof
the interest received for the actual period of existence of this Note exceeds
the applicable maximum lawful rate, Noteholder shall, at its option, either
refund the amount of such excess or credit the amount of such excess against the
principal balance of this Note then outstanding and thereby shall render
inapplicable any and all penalties of any kind provided by applicable law as a
result of such excess interest. In the event that Noteholder collects monies
which are deemed to constitute interest which would increase the effective
interest rate on this Note to a rate in excess of that permitted to be charged
by applicable law, all such sums deemed to constitute interest in excess of the
lawful rate shall, upon such determination, at the option of Noteholder, be
either immediately returned or credited against the principal balance of this
Note then outstanding, in which event any and all penalties of any kind under
applicable law as a result of such excess interest shall be inapplicable. By
execution of this Note Maker acknowledges that it believes this Note and all
interest and fees paid pursuant to the Loan represented by this Note, to be
non-usurious. Maker agrees that if, at any time, Maker should believe that this
Note or the Loan is in fact usurious, Maker will give Noteholder notice of such
condition and Maker agrees that Noteholder shall have ninety (90) days in which
to make appropriate refund or other adjustment in order to correct such
condition if in fact such condition exists. The term "applicable law" as used in
this Note shall mean the laws of the State of Indiana or the laws of the United
States, whichever allows the greater rate of interest, as such laws now exist or
may be changed or amended or come into effect in the future.
10. Noteholder's Attorneys' Fees. Should the Indebtedness represented
by this Note or any part thereof be collected at law or in equity or through any
bankruptcy, receivership, probate or other court proceedings or if this Note is
placed in the hands of attorneys for collection after default, or if the lien or
priority of the lien represented by the Mortgage is the subject of any Court
proceeding, Maker and all endorsers, guarantors and sureties of this Note
jointly and severally agree to pay to Noteholder in addition to the principal
and interest due and payable hereon reasonable attorneys' and collection fees
including those incurred by Noteholder for any appeal.
<PAGE>
11. Maker's Waivers. Maker and all endorsers, guarantors and sureties
of this Note and all other persons liable or to become liable on this Note
severally waive presentment for payment, demand, notice of demand and of
dishonor and nonpayment of this Note, notice of intention to accelerate the
maturity of this Note, notice of acceleration, protest and notice of protest,
diligence in collecting, and the bringing of suit against any other party, and
agree to all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in part, with or without notice, before
or after maturity.
12. Payment of Taxes and Fees. Maker agrees to pay the cost of any
revenue, tax or other documentary fee or stamps now or hereafter required by law
to be affixed to this Note or the Mortgage.
13. Governing Law. This Note and the rights, duties and liabilities of
the parties hereunder and/or arising from or relating in any way to the
indebtedness evidenced by this Note or the transaction of which such
indebtedness is a part shall be governed and construed for all purposes by the
law of the State of Indiana.
14. WAIVER OF TRIAL BY JURY. MAKER AND ALL EXCULPATED PARTIES HEREBY
WAIVE, 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, THE APPLICATION FOR THE LOAN, THE
LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF NOTEHOLDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
MAKER:
USF&G/LEGG MASON REALTY
PARTNERS LIMITED PARTNERSHIP,
a Maryland limited partnership
By: USF&G Realty Partners, Inc. a
Maryland corporation, general
partner
By: __________________________
Name:____________________
Title:___________________
MORTGAGE, SECURITY AGREEMENT
AND FIXTURE FILING
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
a Maryland Limited Partnership
MORTGAGOR
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
a New Jersey corporation
MORTGAGEE
Dated as of April ___, 1997
Prudential Loan No. 6-101-604
RECORDING REQUESTED BY:
The Prudential Insurance Company of America
<PAGE>
TABLE OF CONTENTS
ARTICLE Page
1 DEFINITIONS....................................................... 3
1.1 Application.............................................. 3
1.2 Assignment of Agreements................................. 3
1.3 Assignment of Leases and Rents........................... 4
1.4 Collateral............................................... 4
1.5 Certificate of Representations and Warranties............ 4
1.6 Debt Service Coverage.................................... 4
1.7 Default Rate............................................. 4
1.8 ERISA Agreement.......................................... 4
1.9 Event of Default......................................... 4
1.10 Fixtures................................................. 4
1.11 Hazardous Substances Agreement........................... 4
1.12 Impositions.............................................. 4
1.13 Improvements............................................. 5
1.14 Indebtedness............................................. 5
1.15 Laws and Restrictions.................................... 5
1.16 Leases................................................... 5
1.17 Loan..................................................... 5
1.18 Loan Documents........................................... 5
1.19 Loan to Value Ratio...................................... 5
1.20 Major Tenant............................................. 5
1.21 Material Adverse Change.................................. 5
1.22 Net Operating Income..................................... 6
1.23 Note..................................................... 6
1.24 Obligations.............................................. 6
1.25 Permitted Exceptions..................................... 6
1.26 Person................................................... 7
1.27 Personalty............................................... 7
1.28 Premises................................................. 7
1.29 Principal Party.......................................... 7
1.30 Property................................................. 7
1.31 Receiver................................................. 7
1.32 Rents.................................................... 7
1.33 Transfer................................................. 7
2 COVENANTS......................................................... 7
2.1 Obligations of Mortgagor................................. 8
2.2 Maintenance of Current Status............................ 8
2.3 Maintenance, Waste and Repair............................ 8
<PAGE>
ARTICLE Page
2.4 Impositions and Other Taxes.............................. 8
2.5 Compliance with Law...................................... 9
2.6 Books and Records, Annual Operating Statements,
Financial Statements, Rent Roll and Other Information.... 10
2.7 Further Assurances....................................... 10
2.8 Defense of Title and Litigation.......................... 11
2.9 Inspection of Property................................... 11
2.10 Tax and Insurance Deposits............................... 11
2.11 Tax Service Contract..................................... 13
2.12 Zoning and Other Title Matters........................... 13
2.13 Due on Sale or Encumbrance............................... 13
2.14 No Cooperative or Condominium............................ 15
2.15 Insurance................................................ 15
2.16 Estoppel Certificates.................................... 17
3 CASUALTIES AND CONDEMNATION....................................... 17
3.1 Casualties and Insurance Proceed......................... 17
3.2 Condemnation............................................. 20
4 EVENTS OF DEFAULT................................................. 22
4.1 Events of Default........................................ 22
5 REMEDIES.......................................................... 24
5.1 Remedies................................................. 24
5.2 Expenses................................................. 26
5.3 Rights Pertaining to Sales............................... 26
5.4 Application of Proceeds.................................. 28
5.5 Additional Provisions as to Remedies..................... 29
5.6 Waiver of Rights and Defenses............................ 30
6 SECURITY AGREEMENT AND FIXTURE FILING............................. 32
6.1 Security Agreement....................................... 32
6.2 Fixture Filing........................................... 32
6.3 Remedies................................................. 32
6.4 Further Assurances....................................... 32
6.5 Waivers.................................................. 33
7 MISCELLANEOUS..................................................... 33
7.1 No Waiver................................................ 33
7.2 Abandonment.............................................. 33
7.3 Notices.................................................. 33
<PAGE>
ARTICLE Page
7.4 Severability............................................. 34
7.5 Joinder of Foreclosure................................... 34
7.6 Governing Law............................................ 34
7.7 Subordination............................................ 34
7.8 Waiver of Statute of Limitations......................... 35
7.9 Entire Agreement......................................... 35
7.10 Other Security Instruments............................... 35
7.11 Charges for Statements................................... 35
7.12 Usury.................................................... 35
7.13 Publicity................................................ 36
7.14 Information Reporting Under IRS Section 6045(e).......... 36
7.15 Destruction of Note...................................... 36
7.16 Indemnification and Defense.............................. 36
7.17 Successors and Assigns................................... 37
7.18 Interpretation........................................... 38
7.19 Commingling of Funds..................................... 38
7.20 Survival................................................. 38
7.21 Additional Security...................................... 39
7.22 No Merger................................................ 39
7.23 Performance by Mortgagor................................. 39
7.24 Recovery of Expenses..................................... 39
7.25 Standards of Discretion.................................. 39
7.26 Counterparts............................................. 40
7.27 Prepayment............................................... 40
7.28 FIRPTA Certificate....................................... 40
7.29 Limitation on Personal Liability......................... 40
7.30 WAIVER OF RIGHT TO TRIAL BY JURY......................... 42
<PAGE>
THIS MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (this "Mortgage")
is made as of April ___, 1997 by USF&G/LEGG MASON REALTY PARTNERS LIMITED
PARTNERSHIP, a Maryland limited partnership, having offices c/o USF&G Realty
Advisors, Inc., 100 Light Street, 10th floor, Baltimore, Maryland 21202
("Mortgagor"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New
Jersey corporation, having offices c/o The Prudential Realty Group, One
Prudential Plaza, Suite 1300, Chicago, Illinois 60601 ("Mortgagee").
W I T N E S S E T H:
WHEREAS, Mortgagor by its promissory note of even date herewith
("Note") is indebted to Mortgagee in the principal sum of $5,000,000; and
WHEREAS, Mortgagor desires to secure the payment of and the performance
of all of its obligations under the Note and certain additional Obligations (as
hereinafter defined);
NOW, THEREFORE, in consideration of the principal sum of the Note and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Mortgagor hereby irrevocably MORTGAGES AND WARRANTS to
Mortgagee, upon the terms and conditions of this Mortgage, all of Mortgagor's
right, title, interest, estate and claim now owned or hereafter acquired in, to
or relating to the property described in clauses (i) through (ix) below
(collectively, the "Property"):
(i) That certain real property located in the County of
Marion, State of Indiana, and more fully described in Exhibit A
attached hereto (the "Land");
(ii) Any and all buildings and improvements, now or hereafter
erected or located in or on the Land, including all Fixtures (as
hereinafter defined) that are presently or become so related to such
buildings and improvements that an interest in them arises under the
real estate laws of the State in which the Premises are located,
together with all appurtenances and additions thereto and betterments,
renewals, substitutions and replacements thereof, all of which shall be
deemed and construed to be part of the realty (collectively, the
"Improvements" and, together with the Land, sometimes hereinafter
referred to, collectively, as the "Premises");
(iii) All items incorporated as part of or attributed or
affixed to any of the Premises or other real property included in the
Property or any other interest of Mortgagor in, to or relating to the
Premises, in such manner that such items are no longer personal
property under the laws of the State in which the Premises are located,
whether or not the same constitute Fixtures;
<PAGE>
(iv) All rents, proceeds, issues, profits, royalties, income
and receipts of any type or kind and other benefits derived from all or
any part of the Property (collectively, the "Rents");
(v) All easements, rights-of-way and rights used or usable in
connection with the Premises or as a means of access thereto,
including, without limiting the generality of the foregoing, all rights
pursuant to any trackage agreement and all rights pursuant to all
covenants, conditions and restrictions and reciprocal easement
agreements, all rights to the non-exclusive use of common drive
entries, all water and water rights, all air rights, all development
rights, and all mineral, mining, oil and gas rights and rights to
produce or share in the production of anything related thereto,
together with all tenements, hereditaments and appurtenances thereof
and thereto;
(vi) Any land lying within the right-of-way of any street,
open or proposed, adjoining the Premises, and any and all sidewalks,
alleys, and strips and gores of land adjacent to or used in connection
with the Premises;
(vii) All leasehold estates, all ground leases, leases or
subleases covering the Premises or any portion thereof now or hereafter
existing or entered into (collectively, the "Leases"), and all right,
title and interest of Mortgagor thereunder, including all guaranties
thereof, all cash or security deposits, prepaid rentals, and all
deposits or payments of a similar nature;
(viii) All plans, specifications, maps, surveys, studies,
reports, franchises, permits, licenses, authorizations, trademarks,
logos, architectural, engineering and construction contracts,
guaranties, warranties and other undertakings covering the quality of
performance of work or material under the foregoing contracts and any
other contract rights or claims, the deposits made by Mortgagor
pursuant to Paragraph 2.10 and any account in which such deposits are
held, books of account, general intangibles, accounts, inventories and
supplies, causes of action, proceeds of insurance and any and all
awards made as a result of a taking by eminent domain, or by any
proceeding or purchase in lieu thereof, of the whole or any part of the
Property, including, without limitation, any award resulting from a
change of any streets (whether as to grade, access or otherwise) and
any award for severance damages, insurance policies, Leases, and all
other documents, of whatever kind or character, relating to the use,
development, occupancy, leasing, sale or operation of the Premises, all
of the Fixtures prior to the time they become so related to the
Premises that an interest in them arises under the real estate laws of
the State in which the Premises are located, and all other personal
property now or hereafter located in, upon or about or used in
connection with the Property, including, without limitation, the
personal property described in Exhibit B attached hereto, together with
all present and future attachments, accessions, replacements,
substitutions and additions thereto or therefor, and the cash and
non-cash proceeds thereof (collectively, the "Personalty"); and
<PAGE>
(ix) All options to purchase or lease the Premises or any
other Property, or any portion thereof or interest therein, in and to
any greater estate in the Premises or any other Property.
TO HAVE AND TO HOLD the Property, subject only to the Permitted
Exceptions (as hereinafter defined), together with the rights, privileges and
appurtenances thereto belonging to Mortgagee, FOR THE PURPOSE OF SECURING the
following obligations (collectively, the "Obligations"):
(i) Payment of and performance of all covenants, obligations
and agreements of Mortgagor arising under or in connection with the
Note, this Mortgage or any other Loan Document (as hereinafter
defined);
(ii) All renewals, extensions, amendments, modifications,
consolidations and changes of, or substitutions or replacements for,
all or any part of the items described under clause (i) above; and
(iii) Payment of all sums advanced and costs and expenses
incurred by Mortgagee to protect and preserve the Property and the lien
and security interests created herein or in connection with the items
described under clauses (i) and (ii) above or any part thereof, or for
the acquisition or perfection of the security therefor, whether made or
incurred at the request of Mortgagor or Mortgagee, including attorneys'
fees and court costs advanced or incurred by Mortgagee to protect or
preserve the Property or the validity or priority of this Mortgage.
IN FURTHERANCE OF THE FOREGOING, Mortgagor hereby warrants, represents
covenants and agrees as follows:
ARTICLE 1
DEFINITIONS
As used in this Mortgage, the following terms shall have the following
meanings:
1.1 Application. The First Mortgage Loan Application, dated March 3,
1997, executed by Mortgagor (referred to as " Mortgagor" therein), which
includes the mortgage loan conditions incorporated therein.
1.2 Assignment of Agreements. That certain Assignment of Agreements
of even date herewith executed by Mortgagor in favor of Mortgagee.
<PAGE>
1.3 Assignment of Leases and Rents. That certain Assignment of Leases
and Rents of even date herewith executed by Mortgagor in favor of Mortgagee.
1.4 Collateral. As defined in Paragraph 6.1 hereof.
1.5 Certificate of Representations and Warranties. That certain
Certificate of Representations and Warranties of even date herewith executed by
Mortgagor in favor of Mortgagee.
1.6 Debt Service Coverage. The ratio, as determined by Mortgagee, of
(i) Net Operating Income for the Property for the applicable twelve-month
period, to (ii) the sum of (a) the annual debt service payments (including
principal and interest) on the Loan for such twelve-month period, and (b) the
annual debt service payments (including principal and interest) on all other
indebtedness secured by a lien on all or part of the Property for such
twelve-month period. For purposes of calculating annual debt service,
amortization of the aggregate principal indebtedness over a twenty-five (25)
year period (or such lesser period if the Note or other loan documents in the
case of loans other than the Loan provide otherwise) beginning upon commencement
of the term of the Loan is assumed to apply during the entire term of the Loan.
1.7 Default Rate. As defined in the Note.
1.8 ERISA Agreement. That certain ERISA Certificate and
Indemnification Agreement of even date herewith executed by Mortgagor in favor
of Mortgagee.
1.9 Event of Default. As defined in Article 4 hereof.
1.10 Fixtures. All fixtures (other than any tenant's personal property,
to the extent Mortgagor, any general partner of Mortgagor, any parent company of
Mortgagor or any general partner, any owner of the Property, or any guarantor or
surety of Mortgagor's obligations under the Loan Documents has no ownership
interest therein) located upon or within the Improvements or now or hereafter
installed in, or used in connection with any of the Improvements, including any
and all machinery, equipment, appliances and fixtures, attachments, furniture,
furnishings, carpets, fire sprinklers, alarm systems and other articles of a
similar nature, whether or not permanently affixed to the Premises.
1.11 Hazardous Substances Agreement. That certain Hazardous Substances
Remediation and Indemnification Agreement of even date herewith executed by
Mortgagor in favor of Mortgagee.
1.12 Impositions. All real estate and personal property and other taxes
and assessments, and any and all other charges, expenses, payments, claims,
mechanics' or material suppliers' liens or assessments of any kind or nature
whatsoever, whether general or special,ordinary or extraordinary, foreseen or
<PAGE>
unforeseen, public or private, that at any time prior to or after the execution
of the Loan Documents may be measured, assessed, levied, imposed, or become a
lien upon (i) the Property or any interest therein or any part thereof,
including the Rents, (ii) any use or occupancy of the Property, (iii) this
transaction, or (iv) any document to which Mortgagor or any Principal Party is
a party that creates or transfers an interest or an estate in all or any part
of the Property.
1.13 Improvements. As defined in the granting paragraph of this
Mortgage.
1.14 Indebtedness. The indebtedness evidenced by the Note (including,
without limitation, any prepayment premium due thereunder) and any extensions,
modifications or renewals thereof, whether or not evidenced by a new or
additional promissory note or notes, and all other amounts due from Mortgagor to
Mortgagee hereunder or evidenced and/or secured by the Loan Documents, plus
interest on all such amounts as provided in the Loan Documents.
1.15 Laws and Restrictions. All laws, regulations, codes, ordinances,
rules, statutes and policies, orders or judgments of any court or governmental
authority, restrictive covenants and other title encumbrances, permits,
authorizations and approvals, relating or applying to the development,
occupancy, ownership, management, use, and/or operation of the Property or
otherwise affecting the Property or Mortgagor.
1.16 Leases. As defined in the granting paragraph of this Mortgage.
1.17 Loan. The loan from Mortgagee to Mortgagor evidenced by the Note.
1.18 Loan Documents. The Note, this Mortgage, the Application, the
Assignment of Agreements, the Assignment of Leases and Rents, the ERISA
Agreement, the Certificate of Representations and Warranties, the Hazardous
Substances Agreement and all other documents evidencing, securing or relating to
the Loan, the payment of the Indebtedness or the performance of the Obligations.
1.19 Loan to Value Ratio. The ratio, as determined by Mortgagee, of (i)
the aggregate principal balance, together with all accrued but unpaid interest,
of all encumbrances against the Property (and, for purposes of Paragraph 2.13.B,
the principal amount of the additional encumbrance for which Mortgagor is
seeking Mortgagee's consent), to (ii) the fair market value of the Property, as
determined by Mortgagee.
1.20 Major Tenant. As defined in the Application.
1.21 Material Adverse Change. Any material and adverse change in (i)
the financial condition of Mortgagor or any Principal Party, or (ii) the
condition, use or operation of the Property.
<PAGE>
1.22 Net Operating Income. For any period, gross income from operations
of the Property derived from arm's length, market rate rents from Leases
(excluding percentage rent and interest income from security deposit accounts)
with unaffiliated third parties, service fees or charges, and additional rent
resulting from operating expense, common area maintenance and tax escalation
pass through provisions (excluding capital gains income derived from the sale of
assets and other items of income which Mortgagee reasonably determines are
unlikely to occur in any subsequent period), less operating expenses (such as,
but not limited to, cleaning, utilities, administrative, landscaping, security
and management expenses, repairs and maintenance and reserves for replacements)
and less fixed expenses (such as insurance, real estate and other taxes),
assuming, for each of the foregoing categories of expenses, for any period
during which less than ninety-five percent (95%) of the net rentable area of the
Property is leased and occupied, a ninety-five percent (95%) occupancy level,
which expenses shall be related to the Property, shall be for services from
arm's length, third party transactions or equivalent to the same, and shall
exclude all expenses for capital improvements and replacements, debt service and
depreciation or amortization of capital expenditures and other similar noncash
items. Gross income shall not be anticipated for any greater period than that
approved by generally accepted accounting principles, nor shall operating
expenses be prepaid. Documentation of Net Operating Income and expenses shall be
certified by an officer of a general partner of Mortgagor with detail reasonably
satisfactory to Mortgagee and shall be subject to the approval of Mortgagee.
Notwithstanding the foregoing, for purposes of calculating gross income from
operations of the Property, gross income shall be reduced by such amounts as
Mortgagee reasonably determines are unlikely to recur in a subsequent period,
including income from Leases with cancellation or termination rights or options
as well as Leases that will expire during the period for which a calculation is
being made. Evidence of gross income shall be in form and substance reasonably
satisfactory to Mortgagee and shall include, without limitation, certified
operating statements, a certified rent roll, estoppel certificates acceptable to
Mortgagee from tenants that have not previously submitted them to Mortgagee in
connection with the Loan and a certified copy of each Lease not previously
received by Mortgagee. Gross income shall be determined by Mortgagee in its
reasonable discretion, taking into account whether there is any basis to believe
that income and expenses will not be maintained at substantially the same levels
suggested by the evidence of gross income submitted to Mortgagee.
1.23 Note. As defined in the granting paragraph of this Mortgage,
together with any modifications, renewals or extensions thereof.
1.24 Obligations. As defined in the securing paragraph of this
Mortgage.
1.25 Permitted Exceptions. All of those title exceptions set forth in
the title insurance policy in favor of the Mortgagee that insures the priority
of this Mortgage.
<PAGE>
1.26 Person. Any natural person, corporation, partnership, firm,
association, government, governmental agency or any other entity, whether acting
in an individual, fiduciary or other capacity.
1.27 Personalty. As defined in the granting paragraph of this Mortgage.
1.28 Premises. As defined in the granting paragraph of this Mortgage.
1.29 Principal Party. Mortgagor and any general partner of Mortgagor.
1.30 Property. As defined in the granting paragraph of this Mortgage.
1.31 Receiver. Any trustee, receiver, custodian, fiscal agent,
liquidator or similar officer.
1.32 Rents. As defined in the granting paragraph of this Mortgage.
1.33 Transfer. The occurrence of (i) any voluntary or involuntary sale,
conveyance, assignment, transfer, alienation, mortgage, conveyance of security
or title, encumbrance or other disposition of the Property or any part thereof
or any interest therein, of any kind, or any other transaction the result of
which is, directly or indirectly or voluntarily or involuntarily, to divest
Mortgagor of its title to the Property or any interest therein, (ii) any merger,
consolidation or dissolution involving, or the sale or transfer of all or
substantially all of the assets of, Mortgagor or any general partner of a
partnership Mortgagor, (iii) the transfer (at one time or over any period of
time) of ten percent (10%) or more of (a) the voting stock of (1) a corporate
Mortgagor, (2) any corporate general partner of a partnership Mortgagor or (3)
any corporation which is the direct or indirect owner of ten percent (10%) or
more of the voting stock of a corporate Mortgagor or any corporate general
partner of a partnership Mortgagor, or (b) the beneficial interest in Mortgagor,
or the interest in any Person who owns fifty percent (50%) or more of the
beneficial interest in Mortgagor, if a trust, (iv) the transfer of any general
partnership interest in a partnership Mortgagor or in any partnership which is a
direct or indirect general partner of a partnership Mortgagor, or (v) the
conversion of any general partnership interest in a partnership Mortgagor to a
limited partnership interest.
ARTICLE 2
COVENANTS
Mortgagor hereby covenants and agrees as follows:
<PAGE>
2.1 Obligations of Mortgagor. Mortgagor will pay when due and otherwise
timely perform, or cause to be timely performed, all the Obligations, all
without relief from valuation and appraisement laws.
2.2 Maintenance of Current Status. Mortgagor will maintain in good
standing its existence, franchises, rights and privileges under the laws of the
State pursuant to which it was organized and will maintain its right to transact
business in the State in which the Premises are located. Mortgagor will not, (i)
without Mortgagee's prior written consent, terminate, alter, modify or amend or
permit the termination, alteration, modification or amendment of its
organizational documents, including its partnership agreements, statement of
partnership, trust agreement, articles of incorporation or by-laws, as
applicable, (ii) change its name, the address of its principal offices or the
name under which Mortgagor conducts business without promptly notifying
Mortgagee of such change, or (iii) without Mortgagee's prior written consent
reorganize or change its legal structure.
2.3 Maintenance, Waste and Repair. Mortgagor will maintain the
Property, including the parking, recreational and landscaped parts thereof, in
good and safe order, repair and operating condition, promptly make all necessary
repairs, renewals, replacements, additions and improvements thereto, interior
and exterior, structural and non-structural, foreseen or unforeseen or otherwise
necessary to insure that the security granted hereunder and under the Loan
Documents shall not in any way be materially diminished or impaired. Mortgagor
will not (i) diminish or materially alter the Improvements, nor erect any new
buildings, structures or building additions on the Land, without the prior
written consent of Mortgagee, (ii) remove or permit to be removed any of the
Fixtures or other Personalty from the Premises without the prior written consent
of Mortgagee unless replaced by articles of equal suitability and value owned by
Mortgagor free and clear of any lien or security interests and in such a manner
that the replacement or substituted article is subject to the security interests
created hereby, it being understood and agreed that all replacements,
substitutions and additions of and to the Property shall be and become
immediately subject to the lien of this Mortgage and covered hereby, (iii)
permit any waste, misuse or deterioration of the Property or make any change in
the use thereof, nor do or permit to be done thereon anything, that may in any
way impair the security of this Mortgage, or (iv) abandon all or any part of the
Property. Mortgagor will, at all times, directly and exclusively manage the
Property itself or use F.C. Tucker Company, Inc. as a management company or such
other management company approved by Mortgagee to do so. Mortgagor will, at all
times, maintain a roof maintenance contract in form and substance satisfactory
to Mortgagee and with a contractor satisfactory to Mortgagee with respect to
that portion of the Premises occupied by the Major Tenants as of the date of
this Mortgage pursuant to respective Leases between the Major Tenants and
Mortgagor.
<PAGE>
2.4 Impositions and Other Taxes.
A. Mortgagor will pay, when due, all Impositions, including utility
charges and all claims and demands of mechanics, materialmen, laborers and
others which, if unpaid, might result in, or permit the creation of, a lien or
encumbrance on all or any part of the Property or the Rents, except that
Mortgagor may, at its expense and before any delinquency occurs or lien is
imposed or accrues, contest the amount or validity or application of any such
Impositions by appropriate legal proceedings promptly initiated and conducted in
good faith and with due diligence, provided that Mortgagee receives prior
written notice of Mortgagor's interest to so contest or object to an Imposition
and is reasonably satisfied that (i) neither the Property nor any part thereof
or interest therein will be in danger of being foreclosed upon, sold, forfeited,
terminated, canceled, or lost as a result of such contest, and (ii) Mortgagor
shall have posted a bond or furnished such other security as may be required
from time to time by Mortgagee and as is satisfactory to Mortgagee in form and
in amount. Mortgagor will provide to Mortgagee receipts or other sufficient
evidence of payment of Impositions within twenty (20) days of Mortgagee's
request therefor. Mortgagor shall indemnify, defend, protect and hold Mortgagee
harmless from all loss, liability, cost or expense by reason of such contest,
including reasonable attorneys' fees and expenses incurred by Mortgagee. In any
event, any Imposition contested hereunder shall be paid and fully discharged by
Mortgagor within ten (10) days after entry of any judgment adverse to Mortgagor
in any action to enforce or foreclose the same or at any time when such payment
or discharge is necessary in order to prevent loss of control or dispossession
of Mortgagor from the Property or any part thereof.
B. Mortgagor will pay all taxes (excluding income, franchise and doing
business taxes), assessments, charges, expenses, costs and fees (including
registration and recording fees and mortgage taxes) levied on, assessed against
or incurred by Mortgagee in connection with any of the Loan Documents. Mortgagor
will also pay all stamp and other similar taxes required to be paid in
connection with the Obligations.
C. In the event of the enactment of or change (including a change in
interpretation) of any applicable law, in any manner changing or modifying the
laws governing (i) the taxation of mortgages, deeds of trust or other security
instruments or the debts secured thereby, (ii) the manner of collecting such
taxes, or (iii) reserve or special deposit requirements in respect of loans or
other assets held by Mortgagee, so as to adversely affect Mortgagee, this
Mortgage or any other Loan Document or the Indebtedness, Mortgagor will promptly
pay any such tax and otherwise compensate Mortgagee to the extent of such
detriment; provided, however, that if Mortgagor fails to make such payment or if
any such law prohibits Mortgagor from making such payment or would penalize
Mortgagee in the event of such payment, then the entire principal balance of the
Indebtedness, together with all interest accrued thereon and any and all other
sums secured by this Mortgage shall, with notice, become immediately due and
payable at the option of Mortgagee.
<PAGE>
2.5 Compliance with Law. Mortgagor will promptly and faithfully comply
with, and cause the Property to be maintained, used and operated in accordance
with, all present and future Laws and Restrictions. If Mortgagor receives any
notice that Mortgagor or the Property is in default under or not in compliance
with any present or future Laws and Restrictions, or receives notice of any
proceeding initiated under or with respect to such default or non-compliance,
Mortgagor will promptly furnish a copy of such notice to Mortgagee.
2.6 Books and Records, Annual Operating Statements, Financial
Statements, Rent Roll and Other Information.
A. Mortgagor, without expense to Mortgagee, will maintain full
and complete books of account and records reflecting the operation of
the Property. Mortgagor will keep at its offices and make available to
Mortgagee during normal business hours, all such books and records and
the "as-built" plans and specifications or, if unavailable, the final
set of plans and specifications from which the Improvements were
constructed, if available, certified by a licensed architect or
licensed contractor as true, correct and complete.
B. Within one hundred twenty (120) days after the close of
each fiscal year of Mortgagor, Mortgagor shall furnish to Mortgagee (i)
annual operating statements showing all elements of income and expense
for the operation of the Property, (ii) financial statements of the
Mortgagor, and, if applicable, of Mortgagor's general partner(s), and
(iii) a current rent roll, showing all items set forth in the rent roll
delivered to Mortgagee in connection with the closing of the Loan, as
well as gross sales of each tenant paying percentage rental. Mortgagor
will promptly furnish to Mortgagee such other financial information
concerning the condition of Mortgagor and the Property, and all other
information concerning the Property or the performance by Mortgagor of
the Obligations, that Mortgagee may reasonably request. All such
statements and information shall be prepared in a manner satisfactory
in form to Mortgagee and certified by an authorized person, partner or
officer approved by Mortgagee. In the event any such operating
statement, financial statement, rent roll or other information is not
timely submitted to Mortgagee, a service fee of $500.00 shall
automatically become due and payable to Mortgagee and be secured by
this Mortgage. This charge shall be in addition to all other rights and
remedies available to Mortgagee upon the occurrence of an Event of
Default.
C. Mortgagee and its representatives shall have the right, at
all reasonable times and upon reasonable notice, to examine and make
copies of Mortgagor's plans, books, records, income tax returns and all
supporting data concerning the Property. Mortgagor will assist
Mortgagee and its representatives in conducting such examination.
<PAGE>
2.7 Further Assurances. Mortgagor will do all acts necessary to keep
valid and effective the lien of this Mortgage and to carry into effect its
objectives and to protect the lawful owner of the Note and the other
Obligations. Mortgagor, at any time upon the reasonable request of Mortgagee,
will at Mortgagor's expense, execute, acknowledge and deliver all such
additional papers and instruments and perform all such further acts as may be
reasonably necessary to perform the Obligations and, as Mortgagee deems
reasonably necessary, to preserve the priority of the lien of this Mortgage or
to carry out the purposes of the Loan Documents. Without limiting the generality
of the foregoing, Mortgagor will promptly and, insofar as not contrary to
applicable law, at Mortgagor's own expense, execute, record, rerecord, file and
re-file in such offices, at such times and as often as may be necessary, this
Mortgage, additional Mortgages, and every other instrument in addition to or
supplemental hereto, including applicable financing statements, as may be
necessary to create, perfect, maintain and preserve the liens, encumbrances and
security interests intended to be created by the Loan Documents and the rights
and remedies of Mortgagee thereunder. Upon request by the Mortgagee, Mortgagor
will promptly supply evidence of fulfillment of the foregoing acts and
assurances.
2.8 Defense of Title and Litigation. Mortgagor will forever warrant and
defend its title to the Property and the validity, enforceability and priority
of the lien and security interests created hereby against the claims and demands
of all Persons. If the lien or security interests created by this Mortgage or
any of the other Loan Documents, or the validity, enforceability or priority
thereof, or title or any of the rights of Mortgagor or Mortgagee in or to the
Property, shall be endangered or questioned, or shall be attacked directly or
indirectly, or if any action or proceeding is instituted against Mortgagor or
Mortgagee with respect thereto, Mortgagor will promptly notify Mortgagee thereof
and will diligently use its best efforts to cure any defect so asserted. In so
doing, Mortgagor will take all necessary and proper steps for the defense of
such action or proceeding, including the employment of counsel, the prosecution
or defense of litigation and, subject to Mortgagee's approval, the compromise,
release or discharge of any and all adverse claims. Mortgagee (whether or not
named as a party to such actions or proceedings) is entitled (but shall not be
obligated) to take such additional steps as it may deem necessary or proper for
the defense of any such action or proceeding or the protection of the lien,
security interest, validity, enforceability or priority of this Mortgage or any
other Loan Document or of such title or rights, including the employment of
counsel, the prosecution or defense of litigation, the compromise, release or
discharge of such adverse claims and the removal of such prior liens and
security interests.
2.9 Inspection of Property. Mortgagor hereby grants to Mortgagee, its
agents, employees, consultants and contractors, the right to enter upon the
Property for the purpose of making any and all inspections, reports, tests,
inquiries and reviews as Mortgagee (in its sole and absolute discretion) deems
necessary to assess the then current condition of the Property, or for the
purpose of performing any of the other acts Mortgagee is authorized to perform
hereunder or under the Hazardous Substances Agreement. Mortgagor will cooperate
with Mortgagee to facilitate such entry and the accomplishment of such purposes.
<PAGE>
2.10 Tax and Insurance Deposits.
A. Mortgagee may, at any time after an Event of Default has
occurred (whether or not subsequently waived or then existing), require
for the balance of the term of the Note that Mortgagor deposit with
Mortgagee or any service or financial institution designated by
Mortgagee pursuant to Paragraph 2.10.F. (collectively, "Depository"),
monthly, one-twelfth (1/12) of the annual Impositions and the premiums
for all insurance policies required hereunder, and Mortgagor will make
such deposits. Mortgagor will also deposit with the Depository a sum of
money which, together with the aforesaid monthly installments, will be
sufficient to make each of said payments of Impositions and premiums at
least thirty (30) days before such payments are due. If the amount of
any such payments is not ascertainable at the time any such deposit is
required to be made, the deposit will be made on the basis of
Mortgagee's estimate thereof, and, when such amount is fixed for the
then-current year, Mortgagor will promptly deposit any deficiency with
the Depository.
B. All funds so deposited will, until so applied, constitute
additional security for the Obligations, will be held by the Depository
without interest (except to the extent required under applicable law),
and may be commingled with other funds of the Depository. Provided that
no Event of Default shall exist, all such funds will be applied in
payment of the annual Impositions and insurance premiums, but only to
the extent that the Depository shall have such funds on hand.
Notwithstanding the foregoing, Depository shall have no obligation to
use said funds to pay (i) any of the annual Impositions and insurance
premiums unless Mortgagor shall have furnished the Depository with the
bills or invoices therefor in sufficient time to pay the same before
any penalty or interest attaches and before said policies of insurance
lapse, as the case may be, (ii) any installment of Impositions prior to
the last day on which payment thereof may be made without penalty or
interest, or (iii) any insurance premium prior to the due date thereof.
If an Event of Default shall exist (whether or not the Obligations have
been accelerated as herein provided), all funds so deposited may, at
Mortgagee's option, be applied to the Obligations in the order
determined by Mortgagee, including the unperformed Obligation which
resulted in the then existing Event of Default, or to pay the
Impositions and insurance premiums as provided above. In no event shall
Mortgagor be entitled to claim any credit against the principal and
interest due under the Note for any payment or deposit for taxes or
insurance.
C. Mortgagee, in making any payment authorized by this
Mortgage (i) relating to taxes and assessments, may do so according to
any bill, statement or estimate procured from the appropriate public
office without inquiring into the accuracy of such bill, statement or
estimate or into the validity of any tax, assessment, sale, forfeiture,
tax lien or title or claim thereof, or (ii) for the purchase,
discharge, compromise or settlement of any other prior lien, may do so
without inquiring as to the validity or amount of any claim or lien
which may be asserted.
<PAGE>
D. Upon an assignment or other transfer of this Mortgage, the
Depository shall have the right to pay over the balance of such
deposits in its possession to the assignee or other successor, and the
Depository and Mortgagee shall thereupon be completely released from
all liability with respect to such deposits. In such event, Mortgagor
and any successor owner of the Property shall look solely to the
assignee or transferee with respect to such deposits. This provision
shall apply to every transfer of such deposits to a new assignee or
transferee.
E. Subject to the restrictions on Transfers herein, transfer
of record title to the Premises and any other Property shall
automatically transfer to the new owner the beneficial interest in any
deposits under this Paragraph. Upon full payment and satisfaction of
the Note or, at Mortgagee's option, at any prior time, the balance of
such amounts in the Depository's possession shall be paid over to the
record owner of the Property, and no other party shall have any right
or claim thereto.
F. At Mortgagee's request, Mortgagor agrees to make the
aforesaid deposits in an account with First National Bank of Maryland,
Vanguard, NBD Bank or such other service or financial institution as
Mortgagee may from time to time designate in lieu of Mortgagee, and the
fees and costs of such institution shall be borne by Mortgagor.
2.11 Tax Service Contract. Throughout the term of the Loan, at
Mortgagor's sole expense not to exceed $519.00, Mortgagor will purchase for the
benefit of Mortgagee tax service contracts issued by a tax reporting agency
satisfactory to Mortgagee to monitor the payment of all real estate taxes and
assessments relating to the Property.
2.12 Zoning and Other Title Matters. Mortgagor will not, without the
prior written consent of Mortgagee, (i) initiate, support, join in, or consent
to any change in the current use of the Premises or in any zoning ordinance,
private restrictive covenant, assessment proceedings or other public or private
restriction limiting or restricting the uses that may be made of the Premises or
any part thereof, (ii) change the boundaries of the Premises, or initiate,
support, join in or consent to the annexation of the Premises to any
municipality, (iii) impose any restrictive covenants or encumbrances upon the
Premises or otherwise modify, amend or supplement, or do anything that may
result in the modification, amendment or supplementation of, the Permitted
Exceptions, or (iv) permit the Premises to be used by the public or any person
in such manner as to make possible a claim of adverse usage or possession or of
any implied dedication or easement by prescription.
2.13 Due on Sale or Encumbrance. Mortgagor will not, and will not
cause, allow or permit a Transfer without the prior written consent of
Mortgagee, which consent may be withheld for any reason or no reason, or given
conditionally, in Mortgagee's sole and absolute discretion. If a Transfer occurs
without the foregoing consent of Mortgagee, then the entire balance of the
Indebtedness, including all accrued interest and any other sums secured hereby,
<PAGE>
together with a prepayment premium calculated in accordance with the provisions
of the Note, shall become immediately due and payable at the option of
Mortgagee. Any permitted transferee (including, without limitation, a transferee
of the property permitted pursuant to Paragraph 2.13.A. below) shall, as a
condition of the effectiveness of any consent or waiver by Mortgagee hereunder,
assume all of Mortgagor's obligations under the Loan Documents and agree to be
bound thereby. Such assumption shall not, however, release Mortgagor or any
Principal Party from any liability under the Loan Documents. This provision
shall not apply to (i) transfers of title or interest under any will or
testament or applicable law of descent, (ii) transfers of limited partnership
interests or (iii) transfers of general partnership interests, so long as USF&G
Realty Partners, Inc., a Maryland corporation, and Legg Mason Realty Partners,
Inc., a Maryland corporation, (each, a "General Partner") or a wholly-owned
affiliate of either General Partner, alone or in concert, have discretion and
control over the affairs and business of Mortgagor at least equivalent to the
discretion and control held by the General Partners as of the date of this
Mortgage. Consent to any Transfer by Mortgagee shall not be deemed a waiver of
Mortgagee's right to require such consent to any further or future Transfers.
A. Notwithstanding the foregoing, if no Event of Default or
event which with the passage of time or the giving of notice or both
would constitute an Event of Default has occurred and is continuing,
Mortgagee agrees, within thirty (30) days after written request by
Mortgagor, to consent to one and only one transfer of the entire
property, if (i) the proposed transferee of the Property is a Person
which, in the judgment of Mortgagee, has financial capability and
creditworthiness, reputation and experience in the ownership,
operation, management, and leasing of similar properties, equal to or
greater than Mortgagor; (ii) at the time of transfer the Loan to Value
Ratio does not exceed sixty percent (60%); (iii) Mortgagor pays
Mortgagee a non-refundable servicing fee (as specified by Mortgagee) at
the time of the request which shall be deemed earned by Mortgagee even
if such request is denied, and an additional fee equal to one percent
(1%) of the outstanding principal balance of the Loan at the time of
the transfer; (iv) at Mortgagee's option, Mortgagee has received an
endorsement to Mortgagee's title policy at Mortgagor's expense which
endorsement verifies the first priority of the Loan Documents; (v) the
Debt Service Coverage is greater than or equal to 1.75 to 1.00 for the
preceding twelve (12) month period and Mortgagee receives satisfactory
evidence that this Debt Service Coverage will be maintained for the
next succeeding twelve (12) months; (vi) the transferee expressly
assumes all obligations under the Loan Documents and executes any
documents reasonably required by Mortgagee, and all of these documents
are satisfactory in form and substance to Mortgagee; (vii) Mortgagee
reasonably approves the form and content of all transfer documents, and
Mortgagee is furnished with a certified copy of the recorded transfer
documents; (viii) the transferee complies with and delivers the ERISA
Agreement and the transfer is permitted under the provisions of the
ERISA Agreement; and (ix) Mortgagor or the transferee pays all
reasonable fees, costs, and expenses incurred by Mortgagee in
connection with the proposed transfer, including, without limitation,
all legal (for only outside counsel),
<PAGE>
accounting, title insurance, documentary stamps taxes, intangible
taxes, mortgage taxes, recording fees, and appraisal fees, whether or
not the transfer is actually consummated.
B. Provided that (i) no Event of Default or Event which with
the passage of time or the giving of notice or both would constitute an
Event of Default has occurred and is continuing, and (ii) the then
current Loan to Value Ratio, as determined by Mortgagor in its sole and
absolute discretion, is less than fifty percent (50%), then Mortgagor
may request in writing that Mortgagee consent to one and only one
secondary encumbrance of the Property, which consent may be withheld in
Mortgagee's sole and absolute discretion applying such standards as
Mortgagee deems appropriate, which may include, but shall not be
limited to, Mortgagee's then current underwriting practices and
standards.
2.14 No Cooperative or Condominium. Mortgagor will not operate the
Premises or permit the Premises to be operated as a cooperative or condominium
or otherwise such that the tenants or other occupants thereof participate in
ownership, control, or management of the Premises or any part thereof, as tenant
stockholders or otherwise.
2.15 Insurance.
A. Mortgagor, at its sole cost and expense, will keep and
maintain for the mutual benefit of Mortgagor and Mortgagee the
following policies of insurance and shall faithfully comply with the
provisions thereof: (i) insurance against loss or damage to the
Property by fire and other risks covered by insurance commonly known as
"all risk" coverage for real and personal property, including
endorsements for loss by flood if all or part of the Premises are
located within a federal or state designated flood hazard zone or other
flood zone area, "extra expense" coverage and "agreed amount" coverage,
and protection against such other risks or hazards as Mortgagee from
time to time reasonably may designate, in an amount equal to one
hundred percent (100%) of the then current "full replacement cost" of
the Improvements, the Fixtures and the other Personalty, without
deduction for physical depreciation; (ii) rental loss insurance against
loss of income in an amount equal to at least twelve (12) months' base
and additional rental, including charges for taxes, insurance,
utilities and other operating expense reimbursements or "pass-throughs"
at then current income levels; (iii) commercial general liability
insurance for bodily injury or death or property damage occurring in,
upon or about, or resulting from, the Premises or any other Property,
or any street, drive, sidewalk, curb or passageway adjacent thereto
(but such coverage or the amount thereof shall in no way limit the
indemnifications in this Mortgage and other Loan Documents), with a
combined single limit in such amounts as are reasonably approved by
Mortgagee; (iv) "builders risk" insurance during the period of any
construction, repair, replacement, renovation or alteration of the
Improvements, in such amounts as are reasonably approved by Mortgagee;
(v) boiler and machinery insurance; and (vi) such
<PAGE>
other insurance, and in such amounts, as may from time to time be
reasonably required by Mortgagee.
B. All policies of insurance required by this Mortgage (i)
shall be prepaid annually and otherwise satisfactory in form, substance
and amount to Mortgagee and written with an insurance company rated as
"B+/XII" or better in Best's Insurance Reports, (ii) shall name
Mortgagee as an additional insured as its interest may appear, (iii)
shall contain a Standard Mortgagee clause acceptable to Mortgagee and a
waiver of subrogation rights by the insurer, (iv) shall contain an
agreement by the insurer that such policy shall not be amended or
canceled without at least thirty (30) days' prior written notice to
Mortgagee, and (v) shall contain such other provisions as Mortgagee
deems reasonably necessary or desirable to protect its interests. No
approval by Mortgagee of any insurer shall be construed to be a
representation, certification or warranty of its solvency and no
approval by Mortgagee as to the amount, type and/or form of any
insurance shall be construed to be a representation, certification or
warranty of its sufficiency.
C. In the event a blanket policy is submitted to satisfy
Mortgagor's obligations under this Paragraph, in addition to such other
requirements set forth herein, Mortgagor shall deliver to Mortgagee a
certificate from such insurer indicating that Mortgagee is an insured
under such policy and designating the amount of such insurance
applicable to the Property.
D. Mortgagor will furnish evidence, satisfactory to Mortgagee,
that (i) all insurance requirements (including provisions for waivers
of subrogation) set forth in the Leases or any other agreements
affecting the Property shall have been satisfied by each party thereto,
(ii) Mortgagor's insurance coverage is sufficient (assuming the total
destruction of the Property) to permit Mortgagor to rebuild the
Improvements (including basic tenant improvements) and to replace
Personalty (including the Fixtures) in such a manner as to enable the
Property to be operable and rentable as it is currently rented and
operated, and (iii) each tenant, required by the terms of its Lease to
maintain insurance on its leased premises, has caused Mortgagee to be
named as an additional insured or loss payee under such insurance
policies.
E. Self-insurance (other than the applicable deductibles
approved by Mortgagee) shall not satisfy the requirements of this
Paragraph.
F. All of Mortgagor's right, title and interest in and to all
policies of insurance and any unearned premiums thereon are hereby
assigned (to the fullest extent assignable) to Mortgagee, and in the
event of foreclosure of this Mortgage or other transfer of title or
assignment of the Premises and the other Property, all right, title and
interest of Mortgagor in and to all policies of insurance required
hereunder of otherwise then in force with respect thereto and all
proceeds payable thereunder and any unearned
<PAGE>
premium thereon shall immediately vest in the purchaser or other
transferee of the Property.
G. Upon expiration of any policy furnished pursuant to this
Paragraph, Mortgagor shall provide Mortgagee with certificates of
renewal policies together with evidence satisfactory to Mortgagee of
Mortgagor's payment of the applicable premiums.
H. Mortgagor for itself, and on behalf of its insurers, hereby
releases and waives any right to recover against Mortgagee on account
of any liability for: (i) any loss or damage to property, including the
property of any tenant or licensee of the Property; (ii) any loss or
damage to the Improvements; (iii) any other direct or indirect loss or
damage caused by fire or other risks, which loss or damage is covered
by the insurance required to be carried hereunder by Mortgagor, or is
otherwise insured or required to be insured; or (iv) claims arising by
reason of any of the foregoing, irrespective of any negligence on the
part of Mortgagee which may have contributed to such loss or damage.
2.16 Estoppel Certificates. Mortgagor, within ten (10) days after
Mortgagee's request, shall furnish to Mortgagee a written statement, duly
acknowledged, certifying to Mortgagee and/or any proposed assignee or
participant of the Loan as to (i) the outstanding amount of the Indebtedness,
(ii) the terms of payment and maturity date of the Indebtedness, (iii) the date
to which interest has been paid under the Note, (iv) whether any offsets or
defenses exist against the Obligations and, if any are alleged to exist, a
detailed description thereof, (v) that all Leases are in full force and effect
and have not been modified (or if modified, setting forth all modifications),
(vi) the date to which the rent, additional rent and other charges thereunder
have been paid, (vii) whether or not, to the best knowledge of Mortgagor, 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,
and (viii) as to any other matters reasonably requested by Mortgagee and
reasonably related to the Leases, the Indebtedness, the Obligations, the
Property or this Mortgage or other Loan Documents. Mortgagee, within thirty (30)
days after Mortgagor's request, shall furnish to Mortgagor a written statement,
duly acknowledged, certifying to Mortgagor, to the best of Mortgagee's
knowledge, as to the outstanding amount of the Indebtedness and whether or not
any Events of Default exist under the Loan Documents.
ARTICLE 3
CASUALTIES AND CONDEMNATION
3.1 Casualties and Insurance Proceeds.
A. In the event of any damage to or loss or destruction of the
Property, Mortgagor will promptly notify Mortgagee of such event and
take such steps as shall be necessary to preserve any undamaged portion
<PAGE>
of the Property. If, pursuant to Paragraph 3.1.B., the insurance
proceeds are applied to the restoration, replacement or rebuilding of
the Property (but regardless of whether such insurance proceeds, if
any, shall be sufficient for the purpose), Mortgagor will promptly
commence to seek, and diligently seek, building permits and, after
obtaining same, will promptly commence and diligently pursue to
completion the restoration, replacement and rebuilding of the Property
as nearly as possible to its value, condition and character immediately
prior to such damage, loss or destruction, all in accordance with plans
and specifications approved by Mortgagee and with the remaining
provisions of this Paragraph.
B. In the event that all or any portion of the Property is
damaged, destroyed or lost, and such damage, destruction or loss is
covered, in whole or in part, by insurance required under this Mortgage
or otherwise maintained by Mortgagor, then (i) Mortgagee may, but shall
not be obligated to, make proof of loss and is hereby entitled to
settle, adjust or compromise any claims for damage, destruction or loss
thereunder, and (ii) all proceeds payable to Mortgagor thereunder will
be delivered to Mortgagee and, accordingly, each insurance company
concerned is hereby authorized and directed to make payment therefor
directly to Mortgagee. Mortgagee shall have the right to apply the
insurance proceeds, first, to reimburse Mortgagee for all costs and
expenses, including adjustors' and attorneys' fees and disbursements,
incurred in connection with the collection of such proceeds, and,
second, at Mortgagee's option, but subject to Paragraph 3.1.C., to pay
all or any part of the Indebtedness, whether or not then due and
payable, in the order and manner determined by Mortgagee, or to the
cure of any then current default hereunder, or to the restoration,
replacement or rebuilding, in whole or in part, of the portion of the
Property damaged, destroyed or lost, provided that any insurance
proceeds held by Mortgagee to be applied to the restoration,
replacement or rebuilding of the Property shall be paid out from time
to time upon compliance by Mortgagor with such provisions and
requirements as may be imposed by Mortgagee which provisions and
requirements shall be customary and typical for construction loan
escrows. Mortgagee shall pay interest on insurance proceeds held by
Mortgagee in an amount and manner determined solely by Mortgagee.
Notwithstanding the foregoing, Mortgagee shall have no obligation to
pay interest on such funds after the occurrence of an Event of Default.
All such interest shall be added to such funds. To the extent that any
Indebtedness shall remain outstanding after such application of
proceeds, the unpaid Indebtedness will continue in full force and
effect and Mortgagor will not be excused in the payment thereof. If
such proceeds are insufficient to effect the complete restoration,
replacement or rebuilding of the Property, Mortgagee may at its option
declare the balance of the Indebtedness to be due and payable forthwith
and avail itself of any of the remedies provided herein or in any of
the other Loan Documents unless the balance of the funds required to
complete such restoration, replacement or rebuilding, as determined by
Mortgagee, is deposited with Mortgagee within ten (10) days after the
date of delivery to Mortgagor of Mortgagee's determination of such
balance in which event such balance shall be applied first, before
application of insurance proceeds, to the restoration, replacement or
<PAGE>
rebuilding. If Mortgagor shall have received all or any portion of
such insurance proceeds or any other proceeds relating to such
damage or destruction, Mortgagor, upon demand from Mortgagee, will
pay to Mortgagee an amount equal to the amount so received by
Mortgagor, to be applied by Mortgagee in accordance with this Paragraph
3.1.B. Notwithstanding anything herein or at law or in equity to the
contrary, none of the insurance proceeds or payments in lieu thereof
paid to Mortgagee as herein provided shall be deemed trust funds and
Mortgagee shall be entitled to dispose of such proceeds as provided
herein. Mortgagor expressly assumes all risk of loss, including a
decrease in the use, enjoyment or value of the Property, from any
casualty whatsoever, whether or not insurable or insured against.
C. Anything in this Paragraph 3.1. to the contrary
notwithstanding, in the event of an insured loss, Mortgagee will permit
the application of insurance proceeds to restoration of the Property to
as good or better condition as existed prior to the damage, destruction
or loss, in accordance with plans and specifications approved by
Mortgagee in its reasonable discretion, if: (i) no more than thirty
percent (30%) of the gross area of the Improvements is directly
affected by such damage, and the amount of the loss does not exceed
twenty percent (20%) of the value of the Premises immediately before
the damage, destruction or loss; (ii) no Event of Default, or event
which with the passage of time or the giving of notice or both would
constitute an Event of Default, has occurred or is continuing at the
time of such application; (iii) no insurer denies liability to any
named insured; (iv) Leases which are terminated or terminable as a
result of such damage, destruction or loss do not include any Leases to
Major Tenants and cover an aggregate rentable square footage of less
than five percent (5%) of the total rentable square footage in the
Improvements immediately before such damage, destruction or loss; (v)
rental loss insurance is available and in force and effect to offset
fully any abatement of rent to which any tenants of the Premises may be
entitled as a result of such damage, destruction or loss; (vi) in
Mortgagee's sole judgment, restoration can be completed within one year
after the damage, destruction or loss and at least two years before the
maturity of the Note; (vii) Mortgagor shall have entered into a general
construction contract acceptable in all respects to Mortgagee for
restoration, which contract must, among other things, include a
provision for retainage of not less than ten percent (10%) until
complete restoration is achieved, and a final completion date which is
at least two years before the maturity of the Loan; and (viii) in
Mortgagee's reasonable judgement, the security for the Loan must not
have been in any other manner materially impaired as a result of such
damage, destruction or loss.
D. If Mortgagee elects pursuant to Paragraph 3.1.B. or is
required pursuant to Paragraph 3.1.C. to apply insurance proceeds to
the restoration of the Property, the proceeds shall be disbursed
pursuant to a disbursement procedure established by Mortgagee, which
may include, at Mortgagee's election, use of a disbursing agent
("Depository") selected by Mortgagee. The costs and expenses of the
disbursement procedure, including the fees and expenses of the
Depository, shall be paid by Mortgagor. Mortgagor will immediately,
<PAGE>
upon demand by Mortgagee, from time to time deposit with Mortgagee or
Depository, in a mutually acceptable interest-bearing account, such
amounts in excess of the amount from time to time on deposit as may be
necessary to complete such restoration in Mortgagee's sole judgment and
such amounts shall be the first to be disbursed by Mortgagee hereunder.
Under no circumstance will the Mortgagee be obligated to make any
portion of the proceeds available for restoration unless at the time of
the request for any disbursement it has determined in its reasonable
discretion that the restoration can be completed at a cost (which cost
shall include all payments coming due under the terms of the Loan)
which does not exceed the aggregate of the remaining proceeds and any
funds deposited with Mortgagee by Mortgagor. If Mortgagor shall fail
to timely complete the restoration of the Property as determined by
Mortgagee in its sole discretion, or if an Event of Default occurs
prior to full disbursement of the insurance proceeds, any undisbursed
portion may, at Mortgagee's option, be applied to the Indebtedness,
whether or not then due and in any order of priority, and such
application shall be deemed a prepayment of the Indebtedness, subject
to a prepayment premium, computed in accordance with the applicable
provisions of the Note.
E. The proceeds, including any loss of rental income insurance
proceeds which have been deposited with Mortgagee or which the carrier
has acknowledged to be payable, and any additional funds deposited by
Mortgagor with Mortgagee, shall constitute additional security for the
Loan. Mortgagor will execute, deliver, file and/or record, at its own
expense, such documents and instruments as Mortgagee may require to
grant to Mortgagee a perfected, first priority security interest in
such proceeds and additional funds.
3.2 Condemnation.
A. Promptly upon obtaining knowledge of any pending or
threatened institution of any proceedings for the condemnation of the
Property, or any part or interest therein, or of any right of eminent
domain, or of any other proceedings arising out of injury or damage to
or decrease in the value of the Property (including any change in any
street, whether as to grade, access or otherwise), or any part thereof
or interest therein, Mortgagor will notify Mortgagee of the threat or
pendency thereof. Mortgagee may participate in any such proceedings
(but shall not be obligated to do so), the cost of which, including the
reasonable fees and expenses of attorneys and agents selected by
Mortgagee, shall be borne by Mortgagor. Mortgagor from time to time
will execute and deliver to Mortgagee all instruments requested by
Mortgagee or as may be required to permit such participation. Mortgagor
will, at its expense, diligently prosecute any such proceeding, will
deliver to Mortgagee copies of all papers served in connection
therewith and will consult and cooperate with Mortgagee, its attorneys
and agents, in the carrying on and defense of any such proceeding;
provided that no settlement of any such proceeding will be made by
Mortgagor without Mortgagee's prior written consent.
<PAGE>
B. All proceeds of condemnation awards or proceeds of sale in
lieu of condemnation, and all judgments, decrees and awards for injury
or damage to the Property are hereby assigned and shall be paid to
Mortgagee. Mortgagor will execute and deliver such further assignments
thereof as Mortgagee may request and authorizes Mortgagee to collect
and receive the same, to give receipts and acquittances therefor and to
appeal from any such judgment, decree or award. Mortgagee shall in no
event be liable or responsible for failure to collect, or to exercise
diligence in the collection of, any of the same, or be obligated to
question the amount of the same.
C. Mortgagee will apply any proceeds, judgments, decrees or
awards referred to in Paragraph 3.2.B., first to reimburse Mortgagee
for all costs and expenses, including attorneys' fees and
disbursements, incurred in connection with the proceeding in question
and any appeal therefrom or in the collection of such amounts, and,
second, subject to Paragraph 3.2.D., to apply the remainder thereof as
provided in Paragraph 3.1.B. and Paragraph 3.1.D. for insurance
proceeds held by Mortgagee. If, pursuant to those provisions, Mortgagee
applies such proceeds, judgments, decrees or awards to the restoration,
replacement or rebuilding of the affected Property, Mortgagor will
restore, replace or rebuild the Property in accordance therewith. If
Mortgagor receives all or any portion of such proceeds, judgments,
decrees or awards, Mortgagor, upon demand from Mortgagee, will pay to
Mortgagee an amount equal to the amount so received by Mortgagor, to be
applied by Mortgagee pursuant to this Paragraph. Notwithstanding
anything herein or at law or in equity to the contrary, none of the
proceeds, judgments, decrees or awards or payments in lieu thereof paid
to Mortgagee as herein provided will be deemed trust funds and
Mortgagee will be entitled to dispose of such proceeds as provided in
this Paragraph.
D. Anything in this Paragraph 3.2. to the contrary
notwithstanding, in the event of a partial taking, Mortgagee will
permit the application of any condemnation award or other payment to
the restoration of the Property (including, but not limited to,
parking, drives, recreational areas, sidewalks and landscaping) to as
good or better condition as theretofore existed, in accordance with
plans and specifications approved by Mortgagee in its reasonable
discretion, if: (i) such taking involves less than twenty percent (20%)
of the rentable square feet in the Improvements and less than ten
percent (10%) of the parking spaces, and does not affect access to the
Property (or any part thereof) from any public right-of-way; (ii) no
Event of Default, or event which with the passage of time or the giving
of notice or both would constitute an Event of Default, has occurred or
is continuing at the time of such application; (iii) Leases which are
terminated or terminable as a result of such damage, destruction or
loss cover an aggregate rentable square footage of less than five
percent (5%) of the total rentable square footage in the Improvements
immediately before such damage, destruction or loss; (iv) the remaining
Property continues at all times to comply with all applicable Laws and
Restrictions; and (v) in Mortgagee's sole judgment, (a) restoration is
<PAGE>
practicable and can be completed within one year after the taking and
at least two years prior to the maturity of the Note, and (b) the
Property will be economically viable after restoration.
E. Notwithstanding any condemnation, taking or other proceeding
referred to in this Paragraph causing injury to or decrease in value of
the Premises or any interest therein, Mortgagor will continue to timely
pay and perform the Obligations. The reduction in the Obligations
resulting from an application of any proceeds, judgments, decrees or
awards, shall be deemed to take effect only on the date Mortgagee
actually receives and applies such proceeds, judgments, decrees, or
awards against the Obligations. Mortgagee's rights to any such
proceeds, judgments, decrees or awards will not be diminished if,
before Mortgagee's receipt of the same, the Property shall have been
sold through foreclosure of this Mortgage (or pursuant to the power of
sale granted hereunder), or shall have been transferred by deed in lieu
of foreclosure.
ARTICLE 4
EVENTS OF DEFAULT
4.1 Events of Default.
A. It shall constitute an "Event of Default" hereunder if any
of the following events shall occur:
(i) Mortgagor shall fail to perform on the required
date any Obligation involving the payment of money, including
the payment of principal and/or interest under the Note;
(ii) Mortgagor shall fail to timely observe, perform
or discharge any non-monetary Obligation, other than a
non-monetary obligation described in any other clause in this
Article 4, and any such failure shall remain unremedied for
thirty (30) days or such lesser period as may be otherwise
specified in the applicable Loan Document (the "Grace Period")
after notice to Mortgagor of the occurrence of such failure;
provided, however, that Mortgagee may extend the Grace Period
up to ninety (90) days if (a) Mortgagee determines in good
faith that (I) such default cannot be cured within the Grace
Period but can be cured within ninety (90) days, (II) no lien
or security interest created by the Loan Documents shall be
impaired prior to the completion of such cure, and (III)
Mortgagee's immediate exercise of any remedies provided
hereunder or by law is not necessary for the protection or
preservation of the Property or Mortgagee's security interest
therein, and (b) Mortgagor shall immediately commence and
diligently pursue the cure of such default;
<PAGE>
(iii) Mortgagor, as lessor or sublessor, as the case
may be, shall assign the Rents without first obtaining the
written consent of Mortgagee;
(iv) default by Mortgagor after the expiration of all
applicable grace or cure periods under any agreement to which
Mortgagor is a party, other than the Loan Documents, which
agreement relates to the borrowing of money by Mortgagor from
any Person, and such default might give rise to a Material
Adverse Change or adversely affect the security for the Loan,
including a default by Mortgagor under the loan documents
evidencing or relating to a junior lien on the Property;
(v) any representation or warranty made by Mortgagor
in, under or pursuant to any of the Loan Documents was false
or misleading in any material respect as of the date on which
such representation or warranty was made or deemed remade;
(vi) any of the Loan Documents shall cease to be in
full force and effect or be declared null and void, or shall
cease to constitute valid and subsisting liens and/or valid
and perfected security interests in and to the Property, or
Mortgagor shall contest or deny in writing that it has any
further liability or obligation under any of the Loan
Documents;
(vii) the occurrence of a Transfer without the
Mortgagee's prior written consent (as required under the
provisions of Paragraph 2.13); or the occurrence of any other
event which, under the terms of the Loan Documents, would
permit Mortgagee to accelerate the Obligations;
(viii) Mortgagor shall fail at any time to satisfy
the requirements of Paragraph 2.15 and such failure shall
continue for ten (10) days after written notice thereof;
(ix) Any Principal Party shall generally not pay its
debts as they become due or shall admit in writing its
inability to pay its debts, or shall have made a general
assignment for the benefit of creditors;
(x) any Principal Party shall commence any case,
proceeding or other action seeking reorganization,
arrangement, adjustment, liquidation, dissolution or
composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors,
or seeking to have an order for relief entered against it as
debtor, or seeking appointment of a Receiver for it or for all
or any substantial part of its property (collectively, a
"Proceeding");
<PAGE>
(xi) any Principal Party shall take any action to
authorize any of the actions set forth above in clauses (ix)
or (x); or
(xii) any Proceeding shall be commenced against any
Principal Party, and such Proceeding (a) results in the entry
of an order for relief against it which is not fully stayed
within seven (7) business days after the entry thereof or (b)
remains undismissed for a period of sixty (60) days.
ARTICLE 5
REMEDIES
5.1 Remedies. Upon the occurrence of any one or more Events of Default,
Mortgagee may (but shall not be obligated to), in addition to any rights or
remedies available to it hereunder or under the other Loan Documents, take such
action personally or by its agents or attorneys, with or without entry, and
without notice, demand, presentment or protest (each and all of which are hereby
waived), as it deems necessary or advisable to protect and enforce Mortgagee's
rights and remedies against Mortgagor and in and to the Collateral, including
the following actions, each of which may be pursued concurrently or otherwise,
at such time and in such order as Mortgagee may determine, in its sole
discretion, without impairing or otherwise affecting its rights or remedies:
(i) declare the entire balance of the Obligations (including
the entire principal balance thereof, all accrued and unpaid interest
and any premium and late charges thereon and all other such sums
secured hereby) to be immediately due and payable, and upon any such
declaration the entire unpaid balance of the Obligations shall become
and be immediately due and payable, without presentment, demand,
protest, notice of demand, notice of protest, notice of non-payment,
diligence in collection or further notice of any kind, all of which are
hereby expressly waived by Mortgagor, anything in the Loan Documents to
the contrary notwithstanding; or
(ii) institute a proceeding or proceedings, judicial or
otherwise, for the complete foreclosure of this Mortgage under any
applicable provision of law; or
(iii) institute a proceeding or proceedings for the partial
foreclosure of this Mortgage under any applicable provision of law for
the portion of the Obligations then due and payable, subject to the
lien and security interest created by this Mortgage continuing
unimpaired and without loss of priority so as to secure the balance of
the Obligations not then due and payable; or
<PAGE>
(iv) in the event of a sale, by foreclosure or otherwise, of
less than all of the Collateral, this Mortgage shall continue as a lien
and security interest on the remaining portion of the Collateral; or
(v) institute an action, suit or proceeding in equity for the
specific performance of any of the provisions contained in the Loan
Documents; or
(vi) apply for the appointment of a receiver, custodian,
trustee, liquidator or conservator of the Collateral, to be vested with
the fullest powers permitted under applicable law, as a matter of right
and without regard to or the necessity to disprove the adequacy of the
security for the Obligations or the solvency of Mortgagor or any other
person liable for the payment of the Obligations, and Mortgagor and
each other person so liable waives or shall be deemed to have waived
such necessity and consents or shall be deemed to have consented to
such appointment; or
(vii) subject to the provisions and restrictions of any
applicable law, enter upon the Premises and the Improvements, and
exclude Mortgagor and its agents and servants wholly therefrom, without
liability for trespass, damages or otherwise, and take possession of
all books, records and accounts relating thereto and all other
Collateral, and Mortgagor agrees to surrender possession of the
Collateral and of such books, records and accounts to Mortgagee on
demand after the happening of any Event of Default; and having and
holding the same may use, operate, manage, preserve, control and
otherwise deal therewith and conduct the business thereof, either
personally or by its superintendents, managers, agents, servants,
attorneys or receivers, without interference from Mortgagor, and upon
each such entry and from time to time thereafter may, at the expense of
Mortgagor and the Collateral, without interference by Mortgagor and as
Mortgagee may deem advisable, (i) either by purchase, repair or
construction, maintain and restore the Collateral, (ii) insure or
reinsure the same, (iii) make all necessary or proper repairs,
renewals, replacements, alterations, additions, betterments and
improvements thereto and thereon, (iv) complete the construction of the
Improvements and, in the course of such completion, may make such
changes in the contemplated or completed improvements as it may deem
advisable, and (v) in every such case in connection with the foregoing
have the right to exercise all rights and powers of Mortgagee with
respect to the Collateral, either in Mortgagor's name or otherwise,
including the right to make, terminate, cancel, enforce or modify
Leases, obtain and evict tenants and subtenants on such terms as
Mortgagee shall deem advisable and to take any actions described in
subsection (i) of this Paragraph 5.1(g); or
(viii) subject to the provisions and restrictions of any
applicable law, may, with or without entrance upon the Premises,
collect, receive, sue for and recover in its own name all Rents and
cash collateral derived from the Premises, and after deducting
therefrom all costs, expenses and liabilities of every character
incurred by Mortgagee in collecting the same and in using, operating,
managing, preserving and controlling the
<PAGE>
Premises, and otherwise in exercising Mortgagee's rights under
subsection (g) of this Section, including all amounts necessary to pay
Impositions, insurance premiums and other charges in connection with
the Premises, as well as compensation for the services of Mortgagee and
its attorneys, agents and employees, apply the remainder as provided in
Paragraph 5.4; or
(ix) release any portion of the Collateral for such
consideration as Mortgagee may require without, as to the remainder of
the Collateral, in any way impairing or affecting the lien or priority
of this Mortgage, or improving the position of any subordinate
lienholder with respect thereto, except to the extent that the
Obligations shall have been reduced by the actual monetary
consideration, if any, received by Mortgagee for such release, and may
accept by assignment, pledge or otherwise any other property in place
thereof as Mortgagee may require without being accountable for so doing
to any other lienholder; or
(x) may take all actions permitted under the Uniform
Commercial Code of the jurisdiction in which the Collateral is located;
or
(xi) may take any other action, or pursue any other right or
remedy, as Mortgagee may have under applicable law, and Mortgagor does
hereby agree that Mortgagee may so act.
In the event that Mortgagee shall exercise any of the rights or
remedies set forth in subsections (g) and (h) of this Section, Mortgagee shall
not be deemed to have entered upon or taken possession of the Collateral except
upon the exercise of its option to do so, evidenced by its demand and overt act
for such purpose, nor shall it be deemed a beneficiary or mortgagee-in-
possession by reason of such entry or taking possession, provided that Mortgagee
may elect to be appointed a mortgagee-in-possession in accordance with
applicable law. Mortgagee shall not be liable to account for any action taken
pursuant to any such exercise other than for rents actually received by such
party, nor liable for any loss sustained by Mortgagor resulting from any failure
to let the Premises, or from any other act or omission of Mortgagee except to
the extent such loss is caused by the willful misconduct or bad faith of such
party. Mortgagor hereby consents to, ratifies and confirms the exercise by
Mortgagee of said rights and remedies, and appoints Mortgagee as its
attorney-in-fact, which appointment shall be deemed to be coupled with an
interest and irrevocable, for such purposes.
5.2 Expenses. In any proceeding, judicial or otherwise, to foreclose
this Mortgage or defend or enforce any other right or remedy of Mortgagee under
the Loan Documents, there shall be allowed and included as an addition to and a
part of the Obligations in the decree for sale or other judgment or decree all
expenditures and expenses, including reasonable attorneys' fees, which may be
paid or incurred in connection with the defense or exercise by Mortgagee of any
of its rights and remedies provided or referred to in Paragraph 5.1, or any
comparable provisions of any other Loan Documents including, without limitation,
<PAGE>
all such expenditures and expenses incurred before and during a foreclosure and
before and after judgment of foreclosure and at any time prior to sale and
receipt of a deed in foreclosure proceedings, and, where applicable, after sale,
together with interest thereon at the Default Rate specified in the Note, and
the same shall be part of the Obligations and shall be secured by this Mortgage.
5.3 Rights Pertaining to Sales. Subject to the provisions or other
requirements of law, the following provisions shall apply to any sale or sales
of the Collateral under or by virtue of this Article 5, whether made by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale:
A. Mortgagee may conduct any number of sales from time to time
of all or portions of the Collateral and Mortgagor hereby waives any
right which it may have to require the Collateral (or any part thereof)
to be sold as separate tracts or units in the event of foreclosure or
sale.
B. Any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such
postponed or adjourned sale without further notice.
C. After each sale, Mortgagee, or an officer of any court
empowered to do so, shall execute and deliver to the purchaser or
purchasers at such sale a good and sufficient instrument or instruments
granting, conveying, assigning and transferring all right, title and
interest of Mortgagor in and to the property and rights sold (but
without any covenant or warranty, express or implied) and shall receive
the proceeds of said sale or sales and apply the same as herein
provided. Mortgagee is hereby appointed the true and lawful
attorney-in-fact of Mortgagor, which appointment is irrevocable and
shall be deemed to be coupled with an interest, in Mortgagor's name and
stead, to make all necessary conveyances, assignments, transfers and
deliveries of the property and rights so sold, and for that purpose
Mortgagee may execute all necessary instruments of conveyance,
assignment, transfer and delivery, and may substitute one or more
persons with like power, Mortgagor hereby ratifying and confirming all
that said attorney or such substitute or substitutes shall lawfully do
by virtue thereof. Nevertheless, Mortgagor, if requested by Mortgagee,
shall ratify and confirm any such sale or sales by executing and
delivering to Mortgagee or such purchaser or purchasers all such
instruments as may be advisable, in Mortgagee's judgment, for the
purposes as may be designated in such request.
D. Mortgagee may appoint or delegate any one or more persons
as agent to perform any act or acts necessary or incident to any sale
so held, including the posting of notices and the conduct of sale, but
in the name and on behalf of Mortgagee.
E. The receipt of Mortgagee for the purchase money paid at
any such sale, or the receipt of any other person authorized to receive
the same, shall be sufficient discharge therefor to any purchaser of
<PAGE>
any property or rights sold as aforesaid, and no such purchaser, or its
representatives, grantees or assigns, after paying such purchase price
and receiving such receipt, shall be bound to see to the application of
such purchase price or any part thereof upon or for any trust or
purpose of this Mortgage or, in any manner whatsoever, be answerable
for any loss, misapplication or nonapplication of any such purchase
money, or part thereof, or be bound to inquire as to the authorization,
necessity, expediency or regularity of any such sale.
F. Any such sale or sales shall operate to divest all of the
estate, right, title, interest, claim and demand whatsoever, whether at
law or in equity, of Mortgagor in and to the properties and rights so
sold, and shall be a perpetual bar both at law and in equity against
Mortgagor and any and all persons claiming or who may claim the same,
or any part thereof of any interest therein, by, through or under
Mortgagor to the fullest extent permitted by applicable law.
G. Upon any such sale or sales, Mortgagee may bid for and
acquire the Collateral and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting against the Obligations
the amount of the bid made therefor, after deducting therefrom the
expenses of the sale (including reasonable attorneys' fees including
expenses incurred or advanced after judgment of foreclosure through
sale), the cost of any enforcement proceeding hereunder and any other
sums which Mortgagee is authorized to deduct under the terms hereof, to
the extent necessary to satisfy such bid.
H. In the event that Mortgagor, or any person claiming by,
through or under Mortgagor, shall transfer or refuse or fail to
surrender possession of the Collateral after any sale thereof, then
Mortgagor, or such person shall be deemed a tenant at sufferance of the
purchaser at such sale, subject to eviction by means of forcible entry
and detainer proceedings, or subject to any other right or remedy
available hereunder or under applicable law.
I. Upon any such sale, it shall not be necessary for Mortgagee
or any public officer acting under execution or order of court to have
present at the sale or constructively in its possession any of the
Collateral.
J. In the event a foreclosure hereunder shall be commenced by
Mortgagee, Mortgagee may at any time before the sale of the Collateral
abandon the sale, and may institute suit for the collection of the
Obligations and for the foreclosure of this Mortgage, or in the event
that Mortgagee should institute a suit for collection of the
Obligations and for the foreclosure of this Mortgage, Mortgagee may at
any time before the entry of final judgment in said suit dismiss the
same and sell the Collateral in accordance with the provisions of this
Mortgage.
<PAGE>
5.4 Application of Proceeds. Subject to the provisions or other
requirements of applicable law, the purchase money, proceeds or avails of any
sale referred to in Paragraph 5.3, together with any other sums which may be
held by Mortgagee hereunder, whether under the provisions of this Article 5 or
otherwise, shall, except as herein expressly provided to the contrary, be
applied as follows:
First: To the payment of the costs and expenses of any such
sale, including compensation to Mortgagee, its agents and counsel, and
of any judicial proceeding wherein the same may be made, and of all
expenses, liabilities and advances made or incurred by Mortgagee
hereunder (including reasonable attorneys' fees), together with
interest thereon as provided in the Note, and all taxes, assessments
and other charges, except any taxes, assessments or other charges
subject to which the Collateral shall have been sold.
Second: To the payment in full of the obligations (including
principal, interest, premium and fees) in such order as Mortgagee may
elect.
Third: To the payment of any other sums secured hereunder or
required to be paid by Mortgagor pursuant to any provision of the Loan
Documents.
Fourth: To the extent permitted by applicable law, to be set
aside by Mortgagee as adequate security in its judgment for the payment
of sums which would have been paid by application under clauses First
through Third above to Mortgagee, arising out of an obligation or
liability with respect to which Mortgagor has agreed to indemnify
Mortgagee, but which sums are not yet due and payable or liquidated.
Fifth: To the payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
5.5 Additional Provisions as to Remedies.
(i) No right or remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and continuing,
shall be in addition to every other right or remedy given hereunder, or
under the other Loan Documents or now or hereafter existing at law or
in equity, and may be exercised from time to time and as often as may
be deemed expedient by Mortgagee.
(ii) No delay or omission by Mortgagee to exercise any right
or remedy hereunder upon any default or Event of Default shall impair
such exercise, or be construed to be a waiver of any such default or
Event of Default or an acquiescence therein.
<PAGE>
(iii) The failure, refusal or waiver by Mortgagee of its right
to assert any right or remedy hereunder upon any default or Event of
Default or other occurrence shall not be construed as waiving such
right or remedy upon any other or subsequent default or Event of
Default or other occurrence.
(iv) Mortgagee shall not have any obligation to pursue any
rights or remedies it may have under any other agreement prior to
pursuing its rights or remedies hereunder or under the other Loan
Documents.
(v) No recovery of any judgment by Mortgagee and no levy of an
execution upon the Collateral (or any part thereof) or any other
property of Mortgagor shall affect, in any manner or to any extent, the
lien and security interest created by this Mortgage upon and in the
Collateral, or any liens, security interests, rights, powers or
remedies of Mortgagee hereunder, and such liens, rights, powers and
remedies shall continue unimpaired as before.
(vi) Mortgagee may resort to any security given by this
Mortgage or any other security now given or hereafter existing to
secure the Obligations, in whole or in part, in such portions and in
such order as Mortgagee may deem advisable, and no such action shall be
construed as a waiver of any of the liens, rights or benefits granted
hereunder.
(vii) Acceptance of any payment after the occurrence of any
default or Event of Default shall not be deemed a waiver of such
default or Event of Default, and acceptance of any payment less than
any amount then due shall be deemed an acceptance on account only.
(viii) In the event that Mortgagee shall have proceeded to
enforce any right or remedy hereunder by foreclosure, sale, entry or
otherwise, and such proceeding shall be discontinued, abandoned or
determined adversely for any reason, then Mortgagor and Mortgagee shall
be restored to their former positions and rights hereunder with respect
to the Collateral, subject to the lien and security interest hereof.
(ix) Any provision herein or in the other Loan Documents which
grants to Mortgagee certain remedies, recoveries of expenses, rights or
powers including, without limitation, those relating to advances for
taxes and other claims, costs, and expenses, and insurance and proceeds
of insurance shall continue in Mortgagee from and after entry of
judgment of foreclosure sale has been held and judicially approved and
a deed in foreclosure delivered to purchaser.
5.6 Waiver of Rights and Defenses. To the full extent Mortgagor may
do so, Mortgagor agrees with Mortgagee as follows:
<PAGE>
(i) Mortgagor will not at any time insist on, plead, claim or
take the benefit or advantage of any statute or rule of law now or
hereafter in force providing for any appraisement, valuation, stay,
extension, moratorium or redemption, or of any statute of limitations,
and Mortgagor, for itself and its heirs, devisees, representatives,
successors and assigns, and for any and all persons ever claiming an
interest in the Collateral (other than Mortgagee), hereby, to the
extent permitted by applicable law, waives and releases all rights of
reinstatement, redemption, valuation, appraisement, notice of intention
to mature or declare due the whole of the Obligations, and all rights
to a marshaling of the assets of Mortgagor, including the Collateral,
or to a sale in inverse order of alienation, in the event of
foreclosure of the liens and security interests created hereunder.
(ii) Mortgagor shall not be relieved of its obligation to pay
the Obligations at the time and in the manner provided herein and in
the other Loan Documents, nor shall the lien or priority of this
Mortgage or any other Loan Documents be impaired by any of the
following actions, non-actions or indulgences by Mortgagee:
(i) any failure or refusal by Mortgagee to comply with
any request by Mortgagor (x) to consent to any action by
Mortgagor or (y) to take any action to foreclose this Mortgage
or otherwise enforce any of the provisions hereof or of the
other Loan Documents;
(ii) any release, regardless of consideration, of the
whole or any part of the Collateral or any other security for
the Obligations, or any person liable for payment of the
Obligations;
(iii) any waiver by Mortgagee of compliance by Mortgagor
with any provision of this Mortgage or the other Loan
Documents, or consent by Mortgagee to the performance by
Mortgagor of any action which would otherwise be prohibited
thereunder or to the failure by Mortgagor to take any action
which would otherwise be required hereunder or thereunder; and
(iv) any agreement or stipulation between Mortgagee and
Mortgagor, or, with or without Mortgagor's consent, between
Mortgagee and any subsequent owner or owners of the Collateral
(or any part thereof) or any other security for the
Obligations, renewing, extending or modifying the time of
payment or the terms of this Mortgage or any of the other Loan
Documents (including a modification of any interest rate), and
in any such event Mortgagor shall continue to be obligated to
pay the Obligations at the time and in the manner provided
herein and in the other Loan Documents, as so renewed,
extended or modified, unless expressly released and discharged
by Mortgagee.
(c) Regardless of consideration, and without the necessity for
any notice to or consent by the holder of any subordinate lien,
security interest, encumbrance, right, title or interest in or to the
<PAGE>
Collateral (or any part thereof), Mortgagee may release any person at
any time liable for the payment of the Obligations or any portion
thereof or any part of the security held for the Obligations and may
extend the time of payment or otherwise modify the terms of this
Mortgage or of any of the Loan Documents, including a modification of
the interest rate payable on the principal balance of the Note, without
in any manner impairing or affecting this Mortgage or the lien and
security interest thereof or the priority of this Mortgage, as so
extended and modified, as security for the Obligations over any such
subordinate lien, security interest, encumbrance, right, title or
interest.
ARTICLE 6
SECURITY AGREEMENT AND FIXTURE FILING
6.1 Security Agreement. Mortgagor hereby assigns and grants to
Mortgagee a first priority security interest in and to the Personalty and Rents
and any other part of the Property which may not be deemed real property or may
not constitute a "fixture" (within the meaning of Section 9-313 of the Code),
and all replacements, substitutions, and additions of, for and to the same, and
the proceeds thereof (collectively, the "Collateral") in order to secure payment
of the Indebtedness and performance by the Mortgagor of the other Obligations.
This Mortgage shall constitute a Security Agreement within the meaning of the
Uniform Commercial Code (the "Code") of the State in which the Property is
located with respect to such Property.
6.2 Fixture Filing. This Mortgage, upon recording or registration in
the real estate records of the proper office, shall constitute a "fixture
filing" within the meaning of Sections 9-313 and 9-402 of the Code with respect
to any and all Fixtures included within the term "Premises" and any Personalty
that may now be or hereafter become "fixtures" within the meaning of Section
9-313 of the Code.
6.3 Remedies. If an Event of Default occurs under this Mortgage,
Mortgagee, in addition to its other rights and remedies provided under this
Mortgage, shall have all the rights and remedies available to a secured party
under the Code as well as all other rights and remedies available at law or in
equity. Mortgagor, upon request by Mortgagee, will assemble the Collateral and
make it available to Mortgagee at a place Mortgagee designates to allow
Mortgagee to take possession or dispose of the Collateral. Mortgagor agrees that
ten (10) days' prior written notice of the time and place of the sale of the
Collateral, sent to Mortgagor in the manner provided for the mailing of notices
herein, is reasonable notice to Mortgagor. The sale of the Collateral may be
conducted by an employee or agent of Mortgagee and any Person, including both
the Mortgagor and Mortgagee, shall be eligible to purchase any part or all of
the Collateral at the sale. The reasonable expenses of retaking, holding,
preparing for sale, selling and the like incurred by Mortgagee shall include,
but not be limited to, attorneys' fees and legal expenses incurred by Mortgagee,
and shall be borne by Mortgagor.
<PAGE>
6.4 Further Assurances. Mortgagor will upon request by Mortgagee from
time to time, and in the event all or any portion of the Property is leased to a
Person affiliated with a Principal Party, Mortgagor will cause such Person to,
(i) execute, acknowledge and deliver to Mortgagee a separate security agreement,
financing statement or other similar security instruments, in form satisfactory
to Mortgagee, covering all property concerning which there may be any doubt
whether the title to same has been conveyed by or security interest perfected by
this Mortgage and covering all goods which in the opinion of Mortgagee are
essential to the maintenance or operation of the Premises, (ii) execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
any financing statement, affidavit, continuation statement or certificate or
other document as Mortgagee may request in order to perfect, preserve, maintain,
continue and/or extend the security interests under and the priority of this
Mortgage and such security instrument, and (iii) deliver to Mortgagee an
inventory of the Collateral in reasonable detail. Mortgagor will pay to
Mortgagee on demand all costs and expenses incurred by Mortgagee in connection
with the preparation, execution, recording, filing and re-filing of any of the
foregoing documents.
6.5 Waivers. Mortgagor waives any right to require Mortgagee to (i)
proceed against any Person, (ii) proceed against or exhaust any Collateral or
(iii) pursue any other remedy in its power, and further waives any defense
arising by reason of any disability or other defense of Mortgagor or any other
Person, or by reason of the cessation from any cause whatsoever of the liability
of Mortgagor or any other Person. Until the Indebtedness shall have been paid in
full, Mortgagor shall not have any right to subrogation, and Mortgagor waives
any right to enforce any remedy which Mortgagee now has or may hereafter have
against Mortgagor or against any other Person and waives any benefit of and any
right to participate in any Collateral or security whatsoever now or hereafter
held by Mortgagee.
ARTICLE 7
MISCELLANEOUS
7.1 No Waiver. No failure by Mortgagee to insist upon strict, full and
complete (i) payment when due of any portion of the Indebtedness or (ii)
performance of any Obligation, nor failure to exercise any right or remedy
hereunder, shall constitute a waiver of any such failure to pay or breach of any
such Obligation, or of the later exercise of such right or remedy.
7.2 Abandonment. Any and all Personalty that upon foreclosure of the
lien of this Mortgage is owned by Mortgagor and is used in connection with the
operation of the Property shall be deemed at the option of Mortgagee to have
become on such date a part of the Property and abandoned to Mortgagee in its
then condition.
<PAGE>
7.3 Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (i) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged with a copy sent
by mail via United States Postal Service, (ii) one business day after having
been deposited for overnight delivery with any reputable overnight courier
service, or (iii) three 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, addressed as follows:
If to Mortgagor: USF&G/Legg Mason Realty Partners Limited Partnership
6225 Smith Avenue, LB0101
Baltimore, Maryland 21209
Attn: Gerald Trainor
If to Mortgagee: The Prudential Insurance Company of America
One Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
(Reference Loan No. 6-101-604)
with a copy to: The Prudential Insurance Company of America
One Ravinia Drive, Suite 1400
Atlanta, Georgia 30346-2110
Attn: Regional Counsel, Real Estate Operations
(Reference Loan No. 6-101-604)
or addressed as such party may from time to time designate by written notice to
the other parties.
7.4 Severability. If any provision hereof should be held unenforceable
or void, that provision shall be deemed severable from the remaining provisions
and in no way affect the validity of this Mortgage, except that if such
provision relates to the payment of any monetary sum, then Mortgagee may, at its
option, declare the Indebtedness immediately due and payable.
[Remainder of Page Intentionally Left Blank]
<PAGE>
7.5 Joinder of Foreclosure. Should Mortgagee hold any other or
additional security for the performance of the Obligations, its sale or
foreclosure, upon any default in such performance, in the sole discretion of
Mortgagee, may be prior to, subsequent to, or joined or otherwise
contemporaneous with any sale or foreclosure hereunder.
7.6 Governing Law. This Mortgage shall be governed by and construed in
accordance with the laws of the State in which the Land is located.
7.7 Subordination. At the option of Mortgagee, this Mortgage shall
become subject and subordinate in whole or in part (but not with respect to
priority of entitlement to any insurance proceeds, damages, awards, or
compensation resulting from damage to the Property or condemnation or exercise
of power of eminent domain), to any and all contracts of sale and/or any and all
Leases upon the execution by Mortgagee and recording thereof in the appropriate
real estate records office of the county where the Land is located of a
unilateral declaration to that effect. Mortgagee may require the issuance of
such title insurance endorsements to the title policy in connection with any
such subordination as Mortgagee, in its reasonable judgment, shall determine are
appropriate, and Mortgagor shall pay any cost or expense incurred in connection
with the issuance thereof.
7.8 Waiver of Statute of Limitations. Mortgagor hereby waives, to the
full extent allowed by law, the right to plead any statute of limitations as a
defense to any obligation secured by this Mortgage.
7.9 Entire Agreement. The Loan Documents set forth the entire
understanding between Mortgagor and Mortgagee relative to the Loan and the same
shall not be amended except by a written instrument duly executed by each of
Mortgagor and Mortgagee. The foregoing notwithstanding, the terms and the
conditions of the Application shall survive the funding of the Loan, but in the
event of any conflict between the provisions of the Application and any of the
other Loan Documents except as otherwise specifically provided herein, the terms
of such other Loan Documents shall control.
7.10 Other Security Instruments. If Mortgagee at any time holds
additional security for any obligations secured hereby, it may enforce the terms
thereof or otherwise realize upon the same, at its option, either before or
concurrently herewith or after a sale is made hereunder, and may apply the
proceeds to the Indebtedness without affecting the status of or waiving any
right to exhaust all or any other security, including the security hereunder,
and without waiving any breach or default or any right or power whether
exercised hereunder or contained herein or in any such other security.
7.11 Charges for Statements. Mortgagor will pay Mortgagee's charge, up
to the maximum amount permitted by law, for any statement regarding the
Obligations requested by Mortgagor or in its behalf.
<PAGE>
7.12 Usury. In the event that Mortgagee determines that any charge, fee
or interest paid or agreed to be paid in connection with the Loan may, under the
applicable usury laws, cause the interest rate on the Loan to exceed the maximum
permitted by law, then such charges, fees or interest shall be reduced and any
amounts actually paid in excess of the maximum interest permitted by such laws
shall be applied by Mortgagee to reduce the outstanding principal balance of the
Loan. The parties intend that Mortgagor shall not be required to pay, and
Mortgagee shall not be entitled to collect, interest in excess of the maximum
legal rate permitted under the applicable usury laws.
7.13 Publicity. Mortgagee, at its expense, may publicize the financing
of the Property.
7.14 Information Reporting Under IRS Section 6045(e). Any information
returns or certifications that must be filed with the Internal Revenue Service
and/or provided to other parties pursuant to Internal Revenue Code Section
6045(e) shall be prepared, filed by and sent to the appropriate parties by
Mortgagor. To the extent permitted by law, Mortgagee shall have no
responsibility to perform such services; provided however, that upon demand
Mortgagor shall reimburse Mortgagee for any costs incurred by Mortgagee in doing
so and shall also pay such fee as Mortgagee may reasonably and lawfully request.
7.15 Destruction of Note. Mortgagor shall, if the Note is mutilated or
destroyed by any cause whatsoever, or otherwise lost or stolen and regardless of
whether due to the act or neglect of Mortgagee, execute and deliver to Mortgagee
in substitution therefor a duplicate promissory note containing the same terms
and conditions as the Note, within ten (10) days after Mortgagee notifies
Mortgagor of any such mutilation, destruction, loss or theft of the Note. Any
new promissory note executed and delivered hereunder shall be in full
substitution for the Note, shall not constitute any new or additional
indebtedness of Mortgagor to Mortgagee, shall constitute solely a substitute
evidence of the Indebtedness evidenced by the original Note, and shall not
affect in any manner the priority of this Mortgage, or any other document or
instrument executed in connection with or evidencing or securing the
Indebtedness under the Note. Failure or delay by Mortgagee to notify Mortgagor
hereunder shall not affect in any manner Mortgagor's liability for the
Indebtedness under the Note or Mortgagor's obligation to execute a new
promissory note hereunder; and Mortgagor's failure to execute a new promissory
note on Mortgagee's request hereunder shall likewise not affect Mortgagor's
liability for the Indebtedness under the Note. Mortgagee shall pay all
reasonable attorneys' fees incurred by Mortgagor to accommodate Mortgagee under
this Section 7.15.
7.16 Indemnification and Defense.
A. Mortgagor will pay and indemnify, defend, and hold
Mortgagee and its agents harmless from and against all liability, loss,
claims, damage, cost or expense (including the reasonable fees and
costs of attorneys retained by Mortgagee together with the allocated
costs of internal legal counsel) that Mortgagee might incur (i) in
connection
<PAGE>
with the making, administering and/or servicing of the Loan (including
brokerage commissions or fees of any kind with respect to the
Application or commitment issued pursuant thereto or the Loan), (ii)
the enforcement of any of Mortgagee's rights or remedies under the Loan
Documents, (iii) by reason of any failure of any representation or
warranty made by Mortgagor or the failure of Mortgagor to perform any
Obligation, or (iv) by reason or in defense of any and all claims and
demands whatsoever that may be asserted against Mortgagee arising out
of or in connection with the Property or the Loan.
B. Whenever, under any Loan Document, Mortgagor is obligated
to indemnify and/or defend Mortgagee, or Mortgagor is obligated to
defend or prosecute any action or proceeding, then Mortgagee shall have
the right to participate in such prosecution or defense using counsel
of Mortgagee's choice, and all costs and expenses incurred by Mortgagee
in connection with such participation (including reasonable attorneys'
fees and costs) shall be reimbursed by Mortgagor to Mortgagee. In
addition, Mortgagee shall have the right to approve any counsel
retained by Mortgagor in connection with the prosecution or defense of
any such action or proceeding by Mortgagor. Mortgagor shall give notice
to Mortgagee of the initiation of all proceedings prosecuted or
required to be defended by Mortgagor, or which are subject to
Mortgagor's indemnity obligations, under this Mortgage, promptly after
the receipt by Mortgagor of notice of the existence of any such
proceeding, but in no event later than five (5) days thereafter.
C. Should Mortgagee incur any liability, loss, claim, damage,
cost or expense required to be reimbursed by Mortgagor to Mortgagee
hereunder, the amount thereof with interest thereon at the Default
Interest Rate shall constitute part of the Indebtedness, shall be
payable by Mortgagor upon demand and shall be secured by this Mortgage.
D. Mortgagor's obligations under this Paragraph 7.16 shall not
be affected by the absence or unavailability of insurance covering any
such obligations or by the failure by or refusal of any insurance
carrier to perform any obligations on its part under any such insurance
policy.
7.17 Successors and Assigns.
A. The provisions hereof shall be binding upon Mortgagor and
the heirs, devises, representatives, successors and assigns of
Mortgagor, including successors in interest of Mortgagor in and to all
or any part of the Property, and shall inure to the benefit of
Mortgagee and its heirs, successors, substitutes and assigns. All
references in this Mortgage to Mortgagor or Mortgagee shall be
construed as including all of such other persons with respect to the
person referred to. Where two or more Persons have executed this
Mortgage, the obligations of such Persons shall be joint and several,
<PAGE>
and each reference to Mortgagor herein shall mean each of such Persons,
except to the extent the context clearly indicates otherwise.
B. Mortgagee shall have the right, in its sole discretion, at
any time and from time to time, to sell, assign, syndicate, participate
out, or otherwise transfer and/or dispose of all or any portion of its
interest in this Mortgage, the Note and the Obligations, and, in
connection therewith, Mortgagor hereby covenants and agrees that it
will (i) permit Mortgagee and any prospective successor or participant
Mortgagee, or any of their respective agents, access to the Premises
during reasonable hours for inspection of same, and (ii) permit
Mortgagee to submit to third parties any financial data and other
information furnished by Mortgagor or any other person to Mortgagee in
connection with the operation of the Premises. Mortgagor further
covenants and agrees that, at the request of Mortgagee and in
connection with any such sale, assignment or other transfer, Mortgagor
shall cooperate as requested, and shall provide such representations,
warranties, agreements and documents as are customary and usual in the
marketplace or as may be reasonably required by Mortgagee in any such
sale, assignment or other transfer, and shall use diligent efforts to
obtain such documents and agreements from tenants and other third
parties as may be reasonably requested.
7.18 Interpretation. When the identity of the parties or other
circumstances make it appropriate, the masculine gender shall include the
feminine and/or neuter, and the singular number shall include the plural.
Specific enumeration of rights, powers and remedies of Mortgagee and of acts
which it may do and of acts Mortgagor must do or not do shall not exclude or
limit the general. The headings of each Article and Paragraph are for
convenience and do not limit or construe the contents of any provision hereof.
The provisions of the Loan Documents shall be construed as a whole according to
their common meaning, not strictly for or against any party and consistent with
the provisions herein contained, in order to achieve the objectives and purposes
of such documents. Each party and its counsel has reviewed and revised the Loan
Documents and agree that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of such document. The use in the Loan Documents of the
words "including", "such as", or words of similar import when following any
general term, statement or matter shall not be construed to limit such
statement, term or matter to the specific items or matters, whether or not
language of non-limitation such as "without limitation" or "but not limited to",
or words of similar import are used with reference thereto, but rather shall be
deemed to refer to all other items or matters that could reasonably fall within
the broadest possible scope of such statement, term or matter. References to
"foreclosure" and related phrases shall be deemed references to the appropriate
procedure in connection with any judicial foreclosure proceeding or a conveyance
in lieu of foreclosure.
7.19 Commingling of Funds. Any and all sums collected or retained by
Mortgagee hereunder (including insurance and condemnation proceeds and any
deposits made by Mortgagor with Mortgagee or any agent thereof) shall not be
deemed to be held in trust, and Mortgagee may commingle such funds or proceeds
with its general assets and shall not be liable for the payment of any interest
or other return thereon, except to the extent otherwise required by law.
<PAGE>
7.20 Survival. All representations, warranties and covenants of
Mortgagor or any Principal Party contained in this Mortgage or any other Loan
Document, or incorporated by reference herein or therein, shall survive the
execution and delivery of this Mortgage and shall remain continuing covenants,
warranties and representations of Mortgagor so long as any portion of the
Obligations remains outstanding, except to the extent otherwise expressly
provided to the contrary.
7.21 Additional Security. No other security now existing, or hereafter
taken, to secure the Obligations shall be impaired or affected by the execution
of this Mortgage; and all additional security shall be taken, considered and
held cumulatively. The taking of additional security, execution of partial
releases of the security, or any extension of the time of payment of the
Indebtedness shall not diminish the force, effect or lien of this Mortgage and
shall not affect or impair the liability of any maker, surety, guarantor or
endorser for the payment of said Indebtedness. Neither the acceptance of this
Mortgage nor its enforcement, whether by court action or pursuant to the power
of sale or other powers herein contained, shall prejudice or in any manner
affect Mortgagee's right to realize upon or enforce any other security now or
hereafter held by Mortgagee, it being agreed that Mortgagee shall be entitled to
enforce this Mortgage and any other security now or hereafter held by Mortgagee
in such order and manner as it may in its absolute discretion determine.
7.22 No Merger. So long as any of the Indebtedness shall remain unpaid
or Mortgagor shall have any further obligation under the Loan Documents, unless
Mortgagee shall otherwise consent in writing, the fee estate of Mortgagor in the
Property or any part thereof shall not merge, by operation of law or otherwise,
with any leasehold or other estate in the Property or any part thereof, but
shall always be kept separate and distinct therefrom, notwithstanding the union
of said fee estate and such leasehold or other estate in Mortgagor or any other
Person.
7.23 Performance by Mortgagor. If Mortgagor fails to faithfully perform
each and every Obligation to be performed by Mortgagor, Mortgagee, without
demand or notice, may do any or all things necessary to perform the Obligations
of Mortgagor under the pertinent instrument.
7.24 Recovery of Expenses. All sums expended by Mortgagee in the
exercise of any of its rights or remedies under the Loan Documents, including
Mortgagee's rights under Paragraph 2.8, Paragraph 2.9 and Paragraph 7.24 of this
Mortgage, and all reasonable costs and expenses incurred in connection therewith
(including the fees and costs of attorneys and consultants) shall (i) be
immediately due and payable on demand, (ii) accrue interest at the Default Rate
from the date of expenditure by Mortgagee, and (iii) be added to the
<PAGE>
Indebtedness and secured by the Loan Documents prior to any right, title or
interest in or claim upon the Property attaching or accruing subsequent to the
lien of this Mortgage; provided, however, notwithstanding anything to the
contrary herein or in any of the Loan Documents, Mortgagee shall not be entitled
to any out-of-pocket costs and expenses (including the fees and costs of outside
attorneys or costs for internal employees or staff counsel) with respect to
Mortgagee's exercise of its rights under the Loan Documents prior to a default
under the Loan Documents.
7.25 Standards of Discretion. Nothing contained in this Mortgage, the
Note, or any other Loan Documents, shall limit the right of Mortgagee to
exercise its business judgment, or act, in a subjective manner with respect to
any matter as to which it has specifically been granted such right or the right
to act in its discretion or judgment hereunder or thereunder, whether
"objectively" reasonable under the circumstances. Any such exercise shall not be
deemed inconsistent with any covenant of good faith and fair dealing otherwise
implied by law to be a part of this Mortgage; and the parties intend by the
foregoing to set forth and affirm their entire understanding with respect to the
terms, covenants and conditions and standards pursuant to which their rights,
duties and obligations are to be judged, their performance measured, and the
parameters within which Mortgagee's discretion may be exercised hereunder and
under the other Loan Documents.
7.26 Counterparts. This Mortgage may be executed in any number of
counterparts with the same effect as if all parties hereto had executed the same
document. All such counterparts shall be construed together and shall constitute
one instrument, but in making proof hereof it shall only be necessary to produce
one such counterpart.
7.27 Prepayment. Mortgagor may prepay the Loan only on the terms and
conditions set forth in the Note and Mortgagor will pay Mortgagee prepayment
premiums in respect of any prepayment, whether voluntary or involuntary, as
required by and on the terms and conditions set forth in the Note.
7.28 FIRPTA Certificate. In the event of any transfer by Mortgagor of
its rights hereunder or of any interest in the Property otherwise permitted
under this Mortgage, such transferee shall, as an additional condition to such
transfer, under penalty of perjury, execute and deliver to Mortgagee a
certificate concerning the non-foreign status of such transferee substantially
in the form of the FIRPTA representation and warranties in the Certificate of
Representations and Warranties. Nothing in this Paragraph shall be deemed a
modification or waiver of any other provision of any of the Loan Documents
limiting, prohibiting or otherwise relating to any Transfer.
7.29 Limitation on Personal Liability. Except as hereinafter provided,
in the event of Loan Acceleration due to an event of default described in
paragraph 6 of the Note, Mortgagee shall not enforce any deficiency judgment
against Mortgagor or the general partners of Mortgagor (hereinafter referred to
singularly or collectively as the "Exculpated Parties") with respect to any and
all obligations secured by this Mortgage in excess of the amount realized upon
foreclosure against (or sale, pursuant to power of sale, of) any and all
Property therefor; provided, however, that nothing contained herein or in any
Loan Document shall:
<PAGE>
(a) limit Mortgagee's other rights and remedies against the
Exculpated Parties hereunder or thereunder, either at law or in equity;
(b) limit the enforceability of, or Mortgagee's recourse
under, any certificate, indemnity, guaranty, master lease or similar
instrument furnished in connection with the Loan (including, without
limitation, the Hazardous Substances Agreement, the ERISA Agreement,
the Certificate of Representation and Warranties, and the brokerage
indemnity); or
(c) relieve the Exculpated Parties from personal liability or
responsibility for:
(i) waste with respect to the Property;
(ii) any security deposits of tenants (i) not turned
over to Mortgagee upon foreclosure, sale (pursuant to power of
sale), or conveyance in lieu thereof or (ii) not turned over
to a receiver or trustee for the Property after appointment
thereof;
(iii) any insurance proceeds or condemnation awards
received by any of the Exculpated Parties and not turned over
to Mortgagee nor used in compliance with the Loan Documents;
(iv) the greater of the amounts set forth below in
7.29(c)(iv)(1) and (2), if any of the Exculpated Parties
executes an amendment or termination of any lease at the
Property (other than a lease with a Major Tenant which is
addressed in subsection 7.29(E) below) without Mortgagee's
prior written consent, if such consent is required under the
Loan Documents:
(1) the present value (calculated at the
Discount Rate) of the aggregate total dollar amount
(if any) by which (A) rental income and/or other
tenant obligations prior to the amendment of such
lease exceeds (B) rental income and/or other tenant
obligations after the amendment of such lease; or
(2) any termination fee or other
consideration paid;
(v) any rents and other income from the Property
received by any of the Exculpated Parties after a default
under the Loan Documents and not otherwise applied to the
current (not deferred) fixed and operating expenses of the
<PAGE>
Property or to the Indebtedness under the Note; provided,
however, the Exculpated Parties shall be personally liable for
any such amounts paid as management, maintenance, repair or
janitorial fees, costs, expenses or any other charges to any
of the Exculpated Parties or to a person or entity related to
or affiliated with any of the Exculpated Parties;
(vi) any assessments and taxes (accrued and/or
payable) with respect to the Property;
(vii) any sums expended by Mortgagee in fulfilling
the obligations of Mortgagor, as lessor, under any Leases of
the Property;
(viii) any sums expended by Mortgagee, after taking
title to or possession of the Property, to cure any
pre-existing defaults of Mortgagor, as lessor, under any
Leases of the Property; or
(ix) all legal fees, including allocated cost of
Mortgagee's staff attorneys, and other expenses incurred by
Mortgagee in enforcing the Loan Documents if Mortgagor
contests, delays, or otherwise hinders or opposes (including,
without limitation, the filing of a bankruptcy) any of
Mortgagee enforcement actions.
Notwithstanding the foregoing, this agreement by Mortgagee not to
pursue recourse liability SHALL BECOME NULL AND VOID and shall be of no
further force and effect in the event:
(A) that there shall be any breach or violation of
the Due on Sale or Encumbrance section of this Mortgage; or
(B) of any fraud or material misrepresentation by any
of the Exculpated Parties in connection with the Property, the
Loan Documents, the Loan Application, or any other aspect of
the Loan; or
(C) that the Premises or any part thereof shall
become an asset in (i) an involuntary bankruptcy or insolvency
proceeding, filed by a Person other than Mortgagee, which is
not dismissed within ninety (90) days of filing, or (ii) a
voluntary bankruptcy or insolvency proceeding; or
(D) that any of the Exculpated Parties executes an
amendment or termination of any lease with a Major Tenant
assigned to Mortgagee under the Loan Documents, without the
prior written consent of Mortgagee, if such consent is
required under the Loan Documents.
7.30 WAIVER OF RIGHT TO TRIAL BY JURY. MORTGAGOR HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTER-CLAIM FILED BY EITHER PARTY, WHETHER IN
CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE APPLICATION,
THE LOAN, THE LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF MORTGAGEE IN CONNECTION
THEREWITH.
<PAGE>
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be executed
as of the day and year first above written.
Mortgagor:
USF&G/LEGG MASON REALTY
PARTNERS LIMITED PARTNERSHIP,
a Maryland limited partnership
By: USF&G Realty Partners, Inc., a
Maryland corporation, a general
partner
By:_____________________________
Name:_______________________
Title:______________________
<PAGE>
STATE OF )
) SS.
COUNTY OF )
I, , a Notary Public, in and for the County and State aforesaid, DO
HEREBY CERTIFY that __________________, _______________ of USF&G REALTY
PARTNERS, INC., a Maryland corporation, a general partner of USF&G/Legg Mason
Realty Partners Limited Partnership, a Maryland limited partnership, personally
known to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged to me that
he/she being thereunto duly authorized, signed and delivered said instrument as
the free and voluntary act of said corporation and as his/her own free and
voluntary act, for the uses and purposes set forth therein.
WITNESS my hand and notarial seal this _____ day of April, 1997.
_________________________
Notary Public
_________________________
Printed Name
I am a resident of ________________ County, ___________
[NOTARY SEAL]
My Commission expires:
THIS INSTRUMENT PREPARED BY
AND AFTER RECORDING RETURN TO:
Samuel B. Stempel, Esq.
Rudnick & Wolfe
203 North La Salle Street, Suite 1800
Chicago, Illinois 60601
<PAGE>
EXHIBIT A
(Property Description)
PARCEL I (FEE):
Part of the Northeast Quarter of the Southwest Quarter of Section 26, Township
17 North, Range 4 East in Marion County, Indiana, being more particularly
described as follows:
Commencing at the Northwest corner of said Quarter-Quarter Section; thence North
89 degrees 36 minutes 02 seconds East on and along the North line thereof a
distance of 338.58 feet to the Point of Beginning of the land described herein;
thence continuing North 89 degrees 36 minutes 02 seconds East on and along said
North line a distance of 568.00 feet; thence South 00 degrees 15 minutes 05
seconds East a distance of 410.05 feet; thence South 59 degrees 44 minutes 55
seconds West a distance of 101.61 feet; thence South 00 degrees 15 minutes 05
seconds East a distance of 299.37 feet; thence South 89 degrees 44 minutes 55
seconds West a distance of 480.00 feet; thence North 00 degrees 15 minutes 05
seconds West a distance of 187.50 feet; thence South 89 degrees 44 minutes 55
seconds West a distance of 340.85 feet to a point on the West line of said
Quarter-Quarter Section, said point being 570.40 feet South of the Northwest
corner thereof; thence North 00 degrees 01 minute 23 seconds West on and along
said West line a distance of 70.00 feet; thence North 89 degrees 44 minutes 55
seconds East a distance of 340.57 feet; thence North 00 degrees 15 minutes 05
seconds West a distance of 501.27 feet to the Point of Beginning.
PARCEL II (FEE);
A part of the Northeast Quarter of the Southwest Quarter of Section 26, Township
17 North, Range 4 East of the Second Principal Meridian in Marion County,
Indiana, more particularly described as follows:
Commencing at the Northwest corner of said Quarter Quarter Section; thence South
00 degrees 01 minute 23 seconds East along the West line of said Quarter Quarter
Section a distance of 570.40 feet; thence North 89 degrees 44 minutes 55 seconds
East 100.85 feet to the said point being a point on the Easterly Right-of-Way
line of Shadeland Avenue (S.R. 100) the Right-of-Way Grant of which is recorded
as Instrument No. 75-3285 in the Office of the Recorder of said County, said
point also being the Point of Beginning; thence continuing North 89 degrees 44
minutes 55 seconds East 240.00 feet; thence South 00 degrees 15 minutes 05
seconds East parallel with said Easterly Right-of-Way line 187.50 feet; thence
North 89 degrees 44 minutes 55 seconds East 76.90 feet; thence South 00 degrees
15 minutes 05 seconds East parallel with said Easterly Right-of-Way line 217.22
feet to the Northerly Right-of-Way line of Shadeland Station, the Right-of-Way
Grant of which is recorded as Instrument No. 82-29809 in the Office of the
Recorder of said County; thence
<PAGE>
South 89 degrees 36 minutes 02 seconds West along said Northerly Right-of-Way
line 316.90 feet to the Easterly Right-of-Way line of said Shadeland Avenue;
thence North 00 degrees 15 minutes 05 seconds West along said Easterly
Right-of-Way line 405.54 feet to the Point of Beginning.
PARCEL III:
A non-exclusive Driveway Easement dated February 28, 1991 and recorded November
25, 1991 as Instrument No. 91-121806.
<PAGE>
EXHIBIT B
(Personal Property Description)
All accounts, deposit accounts, certificates of deposit, money,
equipment, machinery, fixtures, goods, inventory, general intangibles,
documents, instruments and chattel paper, and all other personal property (as
said terms are defined in or encompassed by the Uniform Commercial Code of the
State of Indiana) of every kind and description, whether now existing or
hereafter acquired, now or at any time hereafter attached to, erected upon,
situated in or upon, forming a part of, appurtenant to, used or useful in the
construction or operation of or in connection with, or arising from the use or
enjoyment of all or any portion of, or from any lease or agreement pertaining
to, the Premises, including without limitation:
A. All income, rents, royalties, revenue, issues, profits, proceeds and
other benefits from any and all of the Premises;
B. All deposits made with or other security given to utility companies
by Mortgagor with respect to the Premises and the improvements thereon, and all
advance payments of insurance premiums made by Mortgagor with respect thereon,
and all advance payments of insurance premiums made by Mortgagor with respect
thereto and all claims or demands relating to such deposits, other security
and/or such insurance;
C. All fixtures now or hereafter affixed to the Premises, including all
buildings, structures and improvements of every kind and description now or
hereafter erected or placed thereon and any and all machinery, motors,
elevators, boilers, equipment (including, without limitation, all equipment for
the generation or distribution of air, water, heat, electricity, light, fuel or
refrigeration or for ventilating or air conditioning purposes or for sanitary or
drainage purposes or for the removal of dust, refuse or garbage), partitions,
appliances, stoves, ranges, vacuum cleaning systems, call systems, sprinkler
systems and other fire prevention and extinguishing apparatus and materials,
motors, machinery, pipes, fittings, furniture, furnishings, building service
equipment, building materials, supplies, ranges, refrigerators, cabinets,
laundry equipment, kitchen and restaurant equipment, computers and software,
radios, televisions, awnings, shades, blinds, drapes, curtains and drapery rods
and brackets, screens, carpeting, rugs and other floor coverings, lobby
furnishings, games and recreational and swimming pool equipment, incinerators,
incinerating and elevator plants and other property of every kind and
description now or hereafter placed, attached, affixed or installed in such
buildings, structures, or improvements (all of such fixtures being referred to
hereinafter as the "Improvements");
D. All damages, royalties and revenue of every kind, nature and
description whatsoever that Mortgagor may be entitled to receive, either before
or after any default hereunder, from any person or entity owing or having or
hereafter acquiring a right to the groundwater, oil, gas or mineral rights and
reservations of the Premises;
<PAGE>
E. All proceeds and claims arising on account of any damage to or
taking of the Premises or the Improvements thereon or any part thereof, and all
causes of action and recoveries for any loss or diminution in the value of the
Premises or the Improvements;
F. All licenses (including, but not limited to, any operating licenses
or similar licenses), contracts, management contracts or agreements, franchise
agreements, permits, authorities or certificates and all books and records
required or used in connection with the ownership of, or the operation or
maintenance of, the Improvements;
G. All governmental permits relating to construction, all names under
or by which the Premises or the Improvements may at any time be operated or
known, and all rights to carry on business under any such names or any variant
thereof, and all trademarks, trade names, patents pending and good will;
H. All water stock relating to the Premises, shares of stock or other
evidence of ownership of any part of the Premises that is owned by Mortgagor in
common with others, and all documents of membership in any owners' or members'
association or similar group having responsibility for managing or operating any
part of the Premises;
I. All plans and specifications prepared for construction of the
Improvements and all studies, data and drawing related thereto; and also all
contracts and agreements of Mortgagor relating to the aforesaid plans and
specifications or construction of the Improvements;
J. All sales agreements, deposit receipts, escrow agreements and other
ancillary documents and agreements entered into with respect to the sale to any
purchases of any part of the Premises or any buildings or structures on the
Premises, together with all deposits and other proceeds of the sale thereof; and
K. All escrow accounts and Mortgagor's interest in escrow accounts
including escrow accounts into which earnest money is deposited in connection
with the contemplated sale of houses.
All replacements, repairs and substitutions of, appurtenances, and
accessions and additions to, any of the foregoing.
All proceeds of any of the foregoing, including, without limitation,
proceeds of any voluntary or involuntary disposition or claim respected any item
thereof (pursuant to judgment, condemnation award or otherwise) and all goods,
documents, general intangibles, chattel paper and accounts, wherever located,
acquired with cash proceeds of any of the foregoing or proceeds thereof.
PROMISSORY NOTE MODIFICATION AGREEMENT
THIS PROMISSORY NOTE MODIFICATION AGREEMENT is made as of the 1st day
of September, 1997, by and between USF&G/LEGG MASON REALTY PARTNERS LIMITED
PARTNERSHIP, a Maryland limited partnership (the "Borrower") and USF&G REALTY
PARTNERS, INC., a Maryland corporation.
WHEREAS, by a promissory note dated August 23, 1995 (the "Note"), the
Borrower became indebted to the Lender in the original principal sum of
$3,500,000;
WHEREAS, the Note provides that the latest possible maturity date of
the Note was September 1, 1997;
WHEREAS, the parties desire to extend the latest possible Maturity Date
to October 2, 2000.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH:
That in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Lender and the Borrower covenant and agree as follows:
1. The Note is hereby amended by replacing "September 1, 1997"
with "October 2, 2000" in clause 3(e)(iv).
2. The terms, provisions and covenants of the Note are in all other
respects hereby ratified and confirmed and remain in full force and effect.
3. It is expressly agreed that the indebtedness evidenced by the Note
has not been extinguished or discharged hereby. The Borrower and the Lender
agree that the execution of this Agreement is not intended to and shall not
cause or result in a novation with regard to the Note.
WITNESS the signature and seals of the Borrower and the Lender the day
and year first above written.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Promissory Note Modification Agreement to be duly executed and delivered under
seal this ___ day of _______, 1997, effective as of September 1, 1997.
<PAGE>
BORROWER
WITNESS USF&G/LEGG MASON REALTY
PARTNERS LIMITED PARTNERSHIP,
a Maryland limited partnership
By: USF&G Realty Partners, Inc.,
a Maryland corporation, general partner
_______________________ By:___________________(SEAL)
Its:____________________
By: Legg Mason Realty Partners, Inc.,
a Maryland corporation, general partner
_______________________ By:___________________(SEAL)
Its:___________________
LENDER
USF&G REALTY PARTNERS, INC.
_______________________ By:________________________(SEAL)
RENEWAL
PROMISSORY NOTE
$8,500,000.00 September 29, 1997
FOR VALUE RECEIVED, the undersigned USF&G/LEGG MASON REALTY PARTNERS
LIMITED PARTNERSHIP ("Borrower"), a limited partnership organized and existing
under the laws of the State of Maryland, hereby promises to pay to the order of
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA ("Lender") the principal sum of
EIGHT MILLION FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($8,500,000.00), with
interest on the unpaid balance as set forth herein from the date hereof until
Maturity (as hereinafter defined) in accordance with the following:
1. Definitions. In addition to the other terms defined herein, for
purposes hereof:
(a) "Business Day" means, a day (other than a Saturday or Sunday) on
which Lender is open for business and which is also a London Business Day.
(b) "Business Day Convention" means that an adjustment shall be made
for any date that would otherwise fall on a day that is not a Business Day, so
that such date will be the next following Business Day, or if that day would
fall in the next calendar month, then that date will be the next preceding
Business Day.
(c) "LIBOR" shall mean the interest rate for deposits in United
States Dollars for a ninety (90) day maturity, which interest rate appears on
the Telerate Page 3750 of the Dow Jones Telerate Service at approximately 11:00
a.m. London time, two (2) London Business Days prior to the effective date of
the applicable Lock Period. If, for any reason, such rate is not available, then
"LIBOR " shall mean the rate at which, in the opinion of Lender, United States
dollar deposits in the amount of $5,000,000.00 are being offered by leading
reference banks to prime banks in the London interbank market at approximately
11:00 a.m. London time, two (2) London Business Days prior to the effective date
of the applicable Lock Period for a ninety (90) day maturity.
(d) "Lock Period" shall mean each successive three (3) month
period commencing on the date hereof and continuing to and including the
three (3) month period commencing on July 2, 2000.
(e) "London Business Day" means any day on which commercial banks
are open for business (including dealings in foreign exchange and foreign
currency deposits) in London, England.
<PAGE>
(f) "Note Rate" shall mean a rate (rounded upwards, if necessary, to
the next higher 1/100 of 1%) determined pursuant to the following formula:
Note Rate = LIBOR + 1.30 percent
The Note Rate shall be reset for each Lock Period two (2) London Business Days
prior to the effective date of each Lock Period.
2. Interest.
(a) Calculation of Interest. From the date hereof through Maturity,
the entire unpaid principal balance of this Note shall bear at the Note Rate,
calculated on a daily basis and based on a 360-day year and a 30-day month.
Interest shall accrue on the entire unpaid principal amount of this Note. The
LIBOR in effect as of two (2) business days prior to the date hereof is five
and seventy-two hundredths percent (5.72%) and therefore, the Note Rate for the
initial Lock Period is seven and two hundredths percent (7.02%) per annum.
(b) Indemnity. Borrower hereby indemnifies Lender against any
loss or expense which may arise or be attributable to Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any loan (i) as a consequence of any failure by Borrower to make any
payment when due of any amount due hereunder, or (ii) due to any payment or
prepayment of the Loan on a date other than as permitted hereunder. The amount
of such loss or expense shall be determined, in Lender's sole discretion, using
any reasonable attribution or averaging methods which Lender deems appropriate
and practical. Lender's calculations of any such loss or expense shall be
furnished to Borrower and shall be conclusively presumed to be correct save for
manifest error.
(c) Changed Circumstances.
(i) If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Lender with any
request or directive (whether or not having the force of law) of such
governmental authority, central bank or comparable agency:
(A) shall subject Lender to any tax, duty or other charge
with respect to this Note or shall change the basis of taxation of payments to
Lender of the principal of or interest on this Note or any other amounts due in
respect thereof (except for changes in the rate of tax on the overall net income
of Lender imposed by the jurisdiction in which Lender's principal executive
office or lending office is located); or
<PAGE>
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of Governors
of the Federal Reserve System), special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by Lender or
shall impose on Lender or the foreign exchange and interbank markets any other
condition affecting this Note;
and the result of any of the foregoing is to increase the cost to Lender of
maintaining any Note Rate or to reduce the amount of any sum received or
receivable by Lender under this Note in respect of interest at the Note Rate,
then Lender shall promptly notify Borrower of such fact and demand compensation
therefor and, within fifteen (15) days after such notice by Lender, Borrower
agrees to pay to Lender such additional amount or amounts as will compensate
Lender for such increased cost or reduction. Lender will promptly notify
Borrower of any event of which it has knowledge which will entitle Lender to
compensation pursuant to this subparagraph; provided, however, that Lender shall
incur no liability whatsoever to Borrower in the event it fails to do so. The
amount of such compensation shall be determined, in Lender's sole discretion,
using any reasonable attribution or averaging methods which Lender deems
appropriate and practical. A certificate of Lender setting forth the basis for
determining such additional amount or amounts necessary to compensate Lender
shall be conclusively presumed to be correct save for manifest error.
(ii) If, at any time (a) Lender shall determine that, by reason
of circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollar in the applicable amounts are not being offered to
Lender, or (b) the introduction of, or any change in, any applicable law or in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such governmental authority,
central bank or comparable agency, shall make it unlawful or impossible for
Lender to honor its obligations hereunder to make or maintain any Note Rate,
then Lender shall promptly give notice thereof to Borrower and then the entire
unpaid principal balance of this Note, together with all interest accrued
thereon, and any and all other sums secured by the Security Instrument, shall,
without notice, become immediately due and payable at the option of Lender.
3. Regular Payments. Principal and interest hereunder shall be payable
as follows:
(a) All accrued and unpaid interest shall be due and payable
monthly in arrears on the second (2nd) day of each month, commencing on
November 2, 1997, and continuing on the same day of each month thereafter, to
and including the Maturity Date (as hereinafter defined). The date each payment
is due and payable is hereinafter sometimes referred to as the "Monthly Due
Date".
(b) In addition to the interest payments described in section 3(a)
above, monthly installments of principal shall be due and payable commencing on
November 2, 1999, and continuing on the same day of each month thereafter, to
and including the Maturity Date. The amount of such monthly installments of
principal shall be calculated based on an amortization of the outstanding
principal balance of this Note as of October 2, 1999, over a period of 360
months and utilizing the Note Rate which will be in effect as of
October 2, 1999.
<PAGE>
(c) In any event, the entire unpaid balance of principal and accrued
interest shall be due and payable on October 2, 2000 (the "Maturity Date").
"Maturity" shall mean the Maturity Date or such earlier date as the entire
principal balance of the Note may be due and payable by acceleration by Lender
as hereinafter provided.
For any partial month, interest payments due under this Note shall be computed
hereunder with respect to each day during those periods by multiplying the
unpaid principal balance at the close of business on each day (or on the most
recent day that Lender was open for business) by a daily interest factor, which
daily interest factor shall be calculated by dividing the Note Rate by 360 and
shall be based on a 30-day month. Interest so computed shall accrue for each and
every day during any partial month on which any indebtedness remains outstanding
hereunder and including the day on which funds are repaid. Payments in federal
funds immediately available in the place designated by Lender for payment
received prior to 2:00 p.m. local time at said designated place of payment shall
be credited prior to close of business, while other payments may, at the option
of Lender, not be credited until immediately available to Lender in federal
funds in the place designated for payment prior to 2:00 p.m. local time on a day
on which Lender is open for business.
4. Late Payment and Default Interest Provisions
(a) Late Charge. If (i) any monthly interest payment or
monthly principal and interest payment is not paid in full on or before the
Monthly Due Date for such payment or (ii) any other payment due under this Note,
whether principal, interest, prepayment premium or otherwise, is not paid in
full on or before the due date of such payment, then a per diem late charge of
in an amount equal to two percent (2%) of the quotient obtained by dividing (x)
the monthly payment due on such Monthly Due Date by (y) thirty (30) (the "Per
Diem Late Charge") shall be assessed for each day that such payment is not paid
from (and including) the first day after such Monthly Due Date or the due date
of such payment to (and including) the date upon which such payment is made;
provided, however, that if any such monthly interest payment, monthly principal
and interest payment, prepayment premium, or any other payment due under this
Note, together with all accrued Per Diem Late Charges, is not paid in full on or
before the fifteenth day immediately following such Monthly Due Date or the due
date of such payment, then a late charge equal to four percent (4%) of the
monthly interest payment, the monthly principal and interest payment, prepayment
premium, or other payment due under this Note (the "Late Charge") shall be
deemed to be immediately assessed and shall be immediately due and payable. The
Late Charge shall be payable in lieu of and not in addition to any Per Diem Late
Charges that shall have accrued during the two-week period immediately preceding
the assessment of the Late Charge. The Late Charge may be assessed only once on
each overdue payment. Borrower acknowledges that the Per Diem Late Charges or
the Late Charge is a reasonable estimate of and is directly related to the
actual damages suffered by Lender in the event of a late payment. The Per Diem
Late Charge and Late Charge shall be in addition to all other rights and
remedies available to the holder of this Note upon the occurrence of a default
under the Security Instrument.
<PAGE>
(b) Acceleration. If any payment due under this Note is not made
when due (provided, however, that Lender shall provide written notice to
Borrower, in accordance with the notice provisions of the Security Instrument,
of Borrower's failure to pay any installment of principal and/or interest due on
this Note as above promised a maximum of one (1) time in any twelve (12) month
period in which event Maker shall have five (5) days from the delivery of such
notice to pay such amount), or upon the occurrence of any Event of Default (as
defined in the Security Instrument) under any Loan Document (as defined in the
Security Instrument), Lender may, at its option and without further notice to
Borrower, declare the entire unpaid balance of this Note immediately due and
payable in full. Upon Maturity by such acceleration, the prepayment premium
hereafter provided for shall be due and payable. The notice provided for herein
is identical to that provided for in the Security Instrument (as hereinafter
defined), and any notice given by Lender as set forth herein shall
simultaneously satisfy the notice requirements of this Note and the Security
Instrument (as hereinafter defined). Notwithstanding the foregoing, Lender shall
not be required to provide notice and opportunity to cure with respect to the
final payment due hereunder.
(c) Default Rate. Upon Maturity, whether by any such acceleration
(whether due to a voluntary or involuntary default) or otherwise, the unpaid
principal balance of this Note shall bear interest at the Default Rate. The
"Default Rate" to be charged on all due and unpaid sums for all purposes under
the Loan Documents (as defined in the Security Instrument) shall be the lesser
of (i) the maximum rate allowed by the law or (ii) the rate which is the greater
of (A) a per annum rate equal to five percent (5%) over the Note Rate or (B) a
per annum rate equal to five percent (5%) over the prime rate (for corporate
loans at large United States money center commercial banks) published in the
Wall Street Journal on the first business day of each month in which such
Maturity (whether by acceleration or otherwise) occurs or continues. Interest at
the Default Rate shall also commence automatically upon any acceleration of the
Loan. The payment of interest at the Default Rate shall not be required to the
extent that the amount thereof, when taken together with all other interest
payable hereunder, including without limitation any Per Diem Late Charge or Late
Charge, exceeds the maximum interest rate permitted to be charged by applicable
law, and if such payment has been made at the time it is determined that such
excess exists, Lender shall, at its option, either return such excess to
Borrower or credit such excess against the principal balance of this Note then
outstanding and any portion of such excess payments not capable of being so
credited shall be returned to Borrower, in which event any and all penalties of
any kind under applicable law as a result of such excess interest shall be
inapplicable. The charging of interest at the Default Rate shall be in addition
to all other rights and remedies available to the holder of this Note upon the
occurrence of a default under the Security Instrument.
<PAGE>
5. Application of Payments. Prior to the occurrence of an Event of
Default hereunder, the order of application of all payments received from
Borrower shall be as follows: (a) to unpaid late charges and costs of
collection; (b) to the prepayment premium due if any; (c) to interest on the
unpaid balance hereof; and (d) the balance to unpaid principal. After an Event
of Default hereunder, Lender shall have the option of applying any payments
received to principal or interest or any other amount due under the Loan
Documents.
6. Prepayment. This Note may be prepaid, in whole or in part, upon the
giving of not less than thirty (30) days' prior written notice of intention to
do so to Lender without penalty or premium on the last day of any Lock Period
only. This Note may not otherwise be prepaid, except for prepayments made as a
result of casualty or condemnation in accordance with the provisions of the
Security Instrument.
7. No Usury. Under no circumstances shall the aggregate amount paid or
agreed to be paid as interest hereunder exceed the highest lawful rate permitted
under applicable usury law (the "Maximum Rate") and the payment obligations of
Borrower under this Note are hereby limited accordingly. If under any
circumstances, whether by reason of advancement or acceleration of the unpaid
principal balance hereof or otherwise, the aggregate amounts paid on this Note
shall include amounts which by law are deemed interest and which would exceed
the Maximum Rate, Borrower stipulates that payment and collection of such excess
amounts shall have been and will be deemed to have been the result of a mistake
on the part of both Borrower and Lender, and Lender shall promptly credit such
excess (to the extent only of such interest payments in excess of the Maximum
Rate) against the unpaid principal balance hereof, and any portion of such
excess payments not capable of being so credited shall be refunded to Borrower.
8. Security. This Note is the Note referred to in the Amended and
Restated Mortgage and Security Agreement of even date herewith between Borrower
and Lender (the "Security Instrument"), and is secured by the Security
Instrument and entitled to the benefits and security thereof. Reference is made
to the Security Instrument for descriptions of the properties subject thereto
and the respective rights and obligations of Borrower and Lender thereunder.
9. Making of Payments. All payments of principal, prepayment premium,
if any, and interest hereunder are payable in lawful money of the United States
of America at the office of Lender or at such other place and in such manner as
Lender may specify by notice to Borrower. If the date for any payment hereunder
falls on a day which is not a Business Day, then for all purposes hereof the
same shall be deemed to have fallen on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest hereunder.
10. Limited Recourse Liability. Except to the extent set forth in this
Paragraph 10 and Paragraph 11 of this Note, neither the Borrower nor any general
partner(s) of Borrower (singularly or collectively, the "Exculpated Parties")
shall have any personal liability for any of the sums due under this Note, the
Obligations (as defined in the Security Instrument), or any obligations set
<PAGE>
forth in the Loan Documents (as defined in the Security Instrument)
(collectively, the "Loan"). Notwithstanding the preceding sentence, Lender may
bring a foreclosure action or other appropriate action to enforce the Loan
Documents or realize upon and protect the Collateral (as defined in the Security
Instrument)(including, without limitation, naming the Exculpated Parties in the
actions) and in addition THE EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY
FOR:
(a) any indemnity, guaranty (if any), master lease or similar
instrument furnished in connection with the Loan (including, without limitation,
the provisions of Section 3.11 and Section 3.12 of the Security Instrument);
(b) any assessments and taxes (accrued and/or payable) with respect to
the Collateral;
(c) any security deposits of tenants (i) not turned over to Lender
upon foreclosure, sale (pursuant to power of sale), or conveyance in lieu
thereof, or (ii) not turned over to a receiver or trustee for the Collateral
after his/her appointment;
(d) any insurance proceeds or condemnation awards neither turned over
to Lender nor used in compliance with Section 3.07 of the Security Instrument;
(e) [INTENTIONALLY OMITTED];
(f) waste of the Collateral;
(g) any rents or other income from the Collateral received by any of
the Exculpated Parties after a default under the Loan Documents and not
otherwise applied to the indebtedness evidenced by this Note or to the current
(not deferred) operating expenses of the Collateral; PROVIDED, HOWEVER, THAT THE
EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for amounts paid as expenses to
a person or entity related to or affiliated with any of the Exculpated Parties
unless the payments are expressly permitted in the Loan Documents;
(h) Borrower's failure to maintain any letter of credit required (if
any is required) under the Loan Documents or otherwise in connection with the
Loan; or
(i) all legal fees, including the allocated costs of Lender's staff
attorneys, and other expenses incurred by Lender in enforcing the Loan Documents
if Borrower contests, delays, or otherwise hinders or opposes (including,
without limitation, the filing of a bankruptcy) any of Lender's enforcement
actions.
11. Full Recourse Liability. Notwithstanding the provisions of
Paragraph 10 of this Note, the EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY
for all sums due under this Note, the Obligations, and all obligations set forth
in the Loan Documents if:
<PAGE>
(a) there shall be any breach or violation of Article V of the
Security Instrument; or
(b) there shall be any fraud or material misrepresentation by any of
the Exculpated Parties in connection with the Collateral, the Loan Documents,
the Loan Application, or any other aspect of the Loan; or
(c) the Collateral or any part thereof shall become an asset in (i) a
voluntary bankruptcy or insolvency proceeding or (ii) an involuntary bankruptcy
or insolvency proceeding which is not dismissed within ninety (90) days of
filing; provided, however, that this Paragraph 11(c) shall not apply if an
involuntary bankruptcy is filed by Lender.
12. Miscellaneous.
(a) Borrower and all other parties liable hereon, whether as
principal, endorser or otherwise, hereby severally waivepresentment, demand for
payment, protest and notice of dishonor and waive recourse to suretyship
defenses generally, including extensions of time, release of security or other
party liable hereon, and also agree to pay all costs of collection, including
reasonable attorneys' fees incurred by Lender in connection with enforcement of
any of Lender's rights hereunder or under the Security Instrument including
without limitation attorneys fees and costs incurred in connection with any
bankruptcy filing by Borrower.
(b) Any forbearance by Lender in exercising any right or remedy
hereunder or any other Loan Document (as defined in the Security Instrument), or
otherwise afforded by applicable law, shall not be a waiver or preclude the
exercise of any right or remedy by Lender. The acceptance by Lender of payment
of any sum payable hereunder after the due date of such payment shall not be a
waiver of the right of Lender to require prompt payment when due of all other
sums payable hereunder or to declare a default for failure to make prompt
payment.
(c) This Note may not be changed, modified or terminated except
in writing signed by the party to be charged.
(d) This Note shall be governed by and construed in accordance
with the laws of the State of Florida; provided, however, that nothing herein
shall limit or impair any right Lender shall have under applicable laws of the
United States of America, to the extent they supersede the laws of the State of
Florida, to charge interest on the sums evidenced hereby at a rate which exceeds
the maximum rate of interest permitted under the laws of the State of Florida.
(e) If any term of this Note, or the applications hereof to any
person or set of circumstances, shall to any extent be invalid, illegal, or
unenforceable, the remainder of this Note, or the application of such provision
or part thereof to persons or circumstances other than those as to which it is
invalid, illegal, or unenforceable, shall not be affected thereby, and each term
of this Note shall be valid and enforceable to the fullest extent consistent
<PAGE>
with applicable law and this Note shall be interpreted and construed as though
such invalid, illegal, or unenforceable term or provision (or any portion
thereof) were not contained in this Note.
(f) This Note shall be the joint and several obligation of all
makers, endorsers, guarantors and sureties, and shall be binding upon them and
their respective successors and assigns and shall inure to the benefit of Lender
and its successors and assigns. The term "Lender" shall mean the holder of this
Note at the time in question.
(g) All notices under this Note shall be given as provided in the
Security Instrument.
(h) It is expressly agreed that time is of the essence with
respect to this Note.
(i) Under this Note, and the other Loan Documents, Lender's right
to attorneys' fees shall be based upon the actual time involved at the
attorney's customary hourly rates as opposed to any statutory presumption that
may then be in effect in Florida.
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 FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, THE SECURITY
INSTRUMENT, THE LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF LENDER IN CONNECTION
THEREWITH.
THIS RENEWAL PROMISSORY NOTE RENEWS AND RESTATES IN ITS ENTIRETY THAT
CERTAIN NOTE DATED JUNE 28, 1990, EXECUTED BY BORROWER IN FAVOR OF FIDELITY AND
GUARANTY LIFE INSURANCE COMPANY ("FIDELITY") IN THE ORIGINAL PRINCIPAL AMOUNT OF
$8,500,000.00, AS TRANSFERRED BY A CERTAIN ALLONGE TO NOTE DATED AUGUST 14,
1990, AND DELIVERED TO ALLSTATE LIFE INSURANCE COMPANY ("ALLSTATE"), AS AMENDED
BY CONSOLIDATION AND RENEWAL NOTE EXECUTED BY BORROWER IN FAVOR OF ALLSTATE
DATED EFFECTIVE AS OF AUGUST 14, 1990, AS ASSIGNED TO LENDER EFFECTIVE AS OF THE
DATE HEREOF (ALL OF THE FOREGOING HEREINAFTER REFERRED TO AS THE "ORIGINAL
NOTE"). THE ORIGINAL NOTE IS PHYSICALLY ATTACHED HERETO. ALL DOCUMENTARY STAMP
TAXES DUE ON THE ORIGINAL NOTE HAVE BEEN PAID IN FULL. THIS RENEWAL PROMISSORY
NOTE DOES NOT ENLARGE THE OBLIGATIONS OF THE BORROWER UNDER THE ORIGINAL NOTE
AND DOES NOT EXTINGUISH THE OBLIGATION EVIDENCED THEREBY, BUT MERELY AMENDS AND
RESTATES THE SAME. ACCORDINGLY, NO DOCUMENTARY STAMP TAX IS DUE AND OWING IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF THIS RENEWAL PROMISSORY NOTE.
<PAGE>
IN WITNESS WHEREOF, this Note has been executed under seal as of the
date first set forth above.
BORROWER:
USF&G/LEGG MASON REALTY
PARTNERS LIMITED PARTNERSHIP,
a Maryland limited partnership
By: USF&G Realty Partners, Inc.,
a Maryland corporation,
General Partner
By:______________________________
Name:_____________________
Title:____________________
Attest:__________________________
Name:_____________________
Title:____________________
[CORPORATE SEAL]
Documentary stamp taxes in the
amount of $0.00 have been affixed
to the Amended and Restated Mortgage
and Security Agreement securing this
Note.
PREPARED BY AND
WHEN RECORDED MAIL TO:
Glass, McCullough, Sherrill & Harrold, LLP 1409 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Paul P. Mattingly, Esq.
AMENDED AND RESTATED
MORTGAGE AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT (this
"Instrument"), made this ____ day of September, 1997, by USF&G/LEGG MASON REALTY
PARTNERS LIMITED PARTNERSHIP, a Maryland limited partnership, having its
principal office and place of business at c/o USF&G, 6225 Smith Avenue,
Baltimore, Maryland 21209 ("Debtor"), to THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey corporation, having its principal office at Prudential
Plaza, 751 Broad Street, Newark, New Jersey 07102 ("Secured Party").
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS AND SECURES
OBLIGATIONS CONTAINING PROVISIONS FOR CHANGES IN INTEREST RATES, EXTENSIONS OF
TIME FOR PAYMENT, AND OTHER MODIFICATIONS IN THE TERMS OF THE OBLIGATIONS.
PORTIONS OF THE COLLATERAL ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED
TO OR FIXTURES ON THE LAND DESCRIBED IN EXHIBIT A HERETO.
THE COLLATERAL SECURES INDEBTEDNESS EVIDENCED BY THE NOTE SECURED
HEREUNDER IN THE ORIGINAL PRINCIPAL AMOUNT OF EIGHT MILLION FIVE HUNDRED
THOUSAND AND NO/100THS DOLLARS ($8,500,000.00).
NOTE TO CLERK: THIS AMENDED AND RESTATED MORTGAGE RENEWS, RESTATES, AND AMENDS
THAT CERTAIN FLORIDA MORTGAGE AND SECURITY AGREEMENT DATED JUNE 28, 1990,
RECORDED IN OFFICIAL RECORDS BOOK 4196, PAGE 3906, OF THE PUBLIC RECORDS OF
ORANGE COUNTY, FLORIDA (THE "PUBLIC RECORDS") AS AMENDED BY ASSIGNMENT OF
MORTGAGE AND LOAN DOCUMENTS DATED AUGUST 14, 1990, RECORDED IN OFFICIAL RECORDS
BOOK 4208, PAGE 3009 OF THE PUBLIC RECORDS, AS FURTHER MODIFIED BY A PROMISSORY
NOTE AND MORTGAGE RENEWAL AND MODIFICATION AGREEMENT DATED AUGUST 14, 1990,
RECORDED IN OFFICIAL RECORDS BOOK 4208, PAGE 3014, OF THE PUBLIC RECORDS
(COLLECTIVELY THE "ORIGINAL MORTGAGE"), TO THE EXTENT OF THE CURRENT UNPAID
BALANCE OF THE INDEBTEDNESS SECURED BY THE ORIGINAL MORTGAGE IN THE AMOUNT OF
$8,500,000.00. ACCORDINGLY, PURSUANT TO SECTIONS 199.145 AND 201.09, FLORIDA
STATUTES, NO DOCUMENTARY STAMP TAX AND NON-RECURRING INTANGIBLE TAX IS DUE IN
CONNECTION HEREWITH.
<PAGE>
RECITALS:
1. Debtor, by its renewal promissory note of even date herewith
("Note"), is indebted to Secured Party in the principal sum of EIGHT MILLION
FIVE HUNDRED THOUSAND AND NO/100THS DOLLARS ($8,500,000.00) in lawful money of
the United States of America, with interest from the date thereof at the rates
set forth in the Note, principal and interest to be payable in accordance with
the terms and conditions provided in the Note, the final payment of which, if
not sooner paid, is due and payable not later than October 2, 2000. The Renewal
Promissory Note of even date herewith made by Debtor in favor of Secured Party,
in the principal amount of $8,500,000.00 (the "Renewal Note")renews that certain
Consolidation and Renewal Note dated August 14, 1990 (the "Allstate Note"), made
by Debtor in favor of Allstate Life Insurance Company in the principal amount of
$8,500,000.00 as amended and assigned. As per the legend at the beginning of
this Instrument, documentary stamp tax and non-recurring intangible tax was
previously paid with respect to the indebtedness evidenced by the Allstate Note.
2. Debtor desires to secure the payment of and the performance of all
of its obligations under the Note and certain additional Obligations (as
defined in Section 1.01).
IN CONSIDERATION of the principal sum of the Note, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby:
A. Grants, bargains, sells, assigns, transfers, pledges,
mortgages, warrants, and conveys to Secured Party, and grants Secured Party a
security interest in, all of Debtor's right, title, and interest in the
following property (collectively, the "Collateral"), upon the terms and
conditions hereof and WITH POWER OF SALE pursuant to this Instrument and
applicable law:
(i) That certain tract or parcel of land of which Debtor is
now seized and in possession, situated in Orange County, Florida, and more fully
described in Exhibit A attached hereto and by this reference incorporated herein
("Premises");
(ii) Any and all buildings, constructions, and improvements
now or hereafter erected or located in or on the Premises, including, but not
limited to, all fixtures, attachments, appliances, equipment, machinery, and
other articles now owned by Debtor or hereafter acquired by Debtor and attached
or affixed thereto or located thereon (except the personalty owned by tenants)
(collectively, the "Improvements"), together with all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, all of which shall be deemed and construed to be part of the realty;
(iii) All right, title, and interest of Debtor in and to all
items incorporated as part of or attributed or affixed to any of the Premises,
Improvements, or other real property included in the Collateral or any other
interest of Debtor, whether now owned or hereafter acquired, in, to or relating
to the Premises, Improvements, or such other real property, in such manner that
such items are no longer personal property under the laws of the State of
Florida;
<PAGE>
(iv) All easements, rights-of-way, and rights now owned or
hereafter acquired by Debtor and used or usable in connection with the Premises
and the Improvements, or as a means of access thereto, including, without
limiting the generality of the foregoing, all rights pursuant to any trackage
agreement, all rights to the non-exclusive use of common drive entries, all
water and water rights, and all mineral, mining, oil, and gas rights and rights
to produce or share in the production of anything related thereto, together with
all tenements, hereditaments, and appurtenances thereof and thereto;
(v) All right, title, and interest now owned or hereafter
acquired by Debtor in and to any land lying within the right-of-way of any
street, open or proposed, adjoining the Premises, and any and all sidewalks,
alleys, and strips and gores of land adjacent to or used in connection with the
Premises or the Improvements;
(vi) All right, title, and interest of Debtor in, to, and
under all plans, specifications, maps, surveys, studies, reports, permits,
licenses, architectural, engineering and construction contracts, books of
account, insurance policies, and other documents, of whatever kind or character,
relating to the use, construction upon, occupancy, leasing, sale, or operation
of the Premises and/or the Improvements;
(vii) All of the fixtures and personal property described in
Exhibit B attached hereto and by this reference incorporated herein, now owned
or hereafter acquired by Debtor, and all appurtenances and additions thereto and
betterments, renewals, substitutions and replacements thereof; and, if the lien
and security interest granted by this Instrument is subject to any security
interest in said personal property, all right, title, and interest of Debtor,
now or hereafter arising, in and to any and all said property is hereby assigned
to Secured Party, together with the benefits of all deposits and payments now or
hereafter made thereon by or on behalf of Debtor; excluding, however, all
personal property owned by tenants of the Improvements;
(viii) All interests, estates, or other claims or demands in
law and in equity which Debtor now has or may hereafter acquire in the
Collateral;
(ix) All right, title, and interest now owned or hereafter
acquired by Debtor in and to all options to purchase or lease the Premises, the
Improvements or any other Collateral, or any portion thereof or interest
therein, and in and to any greater estate in the Premises, the Improvements, or
any other Collateral; and
(x) All of the estate, interest, right, title, other claim, or
demand, both in law and in equity, including claims or demands with respect to
the proceeds of insurance relating thereto, which Debtor now has or may
hereafter acquire in the Premises, the Improvements or any other Collateral, or
any portion thereof or interest therein, and any and all awards made for the
taking by eminent domain, or by any proceeding or purchase in lieu thereof, of
the whole or any part of the Collateral, including, without limitation, any
award resulting from a change of any streets (whether as to grade, access, or
otherwise) and any award for severance damages; and
B. Assigns, sets over, and transfers to Secured Party:
(i) All leasehold estates, right, title, and interest of
Debtor in and to all ground leases, leases, or subleases covering the Premises,
the Improvements, or any portion thereof, now or hereafter existing or entered
into (collectively, "Leases"), and all right, title, and interest of Debtor
thereunder, including, without limitation, all guaranties thereof, all cash or
security deposits, advance rentals, and all deposits or payments of similar
nature; and
<PAGE>
(ii) All rents, proceeds, issues, profits, royalties, income,
and other benefits derived from the Premises or the Improvements or any other
portion of the Collateral (collectively, the "Rents").
TO HAVE AND TO HOLD the Collateral unto the Secured Party and
its successors and assigns forever, subject to the matters described in Exhibit
C attached hereto and by this reference incorporated herein ("Permitted
Encumbrances"), and to all of the terms, conditions, covenants, and agreements
herein set forth, for the security and benefit of Secured Party, and its
successors and assigns, as holders of the Note or any other Obligations.
IN FURTHERANCE OF THE FOREGOING, Debtor hereby warrants,
represents, covenants, and agrees as follows:
ARTICLE I
OBLIGATIONS
Section 1.01 Obligations. This Instrument is executed,
acknowledged, and delivered by Debtor to secure and enforce the following
obligations (collectively, the "Obligations"):
(a) Payment of and performance of all obligations of Debtor under
the Note;
(b) Performance of every obligation, covenant, and agreement of
Debtor arising under or in connection with this Instrument and all other Loan
Documents (as defined in Section 1.02 hereof);
(c) Payment of all sums advanced pursuant to the terms of this
Instrument to protect and preserve the Collateral and the lien and security
interest hereby created therein;
(d) Payment of all sums advanced and costs and expenses incurred
by Secured Party in connection with the Obligations, or any part thereof, any
renewal, extension or change of or substitution for the Obligations or any part
thereof, or the acquisition or perfection of the security therefor, whether made
or incurred at the request of Debtor or Secured Party;
(e) Payment of all other indebtedness and liabilities
and performance of all other obligations of Debtor to Secured Party arising
pursuant to or in connection with this Instrument or any other Loan Document;
and
(f) All renewals, extensions, amendments, modifications,
consolidations, and changes of, or substitutions or replacements for, all or any
part of the items described under clauses (a) through (e) above.
Section 1.02 Loan Documents. This Instrument, the Note, and any
other deed to secure debt, deed of trust, mortgage, collateral mortgage, pledge,
security deed, security agreement, guaranty, or other agreement or instrument
now or hereafter given to evidence or further secure the payment and performance
of any of the Obligations, are herein referred to collectively as the "Loan
Documents."
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Debtor hereby represents and warrants to Secured Party as follows:
Section 2.01 Title. (i) Debtor is seised of the Premises and
Improvements in fee, and has good, marketable, and insurable title to the
Collateral, free and clear of all liens, charges, encumbrances, and security
interests whatsoever, except Permitted Encumbrances; (ii) Debtor has full power
and authority to grant this Instrument; and (iii) Debtor will forever warrant
and defend its title to the Collateral, and the validity, enforceability, and
priority of the lien and security interest created hereby, against the claims of
all persons.
Section 2.02 Legal Status and Authority. Debtor is a limited
partnership duly organized, validly existing, and in good standing under the
laws of its state of organization or incorporation; and is duly qualified to
transact business and is in good standing in the State of Florida; and has all
necessary approvals, governmental and otherwise, and full power and authority to
own its properties (including the Collateral) and carry on its business as now
conducted and proposed to be conducted.
Section 2.03 Validity of Loan Documents.
(a) The execution, delivery, and performance of the Loan Documents and
the borrowing evidenced by the Note (i) are within the corporate/partnership
power of Debtor; (ii) have been authorized by all requisite
corporate/partnership action; (iii) have received all necessary approvals and
consents, corporate, governmental, or otherwise; (iv) 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, any order or judgment of any court
or governmental authority, the articles of incorporation, bylaws, partnership or
trust agreement, or other governing instrument of Debtor, or any indenture,
agreement, or other instrument to which Debtor is a party or by which it or any
of its 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 properties or assets, except the lien and security interest created
hereby; and (vi) 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 of Florida and except for
Uniform Commercial Code filings relating to the security interest created
hereby).
(b) The Loan Documents constitute legal, valid, and binding
obligations of Debtor.
Section 2.04 Litigation. There is no action, suit, or proceeding,
judicial, administrative, or otherwise (including any condemnation or similar
proceeding), pending or, to the best knowledge of Debtor, threatened or
contemplated against, or affecting, Debtor or the Collateral.
<PAGE>
Section 2.05 Status of Collateral.
(a) The Premises and Improvements are not 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, as amended, or any
successor law, or, if located within any such area, Debtor has obtained and will
maintain the insurance prescribed in Section 3.06 hereof.
(b) Debtor has all necessary certificates, licenses, and other
approvals, governmental and otherwise, necessary for the operation of the
Premises and Improvements and the conduct of its business thereat, 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 not subject to revocation, suspension, forfeiture, or modification.
(c) The Premises and Improvements, and the present and contemplated use
and occupancy thereof, are in full compliance with all applicable zoning
ordinances, building codes, land use, and environmental laws and other similar
laws.
(d) To Debtor's actual knowledge neither Debtor nor, to Debtor's best
knowledge, any tenant of the Premises or the Improvements, or any other person,
has stored or discharged on the Premises or the Improvements, whether with or
without a permit, any hazardous or toxic wastes or substances.
(e) The Premises and Improvements are served by all utilities required
for the contemplated use thereof.
(f) All public roads and streets necessary to serve the Premises and
Improvements for the contemplated use thereof have been completed, are
serviceable, and have been dedicated to and formally accepted by the appropriate
governmental entities.
(g) The Collateral is free from damage caused by fire or other
casualty.
(h) 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, except as otherwise contemplated by the Permitted Encumbrances.
(i) Debtor 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 Premises, free and clear of any and all security interests,
liens, or encumbrances, except the Permitted Encumbrances and the lien and
security interest created hereby.
Section 2.06 Tax Status of Debtor. Debtor is not a "foreign
person" within the meaning of Sections 1445 and 7701 of the Internal Revenue
Code of 1986 and the regulations promulgated thereunder.
Section 2.07 Bankruptcy. No bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceeding, or any other proceeding for the relief of
debtors, has been instituted by or against Debtor or, if Debtor is a
partnership, any general partner of Debtor.
<PAGE>
ARTICLE III
COVENANTS AND AGREEMENTS
Debtor covenants and agrees with Secured Party as follows:
Section 3.01 Payment of Obligations. Debtor shall pay when due and
shall perform the Obligations.
Section 3.02 Continuation of Existence. Debtor shall maintain in
good standing its existence, franchises, rights, and privileges under the laws
of the State of Maryland and its right to transact business in the State of
Florida, and shall not (i) without Secured Party's prior written consent
dissolve, terminate, or otherwise dispose of, directly or indirectly or by
operation of law, all or substantially all of its assets; (ii) reorganize or
change its legal structure without the prior written consent of Secured Party;
or (iii) without Secured Party's prior written consent change its name, the
address of its principal offices, or the name under which Debtor conducts its
business without promptly notifying Secured Party of such change.
Section 3.03 Taxes, Liens, and Other Charges.
(a) Debtor shall pay when due all taxes, liens, assessments, dues,
fines, impositions, and public charges, general and special, ordinary and
extraordinary, of every character (including penalties and interest), now or
hereafter levied or assessed upon or against the Collateral ("Assessments"), and
shall provide Secured Party, within thirty (30) days after the due date of any
such Imposition, with receipts evidencing such payments. Debtor shall also pay
(i) all income, franchise, and other taxes and governmental charges levied,
assessed, or imposed by the United States of America, or any state, any
political subdivision thereof, or any other taxing authority upon Debtor or in
respect of any of the Collateral which, if unpaid, would become a lien or charge
upon the Collateral, or any part thereof; and (ii) all charges made by utility
companies, public or private, for services furnished or used in connection with
the Collateral (together with the Assessments, collectively, "Impositions").
(b) Debtor shall have the right before any delinquency occurs to
contest or object to the amount or validity of any such Imposition by
appropriate legal proceedings, but this right shall not be deemed or construed
in any way as relieving, modifying, or extending Debtor's covenant to pay any
such Imposition at the time and in the manner provided herein unless (A) Debtor
has given prior written notice to Secured Party of Debtor's intent to so contest
or object to an Imposition; and (B) upon Secured Party's written director to
Debtor, Debtor shall demonstrate to Secured Party's reasonable satisfaction that
the legal proceedings shall conclusively operate to prevent the sale of the
Collateral, or any part thereof, to satisfy such Imposition prior to final
determination of such proceedings; and (C) either (i) Debtor shall demonstrate
to Secured Party's reasonable satisfaction that Debtor has provided a good and
sufficient undertaking as may be required or permitted by law to accomplish a
stay of any such sale, or (ii) Debtor shall furnish a good and sufficient bond
or surety as requested by, and in form and amount satisfactory to, Secured
Party.
<PAGE>
(c) Debtor shall pay all taxes (excluding income, franchise, and
doing business taxes), assessments, charges, expenses, costs, and fees
(including registration and recording fees) levied on, or assessed against
Secured Party, or incurred in connection with any of the Loan Documents. Debtor
shall also pay all stamp and other similar taxes required to be paid in
connection with the Obligations.
(d) In the event of the enactment of or change (including a change in
interpretation) of any applicable law, in any manner changing or modifying the
laws governing (i) the taxation of mortgages or other security instruments or
the debts secured thereby; (ii) the manner of collecting such taxes; or (iii)
reserve or special deposit requirements in respect of loans or other assets held
by Secured Party, so as to adversely affect Secured Party, this Instrument, or
any other Loan Document or the indebtedness secured hereby, Debtor shall
promptly pay any such tax and otherwise compensate Secured Party to the extent
of such detriment; provided, however, that if Debtor fails to make such payment
or any such law prohibits Debtor from making such payment or would penalize
Secured Party in the event of such payment, then the entire principal balance of
the Obligations, together with all interest accrued thereon, and any and all
other sums secured by this Instrument, shall, without notice, become immediately
due and payable at the option of Secured Party.
Section 3.04 Defense of Title and Litigation. If the lien or
security interest created by this Instrument, or the validity, enforceability,
or priority thereof or of this Instrument, or if title or any of the rights of
Debtor or Secured Party in or to the Collateral, shall be endangered or
questioned, or shall be attacked directly or indirectly, or if any action or
proceeding is instituted against Debtor or Secured Party with respect thereto,
Debtor will promptly notify Secured Party thereof and will diligently endeavor
to cure any defect which may be developed or claimed, and will take all
necessary and proper steps for the defense of such action or proceeding,
including the employment of counsel, the prosecution or defense of litigation,
and, subject to Secured Party's approval, the compromise, release, or discharge
of any and all adverse claims. Secured Party (whether or not named as a party to
such actions or proceedings) is hereby authorized and empowered (but shall not
be obligated) to take such additional steps as it may deem necessary or proper
for the defense of any such action or proceeding or the protection of the lien,
security interest, validity, enforceability, or priority of this Instrument, or
of such title or rights, including the employment of counsel, the prosecution or
defense of litigation, the compromise, release, or discharge of such adverse
claims, the purchase of any tax title, and the removal of such prior liens and
security interests. Debtor shall, on demand, reimburse Secured Party for all
expenses (including attorneys' fees and disbursements) incurred by it in
connection with the foregoing matters. All such costs and expenses of Secured
Party, until reimbursed by Debtor, shall be part of the Obligations and shall be
and shall be deemed to be secured by this Instrument.
<PAGE>
Section 3.05 Operation and Maintenance of Collateral.
(a) Repair and Maintenance. Debtor will operate and maintain the
Premises, the Improvements, and the other Collateral in good order, repair, and
operating condition ordinary wear and tear excepted; will promptly make all
necessary repairs, renewals, replacements, additions, and improvements thereto,
interior and exterior, structural and nonstructural, foreseen and unforeseen,
or otherwise necessary to ensure that the same as part of the security under
this Instrument shall not in any way be diminished or impaired; and will not
cause or allow any of the Premises, the Improvements, or any other Collateral to
be misused or wasted or to deteriorate. No part of the Improvements shall be
removed, demolished, or structurally or materially altered, nor shall any new
building, structure, facility, or other improvement be constructed on the
Premises without Secured Party's prior written consent.
(b) Replacement of Collateral. Debtor will keep the Premises and the
Improvements fully equipped, and will replace all worn out or obsolete
Collateral with fixtures or personal property comparable thereto when new, and
will not, without Secured Party's prior written consent, remove from the
Premises or the Improvements any fixtures or personalty covered by this
Instrument unless the same is replaced by Debtor with an article of equal
suitability and value when new, owned by Debtor free and clear of any lien or
security interest (other than Permitted Encumbrances and the lien and security
interest created by this Instrument).
(c) Compliance with Laws. Debtor will perform and comply promptly with,
and cause the Collateral to be maintained, used, and operated in accordance
with, any and all (i) present and future laws, ordinances, rules, regulations,
and requirements of every duly-constituted governmental or quasi-governmental
authority or agency applicable to Debtor or the Collateral; (ii) similarly
applicable orders, rules, and regulations of any regulatory, licensing,
accrediting, insurance underwriting or rating organization, or other body
exercising similar functions; (iii) similarly applicable duties or obligations
of any kind imposed under any Permitted Encumbrance or otherwise by law,
covenant, condition, agreement, or easement, public or private; and (iv)
policies of insurance at any time in force with respect to the Collateral. If
Debtor receives any notice that Debtor or the Collateral is in default under or
is not in compliance with any of the foregoing, or notice of any proceeding
initiated under or with respect to any of the foregoing, Debtor will promptly
furnish a copy of such notice to Secured Party.
(d) Zoning; Title Matters. Debtor will not, without the prior written
consent of Secured Party, (i) initiate or support any zoning reclassification of
the Premises or the Improvements, seek any variance under existing zoning
ordinances applicable to the Premises or the Improvements, or use or permit the
use of the Premises and Improvements in a manner which would result in such use
becoming a non-conforming use under applicable zoning ordinances; (ii) modify,
amend, or supplement any of the Permitted Encumbrances; (iii) impose any
restrictive covenants or encumbrances upon the Collateral, execute or file any
subdivision plat affecting the Premises or the Improvements, or consent to the
annexation of the Premises or the Improvements to any municipality; or (iv)
permit or suffer the Premises and the Improvements to be used by the public or
any person in such manner as might make possible a claim of adverse usage or
possession, or of any implied dedication or easement.
<PAGE>
(e) No Cooperative or Condominium. Debtor shall not operate or permit
the Premises or the Improvements to be operated as a cooperative, condominium,
or other form of ownership in which the lessees or other occupants thereof
participate in the ownership, control, or management of the Premises,
Improvements, or any part thereof, as lessees, stockholders, or otherwise.
Section 3.06 Insurance.
(a) Casualty Insurance. Debtor shall keep the Premises, the
Improvements, and the other Collateral insured for the benefit of Secured Party
as follows:
(i) against damage or loss by fire and such other hazards
(including lightning, windstorm, hurricane, hail, explosion, riot, riot
attending a strike, civil commotion, vandalism, malicious mischief, aircraft,
vehicle, and smoke) as are covered by an All Risk coverage policy or the
broadest form of extended coverage endorsement as is available from time to
time, in an amount not less than the Obligations unless the full insurable value
(as defined in subsection (h) of this Section) of the Premises and Improvements,
subject to verification by Secured Party, is less;
(ii) rent or business interruption or use and occupancy insurance,
on such basis and in such amounts as shall be satisfactory to Secured Party, and
in any event not less than an amount equal to one (1) year's total income from
the Premises and the Improvements, including, but not limited to, all rent and
all other income (if any) such as tenant reimbursement of operating expenses;
(iii) against damage or loss by flood if the Premises are
located in an area identified by the Secretary of Housing and Urban Development,
or any successor, as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of 1968
or the Flood Disaster Protection Act of 1973, as amended, modified,
supplemented, or replaced from time to time, on such basis and in such amounts
as shall be reasonably required by Secured Party;
(iv) against damage or loss from (i) sprinkler system leakage
and (ii) boilers, boiler tanks, heating and air-conditioning equipment, pressure
vessels, auxiliary piping, and similar apparatus, on such basis and in such
amounts as shall be reasonably required by Secured Party;
(v) during the period of any construction, repair, restoration, or
replacement of the Improvements and any other Collateral, a standard builder's
risk policy with extended coverage for an amount at least equal to the full
insurable value of such Improvements, and other Collateral and worker's
compensation, in statutory amounts; and
(vi) against damage or loss by earthquake on such basis and in such
amounts as shall be reasonably required by Secured Party.
(b) Liability Insurance. Debtor shall also procure and maintain
comprehensive general liability insurance on an occurrence basis covering Debtor
and Secured Party against claims for bodily injury or death or property damage
occurring in, upon, or about or resulting from the Premises, the Improvements,
or any other Collateral, or any street, drive, sidewalk, curb, or passageway
adjacent thereto, in standard form and with such insurance company or companies
and in such amounts as are reasonably approved by Secured Party (but such
coverage or the amount thereof shall in no way limit such indemnification).
<PAGE>
(c) Other Insurance. Debtor, at Secured Party's request, shall procure
and maintain such other insurance or such additional amounts of insurance
covering Debtor or the Collateral as Secured Party shall from time to time
require, in its reasonable discretion, including, but not limited to, insurance
against war risks, if and to the extent available, and builder's risk insurance,
if applicable.
(d) Form of Policy. All insurance required under this Section shall be
fully paid for, nonassessable, and the policies therefor shall contain such
provisions, endorsements, and expiration dates as Secured Party shall from time
to time request, in its reasonable discretion, and shall be in such form and
amounts and be issued by such insurance companies doing business in the
jurisdiction in which the Premises are located as shall be approved by Secured
Party. Without limiting the foregoing, all such policies shall have endorsed
thereon, in form acceptable to Secured Party, a standard mortgagee clause,
without contribution, in the name of Secured Party. All such policies shall
provide that the same shall not be canceled, amended, or materially altered
(including by reduction in the scope or limits of coverage) without at least
thirty (30) days' prior written notice to Secured Party.
(e) Original Policies. Debtor shall deliver to Secured Party original
or certified copies of policies evidencing the insurance required under this
Section, and any additional insurance on the Collateral. Debtor shall also
deliver to Secured Party (i) receipts evidencing payment of all premiums on such
policies and (ii) originals or certified copies of any and all renewal policies
with evidence satisfactory to Secured Party of the payment of all premiums due
and payable thereon, at least thirty (30) days prior to the expiration of each
such policy. If original policies and renewal policies are unavailable or if
such coverage is under a blanket policy, Debtor shall deliver to Secured Party
duplicate originals of such policies or, if unavailable, original certificates
from the issuing insurance companies evidencing that such policies are in full
force and effect, together with certified copies of the original policies.
(f) No Separate Insurance. Debtor shall not carry separate or
additional insurance concurrent in form or contributing in the event of loss
with that required under this Section unless endorsed in favor of Secured Party
in accordance with the requirements of this Section and otherwise approved by
Secured Party in all respects.
(g) Transfer of Title. In the event of foreclosure of this Instrument
or other transfer of title or assignment of the Premises and the other
Collateral in extinguishment, in whole or in part, of the Obligations, all
right, title, and interest of Debtor in and to all policies of insurance
required under this Section or otherwise then in force with respect thereto, and
all proceeds payable thereunder and unearned premiums thereon, shall immediately
vest in the purchaser or other transferee of the Premises and the other
Collateral.
(h) Replacement Cost. For purposes of this Section, the term "full
insurable value" shall mean the actual cost of replacing the property in
question, without allowance for depreciation and exclusive of the cost of
excavations, foundations, and footings, as determined from time to time (but not
less often than once every calendar year) by the insurance company or companies
holding such insurance or by an appraiser, engineer, architect, or contractor
proposed by Debtor and approved by said company or companies and Secured Party.
<PAGE>
(i) Approval Not Warranty. No approval by Secured Party of any insurer
shall be construed to be a representation, certification, or warranty of its
solvency, and no approval by Secured Party as to the amount, type, and/or form
of any insurance shall be construed to be a representation, certification, or
warranty of its sufficiency.
Section 3.07 Damage and Destruction of Collateral.
(a) Debtor's Obligations. In the event of any damage to or loss or
destruction of the Collateral, (i) Debtor shall promptly notify Secured Party of
such event and take such steps as shall be necessary to preserve any undamaged
portion of the Collateral and (ii) if, pursuant to Section 3.07(b), the
insurance proceeds are applied to the restoration, replacement, or rebuilding of
such Collateral (but regardless whether such insurance proceeds, if any, shall
be sufficient for the purpose), Debtor shall promptly commence to seek, and
diligently seek, building permits and, after obtaining same, shall promptly
commence and diligently pursue to completion the restoration, replacement, and
rebuilding of the Collateral as nearly as possible to its value, condition, and
character immediately prior to such damage, loss, or destruction and in
accordance with plans and specifications approved, and with other provisions for
the preservation of the security hereunder established, by Secured Party.
(b) Secured Party's Rights; Application of Proceeds. In the event that
any portion of the Collateral is so damaged, destroyed, or lost, and such
damage, destruction, or loss is covered, in whole or in part, by insurance
described in Section 3.06, then (i) Secured Party may, but shall not be
obligated to, make proof of loss if not made promptly by Debtor and is hereby
authorized and empowered by Debtor to settle, adjust, or compromise any claims
for damage, destruction, or loss thereunder; (ii) each insurance company
concerned is hereby authorized and directed to make payment therefor directly to
Secured Party; and (iii) Secured Party shall have the right to apply the
insurance proceeds, first, to reimburse Secured Party for all costs and
expenses, including adjustors' and attorneys' fees and disbursements, incurred
in connection with the collection of such proceeds and, second, subject to
Section 3.07(c), the remainder of such proceeds shall be applied, at Secured
Party's option, either (x) in payment (without premium or penalty) of all or any
part of the Obligations, whether or not then due and payable, in the order and
manner determined by Secured Party (provided that to the extent that any
Obligation shall remain outstanding after such application, such unpaid
Obligation shall continue in full force and effect and Debtor shall not be
excused in the payment thereof), or to the cure of any then current default
hereunder; or (y) to the restoration, replacement, or rebuilding, in whole or in
part, of the portion of the Collateral so damaged, destroyed, or lost, provided
that any insurance proceeds held by Secured Party to be applied to the
restoration, replacement, or rebuilding of the Premises shall be paid out from
time to time upon compliance by Debtor with such provisions and requirements as
may be imposed by Secured Party , which provisions and requirements shall be
customary and typical for construction loan escrows. Secured Party shall pay
<PAGE>
interest on insurance proceeds held by Secured Party in an amount and manner
determined solely by Secured Party. Notwithstanding the foregoing, Secured Party
shall have no obligation to pay interest on such funds after the occurrence of
an Event of Default. All such interest shall be added to such funds. In the
event that Debtor shall have received all or any portion of such insurance
proceeds, or any other proceeds in respect of such damage or destruction,
Debtor, upon demand from Secured Party, shall pay to Secured Party an amount
equal to the amount so received by Debtor, to be applied as Secured Party shall
have the right pursuant to clause (iii) of the immediately-preceding sentence.
Notwithstanding anything herein or at law or in equity to the contrary, none of
the insurance proceeds or payments in lieu thereof paid to Secured Party as
herein provided shall be deemed trust funds, and Secured Party shall be entitled
to dispose of such proceeds as provided in this Section. Debtor expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value
of the Collateral, from any casualty whatsoever, whether or not insurable or
insured against.
(c) Application of Proceeds to Restoration. Anything in this Section
3.07 to the contrary notwithstanding, in the event of an insured loss, Secured
Party shall permit the application of insurance proceeds to restoration of the
Collateral to as good or better condition as existed prior to the damage,
destruction, or loss, in accordance with plans and specifications approved by
Secured Party in its reasonable discretion, if: (i) no more than 30% of the
gross area of the Improvements is directly affected by such damage, destruction,
or loss and the amount of the loss does not exceed 20% of the value of the
Collateral immediately before the damage, destruction or loss; (ii) there is no
Event of Default (as defined in Section 6.01) at the time of such application;
(iii) the insurer does not deny liability to any named insured; (iv) rental loss
insurance is available and in force and effect to offset fully any abatement of
rent to which any lessee of the Premises may be entitled as a result of such
loss; (v) in Secured Party's sole judgment, restoration can be completed within
one (1) year after the damage, destruction, or loss and at least three (3)
months prior to the maturity of the Note.
(d) Disbursement of Proceeds. If Secured Party elects pursuant to
Section 3.07(b) or is required pursuant to Section 3.07(c) to apply insurance
proceeds to restoration, (i) the proceeds may at Secured Party's election be
disbursed in installments by Secured Party or by a disbursing agent
("Depository") selected by Secured Party, and whose fees and expenses shall be
paid by Debtor; (ii) Debtor shall, upon demand by Secured Party from time to
time, deposit with Secured Party or a Depository, in a mutually-acceptable
interest-bearing account, the amount of any deductible under such insurance
coverage and such amounts in excess of the amount from time to time on deposit
as may be necessary to complete such restoration; and (iii) the insurance
proceeds shall be disbursed from time to time as restoration progresses
satisfactorily in Secured Party's reasonable judgment, based upon receipt of
appropriate lien waivers and a certificate of the architect or engineer in
charge of the work, the form and content of such certificate to be reasonably
satisfactory to Secured Party, and title insurance protection against mechanic's
and materialmen's liens. If (i) Secured Party elects to apply the proceeds to
restoration of the Collateral and Debtor refuses or fails to restore the
Collateral; (ii) Debtor shall fail to complete the restoration of the
Collateral; (iii) an Event of Default occurs prior to full disburement of the
insurance proceeds; or (iv) for any reason the proceeds of insurance are not
applied to restoration of the Collateral, any undisbursed portion may, at
Secured Party's option, be applied to the Obligations, whether or not then due
and in any order of priority, and any such application to principal shall be
deemed to be a prepayment of the outstanding principal balance of the Note and
shall be subject to a prepayment premium computed in accordance with the Note.
<PAGE>
Section 3.08 Condemnation.
(a) Debtor's Obligations; Proceedings. Promptly upon obtaining
knowledge of any pending or threatened institution of any proceedings for the
condemnation of the Collateral, or any part or interest therein, or of any right
of eminent domain, or of any other proceedings arising out of injury or damage
to or decrease in the value of the Collateral (including any change in any
street, whether as to grade, access, or otherwise), or any part thereof or
interest therein, Debtor will notify Secured Party of the threat or pendency
thereof. Secured Party may participate in any such proceedings (but shall not be
obligated to do so), and Debtor from time to time will execute and deliver to
Secured Party all instruments requested by Secured Party or as may be required
to permit such participation. Debtor shall, at its expense, diligently prosecute
any such proceedings, shall deliver to Secured Party copies of all papers served
in connection therewith, and shall consult and cooperate with Secured Party, its
attorneys and agents, in the carrying on and defense of any such proceedings;
provided that no settlement of any such proceeding shall be made by Debtor
without Secured Party's prior written consent.
(b) Secured Party's Rights to Proceeds. All proceeds of condemnation
awards or proceeds of sale in lieu of condemnation, and all judgments, decrees,
and awards for injury or damage to the Collateral are hereby assigned and shall
be paid to Secured Party. Debtor agrees to execute and deliver such further
assignments thereof as Secured Party may request, and authorizes Secured Party
to collect and receive the same, to give receipts and acquittances therefor, and
to appeal from any such judgment, decree, or award.
(c) Application of Proceeds. Secured Party shall have the right to
apply any proceeds, judgments, decrees, or awards referred to in subsection (b)
of this Section, first, to reimburse Secured Party for all costs and expenses,
including reasonable attorneys' fees and disbursements, actually incurred in
connection with the proceeding in question, and any appeal therefrom, or in the
collection of such amounts, and, second, subject to Section 3.08(d), to apply
the remainder thereof as provided in Sections 3.07(b) and 3.07(d) for insurance
proceeds held by Secured Party, including the waiver of prepayment premium. In
the event that Debtor shall have received all or any portion of such proceeds,
judgments, decrees, or awards, Debtor, upon demand from Secured Party, shall pay
to Secured Party an amount equal to the amount so received by Debtor, to be
applied as Secured Party shall have the right pursuant to this subsection.
Notwithstanding anything herein or at law or in equity to the contrary, none of
the proceeds, judgments, decrees or awards or payments in lieu thereof paid to
Secured Party as herein provided shall be deemed trust funds, and Secured Party
shall be entitled to dispose of such proceeds as provided in this Section.
(d) Application of Proceeds to Restoration. Anything in this Section
3.08 to the contrary notwithstanding, in the event of a limited, partial taking
as hereinafter described, Secured Party shall permit the application of any
condemnation award or other payment to restoration of the Collateral and all
Improvements (including, but not limited to, parking, drives, sidewalks, and
landscaping) located thereon to substantially the same size and character as
theretofore existed, and to as good or better condition, in accordance with
plans and specifications approved by Secured Party in its reasonable discretion,
if: (a) such taking involves less than 20% of the rentable square feet in the
Improvements or less than 10% of the parking spaces, and does not affect access
to the Collateral (or any part thereof) from any public right-of-way; (b) there
is no Event of Default hereunder at the time of such application; (c) the
remaining Collateral continues at all times to comply with all applicable
building, zoning and other land use laws and regulations; (d) in Secured Party's
sole judgment, restoration is practicable and can be completed within one (1)
year after the taking and at least three (3) months prior to the maturity of the
Note; and (e) any and all lessees of the Premises whose leases permit
termination thereof or abatement of rent as a result of such taking agree in
writing to continue their leases without abatement of rent.
<PAGE>
(e) Effect on the Obligations. Notwithstanding any condemnation,
taking, or other proceeding referred to in this Section causing injury to or
decrease in value of the Premises (including a change in any street, whether as
to grade, access, or otherwise), or any interest therein, Debtor shall continue
to pay and perform the Obligations as provided herein. Any reduction in the
Obligations resulting from such application shall be deemed to take effect only
on the date of receipt by Secured Party of such proceeds, judgments, decrees or
awards and application against the Obligations, provided that if prior to the
receipt by Secured Party of such proceeds, judgments, decrees, or awards, the
Collateral shall have been sold on foreclosure of this Instrument (or pursuant
to the power of sale granted hereunder), or shall have been transferred by
deed-in-lieu of foreclosure, Secured Party shall have the right to receive the
same to the extent of any deficiency found to be due upon such sale, with legal
fees and disbursements incurred by Secured Party in connection with the
collection thereof.
Section 3.09 Liens and Liabilities.
(a) Discharge of Liens. Debtor shall pay, bond, or otherwise discharge,
from time to time when the same shall become due, all claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien or encumbrance on the Collateral, or on the
revenues, rents, issues, income, or profits arising therefrom and, in general,
Debtor shall do, or cause to be done, at Debtor's sole cost and expense,
everything necessary to fully preserve the lien and security interest created by
this Instrument and the priority thereof.
(b) Creation of Liens. Debtor shall not, without Secured Party's prior
written consent, create, place, or permit to be created or placed, or through
any act or failure to act, acquiesce in the placing of, or allow to remain, any
deed of trust, mortgage, deed to secure debt, voluntary or involuntary lien,
whether statutory, constitutional, or contractual (except for Impositions which
are not yet due and payable), security interest, encumbrance or charge, or
conditional sale or other title retention document, against or covering the
Collateral, prior to, on a parity with, or subordinate to the lien of this
Instrument, other than Permitted Encumbrances.
(c) No Consent. Nothing in the Loan Documents shall be deemed or
construed in any way as constituting the consent or request by Secured Party,
express or implied, to any contractor, subcontractor, laborer, mechanic, or
materialman for the performance of any labor or the furnishing of any material
for any improvement, construction, alteration, or repair of the Collateral.
Debtor further agrees that Secured Party does not stand in any fiduciary
relationship to Debtor.
Section 3.10 Tax and Insurance Deposits.
(a) Amount of Deposits. Secured Party may, at any time after an Event
of Default (whether or not subsequently waived or then existing), require for
the balance of the term of the Note that Debtor deposit with Secured Party or
any service or financial institution designated by Secured Party pursuant to
Section 3.10(e) (collectively, a "Depository"), monthly, one-twelfth (1/12) of
the annual Assessments and the premiums for insurance required under Section
3.06, and Debtor shall, accordingly, make such deposits. In addition, if
required by Secured Party, Debtor shall also deposit with the Depository a sum
of money which, together with the aforesaid monthly installments, will be
sufficient to make each of said payments of Assessments and premiums at least
sixty (60) days before such payments are due. If the amount of any such payments
is not ascertainable at the time any such deposit is required to be made, the
deposit shall be made on the basis of Secured Party's estimate thereof, and,
when such amount is fixed for the then-current year, Debtor shall promptly
deposit any deficiency with the Depository.
<PAGE>
(b) Use of Deposits. All funds so deposited shall, until so applied,
constitute additional security for the Obligations, shall be held by the
Depository without interest (except to the extent required under applicable
law), may be commingled with other funds of the Depository, and, provided that
no Event of Default (as defined in Section 6.01) shall have occurred and be
continuing hereunder, shall be applied in payment of the aforesaid amounts prior
to their becoming delinquent, but only to the extent that the Depository shall
have such funds on hand, provided that the Depository shall have no obligation
to use said funds to pay (i) any installment of Assessments prior to the last
day on which payment thereof may be made without penalty or interest, or to pay
any insurance premium prior to the due date thereof; or (ii) any of the
aforesaid amounts unless Debtor shall have furnished the Depository with the
bills or invoices therefor in sufficient time to pay the same before any penalty
or interest attaches and before said policies of insurance lapse, as the case
may be. If an Event of Default shall have occurred and be continuing hereunder,
or if the Obligations shall be accelerated as herein provided, all funds so
deposited may, at Secured Party's option, be applied to the Obligations in the
order determined by Secured Party or to cure said Event of Default or as
provided in this Section. In no event shall Debtor claim any credit against the
principal and interest due hereunder for any payment or deposit for taxes or
insurance.
(c) Transfer of Instrument. Upon an assignment or other transfer of
this Instrument, the Depository shall have the right to pay over the balance of
such deposits in its possession to the assignee or other successor, and the
Depository shall thereupon be completely released from all liability with
respect to such deposits, and Debtor or the owner of the Collateral shall look
solely to the assignee or transferee with respect thereto. This provision shall
apply to every transfer of such deposits to a new assignee or transferee.
(d) Transfer of the Premises. Subject to Article V hereof, transfer of
record title to the Premises and any other Collateral shall automatically
transfer to the new owner the beneficial interest in any deposits under this
Section. Upon full payment and satisfaction of this Instrument or, at Secured
Party's option, at any prior time, the balance of amounts deposited in the
Depository's possession shall be paid over to the record owner of the Premises
and such other Collateral, and no other party shall have any right or claim
thereto in any event.
(e) Designated Depository. At Secured Party's request, Debtor agrees to
make the aforesaid deposits with such service or financial institution as
Secured Party may from time to time designate in lieu of Secured Party, and the
fees and costs of such services of such institution shall be borne by Debtor.
(f) Tax Monitoring Service. Secured Party may, at its option, retain
the services of a firm or other person to monitor the payment by Debtor of all
real estate taxes and assessments on or relating to the Collateral, or any part
thereof, and the fees and costs of such firm or other person shall be borne by
Debtor.
<PAGE>
Section 3.11 ERISA.
(a) Debtor covenants and agrees to deliver to Secured Party such
certifications or other evidence from time to time throughout the term of this
Instrument, as requested by Secured Party in its sole discretion, that (i)
Debtor is not an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or a
"governmental plan" within the meaning of Section 3(32) of ERISA; and (ii)
Debtor 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:
(1) Equity interests in Debtor are publicly offered securities, within
the meaning of 29 C.F.R. Section 2510.3-101(b)(2);
(2) Less than twenty-five percent (25%) of all equity interests in
Debtor are held by "benefit plan investors" within the meaning of 29 C.F.R.
Section 2510.3-101(f)(2); or
(3) Debtor qualifies as an "operating company" or a "real estate
operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e).
Debtor represents and warrants to Secured Party that, as of the date
hereof and throughout the term of this Instrument, (aa) Debtor is not an
"employee benefit plan" (as defined above) which is subject to Title I of ERISA;
(bb) the assets of the Debtor do not constitute "plan assets" of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101; (cc) Debtor is
not a "governmental plan" within the meaning of Section 3(32) of ERISA; and (dd)
transactions by or with Debtor are not subject to state statutes regulating
investments of and fiduciary obligations with respect to governmental plans.
(b) Any of the following shall constitute an Event of Default under
this Instrument, entitling Secured Party to exercise any and all remedies to
which it may be entitled under the Loan Documents:
(i) The failure of any representation or warranty made by Debtor
in this Section 3.11 to be true and correct in all respects; or
(ii) The failure of Debtor to provide Secured Party with the
written certification and evidence referred to in Section 3.11(a) above; or
(iii) The consummation by Debtor of a transaction which would
cause this Instrument or any exercise of Secured Party's rights under the Loan
Documents to constitute a non-exempt prohibited transaction under ERISA or a
violation of a state statute regulating governmental plans, subjecting Secured
Party to liability for violation of ERISA or such state statute.
(c) Debtor shall indemnify Secured Party and defend and hold Secured
Party harmless from and against all loss, cost, damage, and expense (including,
without limitation, attorneys' fees and costs incurred in the investigation,
defense, and settlement of claims and 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
Secured Party's sole discretion) that Secured Party may incur, directly or
indirectly, as a result of a default under Section 3.11(a). This indemnity shall
survive any termination, satisfaction, or foreclosure of this Instrument and
shall not be subject to the limitation on personal liability set forth in
Article VIII hereof.
<PAGE>
(d) Anything in the Loan Documents to the contrary notwithstanding, no
sale, assignment, or transfer of any direct or indirect interest in the Debtor
shall be permitted which would negate Debtor's representations in this Section
3.11 or cause this Instrument (or any exercise of Secured Party's rights under
the Loan Documents) to constitute a violation of any provision of ERISA or of
any applicable state statute regulating a governmental plan, as determined in
the sole discretion of Secured Party.
(e) Anything in the Loan Documents to the contrary notwithstanding, no
direct or indirect transfer of the Premises or Improvements, or any interest
therein, including, without limitation, a junior lien or leasehold interest,
shall be permitted which would cause this Instrument (or any exercise of Secured
Party's rights under the Loan Documents) to constitute a violation of ERISA or
any applicable state statute regulating a governmental plan, as determined in
the sole discretion of Secured Party.
(f) Anything in this Instrument to the contrary notwithstanding, not
less than fifteen (15) days before consummation of any permitted transfer of
title to the Premises and Improvements or of an interest in Debtor, or any
direct or indirect right, title, or interest in either of them, or of the
placing of any lien or encumbrance on the Premises and Improvements, Debtor
shall obtain from the proposed transferee or lienholder a representation to
Secured Party in form and substance satisfactory to Secured Party that Section
3.11(a) will be true after the transfer, and further provided that any proposed
lienholder agrees that any direct or indirect transfer of its lien or any
interest therein will be governed by this Section 3.11.
Section 3.12 Environmental Matters.
(a) Hazardous Waste. At its sole cost and expense, Debtor shall comply
with all federal, state, and local laws, rules, regulations, and orders with
respect to the discharge, generation, removal, transportation, storage, and
handling of hazardous or toxic wastes, materials, contaminants, or substances,
pay immediately when due the cost of removal of any such wastes, materials,
contaminants, or substances, and keep the Collateral free of any lien imposed
pursuant to such laws, rules, regulations, and orders. Without limiting the
generality of the foregoing sentence, Debtor shall not use, store, discharge, or
transport on the Premises or Improvements, or permit to be used, discharged,
transported, or installed on the Premises or Improvements, hazardous or toxic
substances, materials, contaminants, or wastes in underground or above-ground
storage tanks, drums, or other containers except in compliance with all
applicable laws, rules, regulations, and orders. Debtor shall maintain the
integrity of all storage tanks and drums on the Premises or Improvements during
the term of the Loan. Secured Party may from time to time inspect or audit the
Premises and Improvements with respect to the condition of any storage tanks and
drums. In the event Debtor fails to do so, Secured Party may declare this
Instrument to be in default. In addition, Debtor hereby grants Secured Party and
its employees and agents an irrevocable and non-exclusive license, subject to
the rights of tenants, to enter the Premises and the Improvements to inspect, to
conduct testing, and, upon expiration of the applicable cure period under this
Instrument, to remove the hazardous or toxic wastes, materials, contaminants, or
substances. The costs of such testing and removal shall immediately become due
to Secured Party and shall be secured by this Instrument. Debtor shall indemnify
Secured Party and hold Secured Party harmless from and against all loss,
liability, damage, claim, judgment, cost, and expense (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of claims) that Secured Party may incur as a result of or in
<PAGE>
connection with the assertion against Secured Party of any claim relating to the
presence or removal of any hazardous or toxic waste, materials, contaminants, or
substance referred to in this paragraph, or compliance or failure to comply with
any federal, state, or local laws, rules, regulations, or orders relating
thereto; provided, however, that this indemnity shall not apply if Debtor can
conclusively prove that (i) the contamination of the Collateral was caused
solely by actions, conditions, or events that occurred after the date that
Secured Party (or any purchaser at a foreclosure sale) actually acquired title
to the Collateral and (ii) the contamination of the Collateral was not caused by
the direct or indirect actions of Debtor, any partner(s) of Debtor, or any agent
of Debtor.
(b) Asbestos. Debtor shall not install or permit to be installed on the
Premises or the Improvements friable asbestos or any substance containing
asbestos and deemed hazardous by federal, state, or local laws, rules,
regulations, or orders respecting such material. With respect to any such
material currently or hereafter present on the Premises or the Improvements,
Debtor shall promptly comply with such federal, state, or local laws, rules,
regulations, or orders, at Debtor's expense. If a program of encapsulation,
enclosure, deferred removal, or alternate form of abatement of hazardous
asbestos is agreed upon, Debtor shall, upon request from Secured Party, provide
periodic inspection or audits for asbestos contaminants. If the level of
contamination exceeds guidelines established by applicable laws, rules,
regulations, or orders, or exceeds levels or criteria deemed safe by a
consultant satisfactory to Secured Party and Secured Party's architectural and
engineering staff, Debtor shall immediately bring the Premises and Improvements
into compliance with such guidelines, levels, and/or criteria. If Debtor shall
fail to so comply with the provisions of this subsection, Secured Party may
declare this Instrument to be in default. In addition, Debtor hereby grants
Secured Party and its employees and agents an irrevocable and non-exclusive
license, subject to the rights of tenants, to enter the Premises and the
Improvements to inspect, conduct testing, and, upon expiration of the applicable
cure period under this Instrument, to remove friable asbestos or any substance
containing asbestos and deemed hazardous by federal, state, or local laws,
rules, regulations, or orders respecting such material. The costs of such
inspection, testing, and removal shall immediately become due to Secured Party
and shall be secured by this Instrument. Debtor shall indemnify Secured Party
and hold Secured Party harmless from and against all loss, liability, damage,
claim, judgment, cost, and expense (including, without limitation, attorneys'
fees and costs incurred in the investigation, defense, and settlement of claims)
that Secured Party may incur as a result of or in connection with the assertion
against Secured Party of any claim relating to the presence or removal of any
asbestos substance referred to in this paragraph, or compliance or failure to
comply with any federal, state, or local laws, rules, regulations, or orders
relating thereto; provided, however, that this indemnity shall not apply if
Debtor can conclusively prove that (i) the contamination of the Collateral was
caused solely by actions, conditions, or events that occurred after the date
that Secured Party (or any purchaser at a foreclosure sale) actually acquired
title to the Collateral and (ii) the contamination of the Collateral was not
caused by the direct or indirect actions of Debtor, any partner(s) of Debtor, or
any agent of Debtor.
(c) Polychlorinated Biphenyls. Debtor shall not use, discharge,
transport, or install on the Premises or Improvements, or permit to be used,
discharged, transported, or installed on the Premises or Improvements, any
polychlorinated biphenyls ("PCB") or materials containing PCB. If, during the
term of the Loan, either the Premises or the Improvements is found to be out of
compliance with any applicable federal, state, and local laws, rules,
regulations, or orders with respect to PCB, Secured Party may declare this
Instrument to be in default. In addition, Debtor hereby grants to Secured Party
and its employees and agents an irrevocable and nonexclusive license, subject to
the rights of tenants, to enter the Premises and Improvements from time to time
to inspect, conduct testing, and/or audit the Premises and the Improvements with
<PAGE>
respect to electrical equipment which may contain PCB and, upon expiration of
the applicable cure period under this Instrument, cause the Premises and the
Improvements to be in compliance with such laws, rules, regulations, or orders.
The costs of such inspection, testing, audit, and the costs of so bringing the
Premises and/or the Improvements into compliance, shall immediately become due
to Secured Party and shall be secured by this Instrument. Debtor shall indemnify
Secured Party and hold Secured Party harmless from and against all loss,
liability, damage, claim, judgment, cost, and expense (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of claims) that Secured Party may incur as a result of or in
connection with the assertion against Secured Party of any claim relating to the
presence or removal of PCB, or compliance with any federal, state, or local
laws, rules, regulations, or orders relating thereto; provided, however, that
this indemnity shall not apply if Debtor can conclusively prove that (i) the
contamination of the Collateral was caused solely by actions, conditions, or
events that occurred after the date that Secured Party (or any purchaser at a
foreclosure sale) actually acquired title to the Collateral and (ii) the
contamination of the Collateral was not caused by the direct or indirect actions
of Debtor, any partner(s) of Debtor, or any agent of Debtor.
(d) Recourse Obligation. Anything herein to the contrary
notwithstanding, the indemnification obligations of Debtor under paragraphs (a),
(b), and (c) of this Section 3.12 shall be full recourse obligations of Debtor
and shall survive repayment of the Note and any termination, satisfaction, or
foreclosure of this Instrument.
Section 3.13 Note Payment Facility. All payments of principal,
premium (if any), and interest on the Note shall be made by Debtor by electronic
funds transfer from a bank account established and maintained by Debtor for this
purpose, if possible; otherwise, Debtor may make all payments due by check on
the same terms and conditions are provided herein. Debtor hereby covenants and
agrees to establish and maintain such an account with a depository satisfactory
to Secured Party, in Secured Party's sole discretion, for so long as the Note
and the indebtedness evidenced thereby shall be outstanding, and further agrees
to direct in writing the depository of such account to so transmit such payments
on or before their respective due dates to the account of Secured Party at such
depository as shall be designated in writing by Secured Party. Secured Party
shall have the right, after thirty (30) days' written notice to Debtor, to
require Debtor to select a different depository. All costs of establishing and
maintaining such accounts and all costs of such electronic funds transfer shall
be paid by Debtor.
Section 3.14 Inspection. Debtor shall allow Secured Party and its
authorized representatives, or agents, including third-party property
appraisers, environmental engineers, architects, engineers, and Secured Party's
employees, to enter upon the Collateral and conduct tests and to enter upon and
inspect the Collateral, or any part thereof, at all reasonable times, and shall
assist Secured Party and such representatives or agents in effecting said
inspection.
Section 3.15 Records, Reports, and Audits.
(a) Maintenance of Records. Debtor shall keep and maintain, in
accordance with sound accounting principles, complete and accurate books and
records in which full and correct entries shall be made with respect to all
operations of or transactions involving the Collateral.
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(b) Reports Concerning Entities. Annually, Debtor shall furnish to
Secured Party the financial information as follows:
(i) Financial statements of Debtor for the most current fiscal
year sworn (which shall hereinafter mean certified as being true, correct, and
accurate by an authorized person, partner, or officer) by Debtor or Certified
Public Accountant ("C.P.A.") audited; and
(ii) If applicable, financial statements of the general partner(s),
any guarantors or sureties of the Note, sworn by the delivering party or C.P.A.
audited.
The financial statements referenced in Subsection 3.15(b)(i) and (ii) above must
include a schedule of all related debt and all contingent liabilities.
(c) Reports Concerning the Collateral. Annually, Debtor shall furnish
to Secured Party operating information on the Collateral as follows:
(i) Annual operating statements for the Collateral (including
income and expenses, an annual rents schedule) sworn by Debtor or C.P.A.
audited; and
(ii) Copies of paid tax receipts for the Collateral for the most
recent tax year; and
(iii) A certified rent roll; and
(iv) A schedule showing the Debtor's tax basis in the Collateral.
(d) Delivery of Reports. All of the reports, statements, and items
required under this Section 3.15 shall be prepared in accordance with
generally-accepted accounting principles, consistently applied, and must be in
form and substance satisfactory to Secured Party. Debtor agrees to provide
Secured Party with such additional financial, management, or other information
regarding Debtor, any general partner of Debtor, or the Collateral, as Secured
Party may request. All of the reports, statements, and items required under this
Section 3.15 must be received each year this Instrument is in force by the date
which is one hundred twenty (120) days after the end of the Debtor's fiscal
year. If any one report, statement, or item is not received by Secured Party on
this due date, a late fee of Five Hundred and No/100 Dollars ($500.00) shall be
due and payable by Debtor.
<PAGE>
(e) Inspection of Records. Debtor shall allow Secured Party or its
authorized representatives at all reasonable times and upon reasonable notice
to examine and make copies of all such books and records and all supporting data
therefor at Debtor's principal place of business or at such other place where
such books, records, and data may be located. Debtor shall assist Secured Party
or such representative in effecting such examination. Within two (2) years after
Secured Party's receipt of any such report, statement, or item, Secured Party
may, upon at least five (5) days' prior written notice to Debtor, inspect and
make copies of Debtor's or any general partner of Debtor's books, records, and
income tax returns with respect to the Collateral, for the purpose of verifying
any such reports, statements, or items.
Section 3.16 Debtor's Certificates. Debtor, within ten (10) days
after Secured Party's request, shall furnish to Secured Party a written
statement, duly acknowledged, certifying to Secured Party and/or any proposed
assignee of this Instrument, as to (a) the amount of the Obligations then owing
under this Instrument; (b) the terms of payment and maturity date of the
Obligations; (c) the date to which interest has been paid under the Note; (d)
whether any offsets or defenses exist against the Obligations and, if any are
alleged to exist, a detailed description thereof; (e) that all Leases are in
full force and effect and have not been modified (or if modified, setting forth
all modifications); (f) the date to which the rent, additional rent, and other
charges thereunder have been paid; (g) whether or not, to the best knowledge of
Debtor, 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; and (h) as to any other matters reasonably requested by
Secured Party and reasonably related to the Leases, the Obligations, the
Collateral, or this Instrument. Secured Party, within thirty (30) days after
Debtor's request, shall furnish to Debtor a written statement, duly
acknowledged, certifying to Debtor, to the best of Secured Party's knowledge, as
to the outstanding amount of the Indebtedness and whether or not any Events of
Default exist under the Loan Documents.
Section 3.17 Full Performance Required; Survival of Warranties. All
representations, warranties, and covenants of Debtor contained in any loan
application or made to Secured Party in connection with the Obligations secured
hereby or contained in this Instrument or any other Loan Document, or
incorporated by reference herein or therein, shall survive the execution and
delivery of this Instrument and, except as and to the extent otherwise provided
in Sections 3.11 and 3.12, shall remain continuing obligations, warranties, and
representations of Debtor so long as any portion of the Obligations remains
outstanding; and Debtor shall fully and faithfully satisfy and perform all such
Obligations, representations, warranties, and covenants.
Section 3.18 Additional Security. No other security now existing or
hereafter taken to secure the Obligations shall be impaired or affected by the
execution of this Instrument; and all additional security shall be taken,
considered, and held as cumulative. The taking of additional security, execution
of partial releases of the security, or any extension of the time of payment of
the indebtedness shall not diminish the force, effect, or lien of this
Instrument and shall not affect or impair the liability of any maker, surety,
guarantor, or endorser for the payment of said indebtedness. Neither the
acceptance of this Instrument nor its enforcement, whether by court action or
pursuant to the powers herein contained, shall prejudice or in any manner affect
Secured Party's right to realize upon or enforce any other security now or
hereafter held by Secured Party, it being agreed that Secured Party shall be
entitled to enforce this Instrument and any other security now or hereafter held
by Secured Party in such order and manner as it may in its absolute discretion
determine.
Section 3.19 Further Acts. Debtor shall do and perform all acts
necessary to keep valid and effective the charges and lien hereof, to carry into
effect its objective and purposes, and to protect the lawful owner of the Note
and the other Obligations. Promptly upon request by Secured Party, and at
Debtor's expense, Debtor shall execute, acknowledge, and deliver to Secured
Party such other and further instruments and do such other acts as in the
reasonable opinion of Secured Party may be necessary or desirable to (a) grant
<PAGE>
to Secured Party the highest available perfected lien on all of the Collateral;
(b) correct any defect, error, or omission which may be discovered in the
contents of this Instrument or any other Loan Document; (c) identify more fully
and subject to the liens, encumbrances, and security interests and assignments
created hereby any property intended by the terms hereof to be covered hereby
(including, without limitation, any renewals, additions, substitutions,
replacements, or appurtenances to the Collateral); (d) assure the first priority
hereof and thereof; and (e) otherwise effect the intent of this Instrument.
Without limiting the generality of the foregoing, Debtor shall promptly and,
insofar as not contrary to applicable law, at Debtor's own expense, record,
re-record, file, and refile in such offices, at such times and as often as may
be necessary, this Instrument, additional mortgages and deeds of trust, and
every other instrument in addition or supplemental hereto, including applicable
financing statements, as may be necessary to create, perfect, maintain, and
preserve the liens, encumbrances, and security interests intended to be created
hereby and the rights and remedies of Secured Party hereunder. Upon request by
the Secured Party, Debtor shall supply evidence of fulfillment of each of the
covenants herein contained concerning which a request for such evidence has been
made.
ARTICLE IV
Additional Advances; Expenses; Indemnity
Section 4.01 Additional Advances and Disbursements. Debtor agrees
that, if Debtor shall default in any of its Obligations to pay any amount or to
perform any action, including its obligation under Section 3.03 to pay
Impositions and under Section 3.06 to procure, maintain, and pay premiums on the
insurance policies referred to therein, then Secured Party shall have the right,
but not the obligation, in Debtor's name or in its own name, and without notice
to Debtor, to advance all or any part of such amounts or to perform any or all
such actions, and, for such purpose and to the extent permitted by applicable
law, Debtor expressly grants to Secured Party, in addition and without prejudice
to any other rights and remedies hereunder, the right to enter upon and take
possession of the Collateral to such extent and as often as it may deem
necessary or desirable to prevent or remedy any such default. No such advance or
performance shall be deemed to have cured such default by Debtor or any Event of
Default with respect thereto. All sums advanced, all Collection Expenses (as
hereinafter defined), and all expenses incurred by Secured Party in connection
with such advances or actions, and all other sums advanced or expenses incurred
by Secured Party hereunder or under applicable law (whether required or optional
and whether indemnified hereunder or not) shall be part of the Obligations,
shall bear interest at the rate stated in the Note for payments from and after
maturity (the "Default Rate"), and shall be secured by this Instrument. Secured
Party, upon making any such advance, shall be subrogated to all of the rights of
the person receiving such advance.
Section 4.02 Other Expenses.
(a) Debtor shall pay or, on demand, reimburse Secured Party for the
payment of all appraisal fees, recording and filing fees, taxes, brokerage fees
and commissions, abstract fees, title insurance premiums and fees, Uniform
Commercial Code search fees, escrow fees, attorneys' fees and disbursements, and
all other costs and expenses of every character incurred by Debtor or Secured
Party in connection with the granting, administration, enforcement, and closing
(including the preparation of the Loan Documents) of the transactions
contemplated hereunder or under the other Loan Documents, or otherwise
attributable or chargeable to Debtor as owner of the Collateral.
<PAGE>
(b) Debtor shall pay or, on demand, reimburse Secured Party for the
payment of any costs or expenses (hereinafter referred to collectively as
"Collection Expenses"), including third-party appraisal fees and expenses,
environmental engineers' fees and expenses, the cost of environmental testing
and preparation of environmental reports, architects' fees and expenses,
engineers' fees and expenses, travel costs of Secured Party's employees, agents,
and representatives, and reasonable attorneys' fees and expenses incurred or
expended in connection with or incidental to (i) any default or Event of Default
by Debtor hereunder or (ii) the exercise or enforcement by or on behalf of
Secured Party of any of its rights or remedies or Debtor's obligations under
this Instrument or under the other Loan Documents, including the enforcement,
compromise, or settlement of this Instrument or the Obligations or the defense,
assertion of the rights and claims of Secured Party hereunder in respect
thereof, by litigation or otherwise.
Section 4.03 Indemnity.
(a) Debtor agrees to indemnify and hold harmless Secured Party from and
against any and all losses, liabilities, suits, obligations, fines, damages,
judgments, penalties, claims, charges, costs, and expenses (including attorneys'
fees and disbursements) which may be imposed on, incurred or paid by or asserted
against Secured Party by reason or on account of, or in connection with, (i) any
default or Event of Default by Debtor hereunder or under the other Loan
Documents; (ii) Secured Party's exercise of any of its rights and remedies, or
the performance of any of its duties, hereunder or under the other Loan
Documents to which Debtor is a party; (iii) the construction, reconstruction, or
alteration of the Collateral or any part thereof; (iv) any negligence or willful
misconduct of Debtor, any lessee of the Premises, or any of their respective
agents, contractors, subcontractors, servants, employees, licensees, or
invitees; (v) any accident, injury, death or damage to any person or property
occurring in, on, or about the Premises or the Improvements, or any street,
drive, sidewalk, curb, or passageway adjacent thereto; or (vi) any other
transaction arising out of or in any way connected with the Collateral (or any
part thereof) or the Loan Documents, except for the willful misconduct or gross
negligence of the indemnified person. Notwithstanding the generality of the
foregoing, Debtor shall indemnify and hold harmless Secured Party for reasonable
attorneys fees and costs imposed on, incurred or paid by or asserted against
Secured Party by reason or on account of, or in connection with the enforcement
or preservation of Secured Party's rights hereunder, whether incurred before or
during trial, on appeal, in arbitration or mediation or in bankruptcy
proceedings, including without limitation any attorneys fees and costs incurred
in connection with any bankruptcy proceeding initialed by Debtor or by Debtor's
creditors. Any amount payable to Secured Party under this Section shall be
deemed a demand obligation, shall be part of the Obligations, shall bear
interest at the Default Rate, and shall be secured by this Instrument.
(b) Debtor's obligations under this Section shall not be affected by
the absence or unavailability of insurance covering the same or by the failure
or refusal by any insurance carrier to perform any obligation on its part under
any such policy of covering insurance. If any claim, action, or proceeding is
made or brought against Secured Party which is subject to the indemnity set
forth in this Section, Debtor shall resist or defend against the same, if
necessary in the name of Secured Party, by attorneys for Debtor's insurance
carrier (if the same is covered by insurance) or otherwise by attorneys approved
by Secured Party. Notwithstanding the foregoing, Secured Party, in its
discretion, may engage its own attorneys to resist or defend, or assist therein,
and Debtor shall pay, or, on demand, shall reimburse Secured Party for the
payment of, the fees and disbursements of said attorneys.
<PAGE>
Section 4.04 Interest After Default. Except as otherwise expressly
provided in any Loan Document, if any payment due hereunder or under any other
Loan Document is not paid in full when due, whether on any stated due date, any
accelerated due date, or on demand or any other time specified under any of the
provisions hereof or thereof, then the same shall bear interest hereunder at the
Default Rate from the due date until paid, and such interest shall be added to
and become a part of the Obligations and shall be secured hereby.
ARTICLE V
Sale, Transfer, or Encumbrance of the Collateral
Section 5.01 Due-on-Sale or Encumbrance. In the event that Debtor,
without the prior written consent of Secured Party (which consent may be
withheld for any reason or for no reason including, but not limited to, the
failure of the prospective transferee of the Collateral to reach an agreement in
writing with Secured Party increasing the interest payable on the Obligations to
such rate or changing any other terms of the Obligations as Secured Party shall
request), shall sell, convey, assign, transfer, or otherwise dispose of or be
divested of its title to, or, shall convey security title to or otherwise
encumber or caused to be encumbered, the Collateral or any part thereof or any
interest therein in any manner or way, whether voluntary or involuntary, or in
the event of (a) any merger, consolidation, or dissolution involving, or the
sale or transfer of all or substantially all of the assets of, Debtor or any
general partner of Debtor; (b) the transfer (at one time or over any period of
time) of 10% or more of the voting stock of (i) a corporate Debtor, (ii) any
corporate general partner of Debtor, or (iii) any corporation which is the
direct or indirect owner of 10% or more of the voting stock of Debtor or any
general partner of Debtor; (c) the transfer of any general partnership interest
in Debtor or in any partnership which is a direct or indirect general partner of
Debtor; or (d) the conversion of any such general partnership interest to a
limited partnership interest, then the entire balance of the Obligations,
together with any prepayment premium due under the Note and any other sums
secured hereby, shall, without notice and without any period of cure, become
immediately due and payable at the option of Secured Party. This provision shall
not apply to transfers of title or interest under any will or testament or
applicable law of descent. This provision does not prohibit the transfer of any
existing limited partnership interest in (i) Debtor, (ii) any partner of Debtor,
or (iii) any partner of a partner of Debtor or transfers of general partnership
interests so long as USF&G Realty Partners, Inc. and/or Legg Mason Realty
Partners, Inc. (each a "General Partner") and/or a wholly-owned affiliate of
either General Partner, alone or in concert, have discretion or control over the
affairs and business affairs of the Debtor at least equivalent to the discretion
and control held by the General Partners as of the date of this Instrument.
The consent of Secured Party required hereunder may be refused by
Secured Party in its sole discretion and for any reason (including without
limitation the possibility of a violation of ERISA) or may be predicated upon
any terms, conditions and covenants deemed advisable or necessary in the sole
discretion of Secured Party, including but not limited to the right to change
the interest rate, date of maturity or payments of principal and/or interest on
the Note, to require payment of any amount as additional consideration as a
transfer fee or otherwise and, if a transfer, to require assumption of the
obligations under the Loan Documents.
<PAGE>
In the event (a) Debtor, without the prior written consent of Secured
Party (which consent may be withheld for any reason and for no reason), shall
mortgage, convey security title to, or otherwise encumber or cause to be
encumbered, the Premises or Improvements or any part thereof or any interest
therein in any manner or way, whether voluntary or involuntary, and (b)
thereafter, Debtor or any partner of Debtor or any partner of a partner of the
Debtor shall (i) file with any bankruptcy court of competent jurisdiction or be
the subject of any petition under Title 11 of the U.S. Code, as amended (the
"Bankruptcy Code"); (ii) be the subject of any order for relief issued under the
Bankruptcy Code; (iii) file or be the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors; (iv)
have sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator, or liquidator; or (v) be the subject of any order,
judgment, or decree entered by any court of competent jurisdiction approving a
petition filed against such party for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency, or relief for debtors, THEN DEBTOR HEREBY STIPULATES AND AGREES THAT
THIS CONSTITUTES "CAUSE" UNDER SECTION 362(d) OF THE BANKRUPTCY CODE TO LIFT THE
AUTOMATIC STAY, AND, SUBJECT TO COURT APPROVAL, SECURED PARTY SHALL THEREUPON BE
ENTITLED AND DEBTOR IRREVOCABLY CONSENTS TO RELIEF FROM ANY AUTOMATIC STAY
IMPOSED BY SECTION 362 OF THE BANKRUPTCY CODE, OR OTHERWISE, TO ALLOW THE
SECURED PARTY TO EXERCISE ALL RIGHTS AND REMEDIES AVAILABLE TO SECURED PARTY
INCLUDING, BUT NOT LIMITED TO, FORECLOSURE, AS PROVIDED IN THE LOAN DOCUMENTS
AND AS OTHERWISE PROVIDED BY LAW, AND DEBTOR HEREBY IRREVOCABLY WAIVES ITS RIGHT
TO OBJECT TO SUCH RELIEF.
Section 5.02 Permitted Transfers Without Fee. Notwithstanding Section
5.01, the original Debtor, and any transferee of the original Debtor permitted
below, may engage in the transactions described below after at least fifteen
(15) days' prior written notice to Secured Party, provided that all of the
following conditions are met: (i) there is no default under the Loan Documents
(or event which with the passage of time or the giving of notice or both would
be a default); (ii) the proposed transferee complies with and delivers the ERISA
certification and indemnification agreement described herein (or, if the
statements required by the certification are not true with respect to the
proposed transferee, Secured Party shall have received such evidence as it may
require in its sole discretion to determine that the proposed transfer is not
and would not render the Loan a prohibited transaction under ERISA); (iii) if
all of the Collateral is transferred, the proposed transferee shall have signed
an assumption agreement acceptable to Secured Party with respect to the Loan
Documents; (iv) the proposed transferee shall have provided such information
about the proposed transferee as requested by Secured Party, and Secured Party
shall have approved the proposed transferee, including, but not limited to, a
review of the proposed transferee's creditworthiness, good character and
reputation, and demonstrated ability and experience (by itself or through its
manager) in the ownership, operation, and leasing of property similar to the
Collateral; and (v) payment by Debtor or the proposed transferee of (1) all
costs and expenses incurred by Secured Party for the processing of said transfer
including a processing fee, (2) any documentary stamp taxes, intangibles taxes,
recording fees, and other costs and expenses required in connection with the
assumption agreement and any modification of the Loan Documents, and (3) all
other costs and expenses (including attorneys' fees and expenses for Secured
Party's outside counsel) of the preparation of the assumption agreement and any
modification of the Loan Documents. Provided all of the foregoing conditions are
fulfilled with respect to each such transfer, Debtor may engage in the following
transaction:
<PAGE>
General partnership interests in Debtor may be transferred
so long as USF&G Realty Partners, Inc. and/or Legg Mason Realty
Partners, Inc. and/or a wholly-owned affiliate of either remain
the only controlling general partners of Debtor.
ARTICLE VI
Defaults and Remedies
Section 6.01 Events of Default. The term "Event of Default,"
as used in this Instrument, shall mean the occurrence of any of the following
events:
(a) if Debtor shall fail to pay when the same shall become due and
payable any sum required to be paid under the Note, hereunder or under any other
Loan Document, whether of principal, interest, premium, fees, or otherwise;
provided, however, that Debtor shall have five (5) days after written notice of
such default from Secured Party to cure such default; and provided further, that
if Secured Party shall give one (1) notice of default within any twelve (12)
month period, Debtor shall have no further right to any notice of monetary
default; or
(b) except as provided in subsections (a), (d), (e), (f), (g), (h),
(l), and (n) hereof, if default shall be made in the performance or observance
of any other provision contained in the Loan Documents, beyond the applicable
grace period therefor or, if no such grace period is applicable, if the default
has not been remedied within thirty (30) days after written notice thereof shall
have been given to Debtor; provided, however, that if the default is, in Secured
Party's reasonable judgment, of such a nature that it cannot reasonably be cured
within said thirty (30) day period, Debtor shall have such additional time for
cure as Secured Party may, in its reasonable discretion, approve in writing
after receipt by Secured Party within said thirty (30) day period of a written
request by Debtor therefor; or
(c) if any representation made herein or in any other Loan Document
(including any mortgage loan application or any certificate delivered in
connection with any of the foregoing), or otherwise made by or on behalf of
Debtor in connection with the transactions contemplated under the Loan
Documents, shall be false or misleading in any material respect as of the date
on which such representation was made or deemed to be remade; or
(d) the Collateral (or any part thereof), or any legal, beneficial, or
equitable interest therein, shall be sold, transferred, or encumbered in
breach of Article V hereof; or
(e) if any other event occurs which, under the terms of the Loan
Documents, would permit Secured Party after the expiration of any applicable
notice and cure period to accelerate the Obligations; or
(f) if Debtor shall become insolvent, or shall make a transfer in fraud
of creditors, or shall make an assignment for the benefit of its creditors, or
shall not be able to pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts as they become due; or
<PAGE>
(g) if any bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceeding, or any other proceedings for the relief of debtors, is
instituted by or against Debtor, and, if instituted against Debtor, is allowed
or consented to or is not dismissed within sixty (60) days after such
institution; or
(h) if any of the events referred to in subsections (f) and (g) of this
Section shall occur with respect to any general partner of Debtor or any
guarantor of payment of any part of the Obligations or of any portion of
Debtor's obligations under the Loan Documents; or
(i) if Debtor abandons the Premises or the Improvements; or
(j) if the Collateral shall be taken, attached, or sequestered on
execution or other process of law in any action against Debtor; or
(k) if there shall have occurred any default, event of default, or
non-performance under the terms of any of the Leases by Debtor, which default,
event of default, or non-performance shall not have been cured within any
applicable grace period therefor under the applicable Lease; or
(l) if Debtor shall fail at any time to obtain, provide, maintain, keep
in force, or deliver to Secured Party the insurance policies required by Section
3.06 hereof, and such failure shall continue for five (5) days after written
notice; or
(m) if any claim of priority (except a claim based upon a Permitted
Encumbrance) to this Instrument or any other document or instrument securing the
Obligations by title, lien, or otherwise shall be upheld by any court of
competent jurisdiction or shall be consented to by Debtor; or
(n) (i) the consummation by Debtor of a transaction which would cause
the loan evidenced by the Note, this Instrument, or any exercise of Secured
Party's rights under the Loan Documents, to constitute a non-exempt prohibited
transaction under ERISA or a violation of a state statute regulating
governmental plans, subjecting Secured Party to liability for violation of ERISA
or such state statute; (ii) the failure of any representation or warranty made
by Debtor under Section 3.11 of this Instrument to be true and correct in all
respects; or (iii) the failure of Debtor to provide Secured Party with the
written certifications and evidence required by Section 3.11 of this Instrument.
Section 6.02 Remedies. Upon the occurrence of any one or more
Events of Default, Secured Party may (but shall not be obligated to), in
addition to any rights or remedies available to it hereunder or under the other
Loan Documents, take such action personally or by its agents or attorneys, with
or without entry and without notice, demand, presentment, or protest (each and
all of which are hereby waived), as it deems necessary or advisable to protect
and enforce Secured Party's rights and remedies against Debtor and in and to the
Collateral, including the following actions, each of which may be pursued
concurrently or otherwise, at such time and in such order as Secured Party may
determine, in its sole discretion, without impairing or otherwise affecting its
rights or remedies:
<PAGE>
(a) declare the entire balance of the Obligations (including the entire
principal balance thereof, all accrued and unpaid interest, and any premium and
late charges thereon, and all other such sums secured hereby) to be immediately
due and payable, and upon any such declaration the entire unpaid balance of the
Obligations shall become and be immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Debtor, anything in the Loan Documents to the
contrary notwithstanding; or
(b) institute a proceeding or proceedings, judicial or otherwise, for
the complete foreclosure of this Instrument under any applicable provision of
law; or
(c) institute a proceeding or proceedings for the partial foreclosure
of this Instrument under any applicable provision of law for the portion of the
Obligations then due and payable, subject to the lien and security interest
created by this Instrument continuing unimpaired and without loss of priority so
as to secure the balance of the Obligations not then due and payable; or
(d) institute, at its option, a proceeding or proceedings for the
foreclosure, whether complete or partial, of this Instrument subject to the
rights of any lessees of the Premises, and the failure of Secured Party to make
any such lessees parties to any such foreclosure proceedings and to foreclose
their rights shall not be, nor be asserted to by Debtor, a defense at any
proceedings instituted by Secured Party to collect the Obligations; or
(e) to the extent permitted under applicable law, elect to treat the
fixtures included in the Collateral either as real property or as personal
property, or both, and proceed to exercise such rights as apply thereto; or
(f) institute an action, suit, or proceeding in equity for the specific
performance of any of the provisions contained in the Loan Documents; or
(g) apply for the appointment of a receiver, custodian, trustee,
liquidator, or conservator of the Collateral, to be vested with the fullest
powers permitted under applicable law, as a matter of right and without regard
to or the necessity to disprove the adequacy of the security for the Obligations
or the solvency of Debtor or any other person liable for the payment of the
Obligations, and Debtor and each other person so liable waives or shall be
deemed to have waived such necessity, and consents or shall be deemed to have
consented to such appointment; or
(h) subject to the provisions and restrictions of any applicable law,
enter upon the Premises and the Improvements, and exclude Debtor and its agents
and servants wholly therefrom, without liability for trespass, damages, or
otherwise, and take possession of all books, records, and accounts relating
thereto and all other Collateral, and Debtor agrees to surrender possession of
the Collateral and of such books, records, and accounts to Secured Party on
demand after the happening of any Event of Default; and having and holding the
same may use, operate, manage, preserve, control, and otherwise deal therewith
and conduct the business thereof, either personally or by its superintendents,
managers, agents, servants, attorneys or receivers, without interference from
Debtor; and upon each such entry and from time to time thereafter may, at the
<PAGE>
expense of Debtor and the Collateral, without interference by Debtor and as
Secured Party may deem advisable, (i) either by purchase, repair, or
construction, maintain and restore the Collateral; (ii) insure or reinsure the
same; (iii) make all necessary or proper repairs, renewals, replacements,
alterations, additions, betterments, and improvements thereto and thereon; (iv)
complete the construction of the Improvements and, in the course of such
completion, may make such changes in the contemplated or completed Improvements
as it may deem advisable; and (v) in every such case in connection with the
foregoing have the right to exercise all rights and powers of Secured Party with
respect to the Collateral, either in Debtor's name or otherwise, including the
right to make, terminate, cancel, enforce, or modify Leases, obtain and evict
tenants and subtenants on such terms as Secured Party shall deem advisable, and
to take any actions described in subsection (j) of this Section; or
(i) subject to the provisions and restrictions of any applicable law,
may, with or without the entrance upon the Premises, collect, receive, sue for,
and recover in its own name all Rents and cash collateral derived from the
Premises, and after deducting therefrom all costs, expenses, and liabilities of
every character incurred by Secured Party in collecting the same and in using,
operating, managing, preserving, and controlling the Premises, and otherwise in
exercising Secured Party's rights under subsection (g) of this Section,
including all amounts necessary to pay Impositions, insurance premiums, and
other charges in connection with the Premises, as well as compensation for the
services of Secured Party and its attorneys, agents, and employees, apply the
remainder as provided in Section 6.05; or
(j) release any portion of the Collateral for such consideration as
Secured Party may require without, as to the remainder of the Collateral, in any
way impairing or affecting the lien or priority of this Instrument, or improving
the position of any subordinate lienholder with respect thereto, except to the
extent that the Obligations shall have been reduced by the actual monetary
consideration, if any, received by Secured Party for such release, and may
accept by assignment, pledge, or otherwise any other property in place thereof
as Secured Party may require without being accountable for so doing to any other
lienholder; or
(k) may take all actions permitted under the Uniform Commercial Code of
the jurisdiction in which the Collateral is located; or
(l) may take any other action, or pursue any other right or remedy, as
Secured Party may have under applicable law, and Debtor does hereby agree that
Secured Party may so act.
In the event that Secured Party shall exercise any of the rights or
remedies set forth in subsections (h) and (i) of this Section, Secured Party
shall not be deemed to have entered upon or taken possession of the Collateral
except upon the exercise of its option to do so, evidenced by its demand and
overt act for such purpose, nor shall it be deemed a beneficiary or mortgagee in
possession by reason of such entry or taking possession. Secured Party shall not
be liable to account for any action taken pursuant to any such exercise other
than for rents actually received by such party, nor liable for any loss
sustained by Debtor resulting from any failure to let the Premises, or from any
other act or omission of Secured Party except to the extent such loss is caused
by the willful misconduct or bad faith of such party. Debtor hereby consents to,
ratifies, and confirms the exercise by Secured Party of said rights and
remedies, and appoints Secured Party as its attorney-in-fact, which appointment
shall be deemed to be coupled with an interest and irrevocable, for such
purposes.
Section 6.03 Expenses. In any proceeding, judicial or otherwise, to
foreclose this Instrument or enforce any other remedy of Secured Party under the
Loan Documents, there shall be allowed and included as an addition to and a part
of the Obligations in the decree for sale or other judgment or decree all
Collection Expenses and all other expenditures and expenses, including
reasonable attorneys' fees, which may be paid or incurred in connection with the
exercise by Secured Party of any of its rights and remedies provided or referred
to in Section 6.02, or any comparable provision of any other Loan Document,
together with interest thereon at the rate specified in the Note, and the same
shall be part of the Obligations and shall be secured by this Instrument.
<PAGE>
Section 6.04 Rights Pertaining to Sales. Subject to the provisions or
other requirements of law, the following provisions shall apply to any sale or
sales of the Collateral under or by virtue of this Article VI, whether made by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale:
(a) Secured Party may conduct any number of sales from time to time of
all or portions of the Collateral and as an entirety or in separate tracts or
units (regardless of the manner in which the Collateral is classified), and
Debtor hereby waives any right which it may have to require the Collateral (or
any part thereof) to be sold as separate tracts or units in the event of
foreclosure or sale.
(b) Any sale may be postponed or adjourned by public announcement at
the time and place appointed for such sale or for such postponed or adjourned
sale without further notice.
(c) After each sale, Secured Party, or an officer of any court
empowered to do so, shall execute and deliver to the purchaser or purchasers at
such sale a good and sufficient instrument or instruments granting, conveying,
assigning, and transferring all right, title, and interest of Debtor (including
all rights of redemption) in and to the property and rights sold (but without
any covenant or warranty, express or implied), and shall receive the proceeds of
said sale or sales and apply the same as herein provided. Secured Party is
hereby appointed the true and lawful attorney-in-fact of Debtor, which
appointment is irrevocable and shall be deemed to be coupled with an interest,
in Debtor's name and stead, to make all necessary conveyances, assignments,
transfers, and deliveries of the property and rights so sold, and for that
purpose Secured Party may execute all necessary instruments of conveyance,
assignment, transfer, and delivery, and may substitute one or more persons with
like power, Debtor hereby ratifying and confirming all that said attorney or
such substitute or substitutes shall lawfully do by virtue thereof.
Nevertheless, Debtor, if requested by Secured Party, shall ratify and confirm
any such sale or sales by executing and delivering to Secured Party or such
purchaser or purchasers all such instruments as may be advisable, in Secured
Party's judgment, for the purposes as may be designated in such request.
(d) Any and all statements of fact or other recitals made in any of the
instruments referred to in subsection (c) of this Section given by Secured Party
as to nonpayment of the Obligations, or as to the occurrence of any Event of
Default, or as to Secured Party having declared all or any of the Obligations to
be due and payable, or as to the request to sell, or as to notice of time,
place, and terms of sale and of the property or rights to be sold having been
duly given, or as to the refusal, failure, or inability to act of Secured Party,
or as to the appointment of any substitute or successor Secured Party, or as to
any other act or thing having been duly done by Debtor, Secured Party, or by
such substitute or successor Secured Party, shall be taken as conclusive and
binding against all persons as to evidence of the truth of the facts so stated
and recited. Secured Party may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale so held,
including the posting of notices and the conduct of sale, but in the name and on
behalf of Secured Party.
(e) The receipt of Secured Party for the purchase money paid at any
such sale, or the receipt of any other person authorized to receive the same,
shall be sufficient discharge therefor to any purchaser of any property or
rights sold as aforesaid, and no such purchaser, or its representatives,
grantees, or assigns, after paying such purchase price and receiving such
receipt, shall be bound to see to the application of such purchase price, or any
part thereof, upon or for any trust or purpose of this Instrument or, in any
manner whatsoever, be answerable for any loss, misapplication, or
non-application of any such purchase money, or part thereof, or be bound to
inquire as to the authorization, necessity, expediency, or regularity of any
such sale.
<PAGE>
(f) Any such sale or sales shall operate to divest all of the estate,
right, title, interest, claim, and demand whatsoever, whether at law or in
equity, of Debtor in and to the properties and rights so sold, and shall be a
perpetual bar both at law and in equity against Debtor, and any and all persons
claiming or who may claim the same, or any part thereof or any interest therein,
by, through or under Debtor to the fullest extent permitted by applicable law.
(g) Upon any such sale or sales, Secured Party may bid for and acquire
the Collateral and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting against the Obligations the amount of the bid made
therefor, after deducting therefrom the expenses of the sale (including
reasonable attorneys' fees), the cost of any enforcement proceeding hereunder,
and any other sums which Secured Party is authorized to deduct under the terms
hereof, to the extent necessary to satisfy such bid.
(h) In the event that Debtor, or any person claiming by, through, or
under Debtor, shall transfer or refuse or fail to surrender possession of the
Collateral after any sale thereof, then Debtor or such person shall be deemed a
tenant at sufferance of the purchaser at such sale, subject to eviction by means
of forcible entry and detainer proceedings, or subject to any other right or
remedy available hereunder or under applicable law.
(i) Upon any such sale, it shall not be necessary for Secured Party or
any public officer acting under execution or order of court to have present at
the sale or constructively in its possession any of the Collateral.
(j) In the event a foreclosure hereunder shall be commenced by Secured
Party, Secured Party may, at any time before the sale of the Collateral, abandon
the sale and may institute suit for the collection of the Obligations and for
the foreclosure of this Instrument, or in the event that Secured Party should
institute a suit for collection of the Obligations and for the foreclosure of
this Instrument, Secured Party may, at any time before the entry of final
judgment in said suit, dismiss the same and sell the Collateral in accordance
with the provisions of this Instrument.
Section 6.05 Application of Proceeds. The purchase money, proceeds,
or avails of any sale referred to in Section 6.04, together with any other sums
which may be held by Secured Party hereunder, whether under the provisions of
this Article VI or otherwise, shall, except as herein expressly provided to the
contrary, be applied in the order determined by Secured Party, to the following
items:
First: To the payment of all Collection Expenses and all the costs and
expenses of any such sale, including compensation to Secured Party, its agents
and counsel, and of any judicial proceeding wherein the same may be made, and of
all expenses, liabilities, and advances made or incurred by Secured Party
hereunder (including reasonable attorneys' fees), together with interest thereon
as provided in the Note, and all taxes, assessments, and other charges, except
any taxes, assessments, or other charges subject to which the Collateral shall
have been sold.
Second: To the payment in full of the Obligations (including
principal, interest, premium, and fees) in such order as Secured Party may
elect.
Third: To the payment of any other sums secured hereunder or required
to be paid by Debtor pursuant to any provision of the Loan Documents.
<PAGE>
Fourth: To the extent permitted by applicable law, to be set aside by
Secured Party as adequate security in its judgment for the payment of sums which
would have been paid by application under clauses First through Third above to
Secured Party, arising out of an obligation or liability with respect to which
Debtor has agreed to indemnify Secured Party, but which sums are not yet due and
payable or liquidated.
Fifth: To the payment of the surplus, if any, to whomsoever may be
lawfully entitled to receive the same.
Section 6.06 Additional Provisions as to Remedies.
(a) No right or remedy herein conferred upon or reserved to Secured
Party is intended to be exclusive of any other right or remedy, and each and
every such right or remedy shall be cumulative and continuing, shall be in
addition to every other right or remedy given hereunder, or under the other Loan
Documents or now or hereafter existing at law or in equity, and may be exercised
from time to time and as often as may be deemed expedient by Secured Party.
(b) No delay or omission by Secured Party to exercise any right or
remedy hereunder upon any default or Event of Default shall impair such
exercise, or be construed to be a waiver of any such default or Event of
Default, or an acquiescence therein.
(c) The failure, refusal, or waiver by Secured Party of its right to
assert any right or remedy hereunder upon any default or Event of Default or
other occurrence shall not be construed as waiving such right or remedy upon any
other or subsequent default or Event of Default or other occurrence.
(d) Secured Party shall not have any obligation to pursue any rights or
remedies it may have under any other agreement prior to pursuing its rights or
remedies hereunder or under the other Loan Documents.
(e) No recovery of any judgment by Secured Party and no levy of an
execution upon the Collateral (or any part thereof) or any other property of
Debtor shall affect, in any manner or to any extent, the lien and security
interest created by this Instrument upon and in the Collateral, or any liens,
security interests, rights, powers, or remedies of Secured Party hereunder, and
such liens, rights, powers, and remedies shall continue unimpaired as before.
(f) Secured Party may resort to any security given by this Instrument
or any other security now given or hereafter existing to secure the Obligations,
in whole or in part, in such portions and in such order as Secured Party may
deem advisable, and no such action shall be construed as a waiver of any of the
liens, rights, or benefits granted hereunder.
(g) Acceptance of any payment after the occurrence of any default or
Event of Default shall not be deemed a waiver or a cure of such default or Event
of Default, and acceptance of any payment less than any amount then due shall be
deemed an acceptance on account only.
(h) In the event that Secured Party shall have proceeded to enforce any
right or remedy hereunder by foreclosure, sale, entry, or otherwise, and such
proceeding shall be discontinued, abandoned, or determined adversely for any
reason, then Debtor and Secured Party shall be restored to their former
positions and rights hereunder with respect to the Collateral, subject to the
lien and security interest hereof.
<PAGE>
Section 6.07 Waiver of Rights and Defenses. To the full extent
Debtor may do so, Debtor agrees with Secured Party as follows:
(a) Debtor will not at any time insist on, plead, claim, or take the
benefit or advantage of any statute or rule of law now or hereafter in force
providing for any appraisement, valuation, stay, extension, moratorium, or
redemption, or of any statute of limitations, and Debtor, for itself and its
heirs, devisees, representatives, successors, and assigns, and for any and all
persons ever claiming an interest in the Collateral (other than Secured Party),
hereby, to the extent permitted by applicable law, waives and releases all
rights of redemption, valuation, appraisement, notice of intention to mature or
declare due the whole of the Obligations, and all rights to a marshaling of the
assets of Debtor, including the Collateral, or to a sale in inverse order of
alienation, in the event of foreclosure of the liens and security interests
created hereunder.
(b) Debtor shall not be relieved of its obligation to pay the
Obligations at the time and in the manner provided herein and in the other Loan
Documents, nor shall the lien or priority of this Instrument or any other Loan
Documents be impaired by any of the following actions, non-actions, or
indulgences by Secured Party:
(i) any failure or refusal by Secured Party to comply with any
request by Debtor (X) to consent to any action by Debtor or (Y) to take any
action to foreclose this Instrument or otherwise enforce any of the provisions
hereof or of the other Loan Documents;
(ii) any release, regardless of consideration, of the whole or any
part of the Collateral or any other security for the Obligations, or any person
liable for payment of the Obligations;
(iii) any waiver by Secured Party of compliance by Debtor with
any provision of this Instrument or the other Loan Documents, or consent by
Secured Party to the performance by Debtor of any action which would otherwise
be prohibited thereunder or to the failure by Debtor to take any action which
would otherwise be required hereunder or thereunder; and
(iv) any agreement or stipulation between Secured Party and Debtor,
or, with or without Debtor's consent, between Secured Party and any subsequent
owner or owners of the Collateral (or any part thereof), or any other security
for the Obligations, renewing, extending, or modifying the time of payment or
the terms of this Instrument or any of the other Loan Documents (including a
modification of any interest rate), and in any such event Debtor shall continue
to be obligated to pay the Obligations at the time and in the manner provided
herein and in the other Loan Documents, as so renewed, extended, or modified,
unless expressly released and discharged by Secured Party.
(c) Regardless of consideration, and without the necessity for any
notice to or consent by the holder of any subordinate lien, security interest,
encumbrance, right, title, or interest in or to the Collateral (or any part
thereof), Secured Party may release any person at any time liable for the
payment of the Obligations or any portion thereof or any part of the security
held for the Obligations, and may extend the time of payment or otherwise modify
the terms of this Instrument or of any of the Loan Documents, including a
modification of the interest rate payable on the principal balance of the Note,
without in any manner impairing or affecting this Instrument or the lien and
security interest thereof or the priority of this Instrument, as so extended and
modified, as security for the Obligations over any such subordinate lien,
security interest, encumbrance, right, title, or interest.
<PAGE>
ARTICLE VII
Satisfaction and Cancellation
Section 7.01 Satisfaction and Cancellation. If the Obligations
shall be paid as the same become due and payable, then and in that event only
all rights hereunder (except for the rights and obligations set forth in
Sections 3.11, 3.12 and 4.03 hereof) shall terminate and the Collateral shall
become wholly released and cleared of the liens, security interests,
conveyances, and assignments evidenced hereby, upon receipt by Secured Party of
evidence satisfactory to it that the foregoing conditions have been satisfied,
at Debtor's sole cost and expense. In such event Secured Party shall, at the
request of Debtor, promptly deliver to Debtor, in recordable form, all such
documents as shall be necessary to cause this Instrument to be satisfied and
canceled of record and to release the Collateral from the liens, security
interests, conveyances, and assignments created or evidenced hereby.
ARTICLE VIII
Limitation on Personal Liability
Section 8.01 Limited Recourse Liability. Except to the extent set
forth in this Section 8.01 and Section 8.02 of this Instrument, neither the
Debtor nor any general partner(s) of Debtor (singularly or collectively, the
"Exculpated Parties") shall have any personal liability for any of the sums due
under the Note, the Obligations, or any obligations set forth in the Loan
Documents (collectively, the "Loan"). Notwithstanding the preceding sentence,
Secured Party may bring a foreclosure action or other appropriate action to
enforce the Loan Documents or realize upon and protect the Collateral
(including, without limitation, naming the Exculpated Parties in the actions)
and in addition THE EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY FOR:
(a) any indemnity, guaranty, master lease or similar instrument
furnished in connection with the Loan (including, without limitation, the
provisions of Section 3.11 and Section 3.12 of this Instrument);
(b) any assessments and taxes (accrued and/or payable) with respect to
the Collateral;
(c) any security deposits of tenants (i) not turned over to Secured
Party upon foreclosure, sale (pursuant to power of sale), or conveyance in lieu
thereof, or (ii) not turned over to a receiver or trustee for the Collateral
after his/her appointment;
(d) any insurance proceeds or condemnation awards neither turned over
to Secured Party nor used in compliance with Section 3.07 of this Instrument;
<PAGE>
(e) waste of the Collateral;
(f) any rents or other income from the Collateral received by any of
the Exculpated Parties after a default under the Loan Documents and not
otherwise applied to the indebtedness evidenced by the Note or to the current
(not deferred) operating expenses of the Collateral; PROVIDED, HOWEVER, THAT THE
EXCULPATED PARTIES SHALL HAVE PERSONAL LIABILITY for amounts paid as expenses to
a person or entity related to or affiliated with any of the Exculpated Parties
unless the payments are expressly permitted in the Loan Documents;
(g) Debtor's failure to maintain any letter of credit required under
the Loan Documents or otherwise in connection with the Loan; or
(h) all legal fees, including the allocated costs of Secured Party's
staff attorneys, and other expenses incurred by Secured Party in enforcing the
Loan Documents if Debtor contests, delays, or otherwise hinders or opposes
(including, without limitation, the filing of a bankruptcy) any of Secured
Party's enforcement actions.
Section 8.02 Full Recourse Liability. Notwithstanding the
provisions of Section 8.01 of this Instrument, the EXCULPATED PARTIES SHALL HAVE
PERSONAL LIABILITY for all sums due under the Note, the Obligations, and all
obligations set forth in the Loan Documents if:
(a) there shall be any breach or violation of Article V of this
Instrument; or
(b) there shall be any fraud or material misrepresentation by any of
the Exculpated Parties in connection with the Collateral, the Loan Documents,
the Loan Application, or any other aspect of the Loan; or
(c) the Collateral or any part thereof shall become an asset in (i) a
voluntary bankruptcy or insolvency proceeding or (ii) an involuntary bankruptcy
or insolvency proceeding which (A) results in the entry of an order for relief
against Debtor or the Collateral which is not fully stayed within seven (7)
business days after the entry thereof, or (B) is not dismissed within ninety
(90) days of filing; provided, however, that this Section 8.02(c) shall not
apply if an involuntary bankruptcy is filed by Secured Party.
<PAGE>
ARTICLE IX
Additional Provisions
Section 9.01 Usury Savings Clause. All agreements in this
Instrument and in the other Loan Documents are expressly limited so that in no
contingency or event whatsoever, whether by reason of advancement or
acceleration of maturity of the Obligations, or otherwise, shall the amount paid
or agreed to be paid hereunder for the use, forbearance, or detention of money
exceed the highest lawful rate permitted under applicable usury laws. If, from
any circumstance whatsoever, fulfillment of any provision of the Loan Documents,
at the time performance of such provision shall be due, shall involve
transcending the limit of validity prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity and if, from any
circumstance whatsoever, Secured Party shall ever receive as interest an amount
which would exceed the highest lawful rate, the receipt of such excess shall be
deemed a mistake and shall be canceled automatically, or, if theretofore paid,
such excess shall be credited against the principal amount of the Obligations to
which the same may lawfully be credited, and any portion of such excess not
capable of being so credited shall be rebated to Debtor.
Section 9.02 Severability. If all or any portion of any provision
of this Instrument or the other Loan Documents shall be held to be invalid,
illegal, or unenforceable in any respect, then such invalidity, illegality, or
unenforceability shall not affect any other provision hereof or thereof, and
such provision shall be limited and construed in such jurisdiction as if such
invalid, illegal, or unenforceable provision, or portion thereof, were not
contained herein or therein.
Section 9.03 Notices. Any notice, demand, consent, approval,
direction, agreement, or communication (any "Notice") required or permitted
hereunder or under the other Loan Documents shall be in writing and shall be
validly given if sent by a nationally-recognized courier that obtains receipts,
delivered personally by a reputable courier that obtains receipts, or mailed by
United States mail, certified mail, return receipt requested, postage prepaid,
addressed as follows to the person entitled to receive the same:
(a) If to Debtor:
USF&G/LEGG MASON REALTY PARTNERS LIMITED PARTNERSHIP
c/o USF&G, 6225 Smith Avenue
Baltimore, Maryland 21209
Attention: Gerald Trainer
With a copy to:
USF&G/LEGG MASON REALITY PARTNERS LIMITED PARTNERSHIP
c/o USF&G, 6225 Smith Avenue
Baltimore, Maryland 21209
Attention: Nick E. McCoy, Esq.
<PAGE>
With a copy to:
Jeffrey A. Abrams, Esq.
Dann Pecar Newman & Kleiman
2300 One America Square
Indianapolis, Indiana 46204
(b) If to Secured Party:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Prudential Capital
Group One Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Mortgage Loan Customer Service
Reference Loan No. 6 102 045
With a copy to:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Prudential Capital
Group One Ravinia Drive, Suite 1400
Atlanta, Georgia 30346
Attention: Regional Counsel
Reference Loan No. 6 102 045
Any notices, demands, or requests (a "notice") required to be made
under this Instrument shall comply with the requirements of this Section. Each
notice shall be in writing and sent (a) by depositing it with the United States
postal service, or any official successor thereto, certified or registered mail,
return receipt requested, with adequate postage prepaid; (b) by depositing it
with a reputable overnight courier service from whom a receipt is available; or
(c) by personal delivery, provided a signed receipt is obtained. Each notice
shall be effective upon being so deposited in the case of (a) and (b) above or
upon delivery in the case of item (c) above, but the time period in which a
response to any notice must be given or any action taken with respect thereto
shall commence to run from the date of receipt of the notice by the addressee
thereof, as evidenced by the return receipt. Rejection or other refusal by the
addressee to accept or receipt the delivery, or the inability to deliver because
of a changed address of which no notice was given, shall be deemed to be the
receipt of the notice sent. Any party shall have the right from time to time to
change the address or individual's attention to which notices to it shall be
sent and to specify up to two (2) additional addresses to which copies of the
notices to it shall be sent by giving the other party hereto at least ten (10)
days' prior notice thereof.
Section 9.04 Right to Deal. In the event that ownership of the
Collateral (or any part thereof) becomes vested in a person other than Debtor,
Secured Party may, without notice to Debtor, deal with such successor or
successors in interest with reference to this Instrument or the Obligations in
the same manner as with Debtor, without in any way vitiating or discharging
Debtor's liability hereunder or for the payment of the Obligations or being
deemed a consent to such vesting.
<PAGE>
Section 9.05 No Merger.
(a) If both the lessor's and the lessee's interest under any Lease
shall at any time become vested in any one person, this Instrument and the lien
and security interest created hereby shall not be destroyed or terminated by the
application of the doctrine of merger, and, in such event, Secured Party shall
continue to have and enjoy all of the rights and privileges of Secured Party
hereunder as to each separate estate.
(b) Upon foreclosure of the lien created hereby on the Collateral (or
any part thereof), as herein provided, any Leases then existing shall not be
destroyed or terminated by application of the doctrine of merger or as a matter
of law or as a result of such foreclosure unless Secured Party or any purchaser
at the foreclosure sale shall so elect by notice to the lessee in question.
Section 9.06 Applicable Law. This Instrument shall be governed by
and construed in accordance with the law of the State of Florida.
Section 9.07 Appointment of Secured Party. Debtor hereby appoints
Secured Party as its attorney-in-fact, which appointment is irrevocable and
shall be deemed to be coupled with an interest, with respect to the execution,
acknowledgment, delivery, and filing or recording for and in the name of Debtor
of any of the documents or instruments referred to in Sections 3.04 and 3.19.
Section 9.08 Sole Discretion of Secured Party. Except as otherwise
expressly provided herein, whenever Secured Party's judgment, consent, or
approval is required hereunder for any matter, or Secured Party shall have an
option or election hereunder, such judgment, the decision as to whether or not
to consent to or approve the same, or the exercise of such option or election
shall be in the sole discretion of Secured Party.
Section 9.09 Provisions as to Covenants and Agreements. All of
Debtor's covenants and agreements hereunder shall run with the land, and time is
of the essence with respect thereto.
Section 9.10 Matters to be in Writing. This Instrument cannot be
altered, amended, modified, terminated, or discharged except in a writing signed
by the party against whom enforcement of such alteration, amendment,
modification, termination, or discharge is sought. No waiver, release, or other
forbearance by Secured Party will be effective against Secured Party unless it
is in a writing signed by Secured Party, and then only to the extent expressly
stated.
Section 9.11 Submission to Jurisdiction. Without limiting the right
of Secured Party to bring any action or proceeding against the undersigned or
its property arising out of or relating to the Obligations (an "Action") in the
courts of other jurisdictions, Debtor hereby irrevocably submits to the
jurisdiction of any Florida state court or federal court sitting in the State of
Florida, and Debtor hereby irrevocably agrees that any Action may be heard and
determined in such Florida state court or in such federal court. Debtor hereby
irrevocably waives, to the fullest extent that it may effectively do so, the
defense of an inconvenient forum to the maintenance of any Action in such
jurisdiction. Debtor hereby irrevocably agrees that the summons and complaint or
any other process in any Action in any jurisdiction may be served by mailing to
any of the addresses set forth herein or by hand-delivery to a person of
suitable age and discretion at any such address. Such service will be complete
on the date such process is so mailed or delivered, and Debtor will have thirty
(30) days from such completion of service in which to respond in the manner
provided by law. Debtor may also be served in any other manner permitted by law,
in which event Debtor's time to respond shall be as provided by law.
<PAGE>
Section 9.12 Construction of Provisions. The following rules of
construction shall be applicable for all purposes of this Instrument, and all
documents or instruments supplemental hereto, unless the context otherwise
requires:
(a) All references herein to numbered Articles or Sections or to
lettered Exhibits are references to the Articles and Sections hereof and the
Exhibits annexed to this Instrument, unless expressly otherwise designated in
context.
(b) The terms "include," "including," and similar terms shall be
construed as if followed by the phrase "without being limited to."
(c) The term "Collateral" and the term "Premises" shall be construed
as if followed by the phrase "or any part thereof."
(d) The term "Obligations" shall be construed as if followed by the
phrase "or any other sums secured hereby, or any part thereof."
(e) Words of masculine, feminine, or neuter gender shall mean and
include the correlative words of the other genders, and words importing the
singular number shall mean and include the plural number, and vice versa.
(f) The term "person" shall include natural persons, firms,
partnerships, corporations, and any other public and private legal entities.
(g) The term "provisions," when used with respect hereto or to any
other document or instrument, shall be construed as if preceded by the phrase
"terms, covenants, agreements, requirements, conditions, and/or."
(h) All Article, Section, and Exhibit captions herein are used for
convenience and reference only and in no way define, limit, or describe the
scope or intent of, or in any way affect, this Instrument.
(i) No inference in favor of or against any party shall be drawn from
the fact that such party has drafted any portion thereof.
(j) The cover page of and all recitals set forth in, and all Exhibits
to, this Instrument are hereby incorporated in this Instrument.
(k) All obligations of Debtor hereunder shall be performed and
satisfied by or on behalf of Debtor at Debtor's sole cost and expense.
(1) The term "lease" shall mean "tenancy, subtenancy, lease, sublease,
or rental agreement," the term "lessor" shall mean "landlord, sublandlord,
lessor, and sublessor," and the term "lessee" shall mean "tenant, subtenant,
lessee, and sublessee."
<PAGE>
Section 9.13 Successors and Assigns. The provisions hereof shall be
binding upon Debtor, and the heirs, devisees, representatives, successors, and
assigns of Debtor, including successors in interest of Debtor in and to all or
any part of the Collateral, and shall inure to the benefit of Secured Party and
its heirs, successors, substitutes, and assigns. All references in this
Instrument to Debtor or Secured Party shall be construed as including all of
such other persons with respect to the person referred to. Where two or more
persons have executed this Instrument, the obligations of such persons shall be
joint and several, except to the extent the context clearly indicates otherwise.
Secured Party shall have the right in its sole discretion at any time during the
term of this Instrument (a) to sell, assign, syndicate, or otherwise transfer
and/or dispose of all or any portion of its interest in the Note and the
Obligations and (b) to submit to Secured Party's assignees the financial data
and all other information being furnished by Debtor to Secured Party under the
terms of this Instrument.
Section 9.14 Counterparts. This Instrument may be executed in any
number of counterparts, with the same effect as if all parties hereto had
executed the same document. All such counterparts shall be construed together
and shall constitute one instrument, but in making proof hereof it shall only be
necessary to produce one such counterpart.
WAIVER OF TRIAL BY JURY. DEBTOR HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THIS
INSTRUMENT, THE LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF SECURED PARTY IN
CONNECTION THEREWITH.
IN WITNESS WHEREOF, the undersigned have executed and sealed this
Instrument the day first set forth above.
BORROWER:
WITNESSES: USF&G/LEGG MASON REALTY PARTNERS
LIMITED PARTNERSHIP, a Maryland
limited partnership
_____________________________
Signature By: USF&G Realty Partners, Inc., a
Print Name:__________________ Maryland corporation, General
Partner
By:_____________________________
_____________________________ Name:____________________
Signature Title:___________________
Print Name:__________________
Attest:_________________________
Name:____________________
Title:___________________
[CORPORATE SEAL]
<PAGE>
STATE OF _______________
COUNTY OF _____________
The foregoing instrument was acknowledged before me, this
__________________, by ________________, as ___________ of __________________,
a___________ ___________. He is personally known to me or has produced driver's
license no. ________ issued by the State of ________ as identification.
Notary Public
My Commission Expires:
<PAGE>
Exhibit A
LEGAL DESCRIPTION OF PREMISES
Parcel 12, ORANGEWOOD NEIGHBORHOOD 2, according to the plat thereof recorded in
Plat Book 17, Pages 81 through 87, of the Public Records of Orange County,
Florida.
<PAGE>
Exhibit B
DESCRIPTION OF PERSONAL PROPERTY SECURITY
1. All machinery, apparatus, goods, equipment, materials, fittings,
fixtures, chattels, and tangible personal property, and all appurtenances and
additions thereto and betterments, renewals, substitutions, and replacements
thereof, now owned or hereafter acquired by Debtor, wherever situate, and now or
hereafter located on, attached to, contained in, or used or usable in connection
with the real property described in Exhibit A attached hereto and incorporated
herein (the "Premises"), and all improvements located thereon (the
"Improvements") or placed on any part thereof, though not attached thereto,
including all screens, awnings, shades, blinds, curtains, draperies, carpets,
rugs, furniture and furnishings, heating, electrical, lighting, plumbing,
ventilating, air-conditioning, refrigerating, incinerating and/or compacting
plants, systems, fixtures and equipment, elevators, hoists, stoves, ranges,
vacuum and other cleaning systems, call systems, sprinkler systems and other
fire prevention and extinguishing apparatus and materials, motors, machinery,
pipes, ducts, conduits, dynamos, engines, compressors, generators, boilers,
stokers, furnaces, pumps, tanks, appliances, equipment, fittings, and fixtures.
2. All funds, accounts, deposits, instruments, documents, contract
rights, general intangibles, notes, and chattel paper arising from or by virtue
of any transaction related to the Premises, the Improvements, or any of the
personal property described in this Exhibit B.
3. All permits, licenses, franchises, certificates, and other rights
and privileges now held or hereafter acquired by Debtor in connection with the
Premises, the Improvements, or any of the personal property described in this
Exhibit B.
4. All right, title, and interest of Debtor in and to the name and
style by which the Premises and/or the Improvements is known, including
trademarks and trade names relating thereto.
5. The following items of tangible personal property: See Exhibit B-1,
if any, attached hereto and incorporated herein.
6. All right, title, and interest of Debtor in, to, and under all
plans, specifications, maps, surveys, reports, permits, licenses, architectural,
engineering and construction contracts, books of account, insurance policies,
and other documents of whatever kind or character, relating to the use,
construction upon, occupancy, leasing, sale, or operation of the Premises and/or
the Improvements.
7. All interests, estates, or other claims or demands, in law and in
equity, which Debtor now has or may hereafter acquire in the Premises, the
Improvements, or the personal property described in this Exhibit B.
8. All right, title, and interest now owned or hereafter acquired by
Debtor in and to all options to purchase or lease the Premises, the
Improvements, or any other personal property described in this Exhibit B, or any
portion thereof or interest therein, and in and to any greater estate in the
Premises, the Improvements, or any of the personal property described in this
Exhibit B.
<PAGE>
9. All of the estate, interest, right, title, other claim or demand,
both in law and in equity, including claims or demands with respect to the
proceeds of insurance relating thereto, which Debtor now has or may hereafter
acquire in the Premises, the Improvements, or any of the personal property
described in this Exhibit B, or any portion thereof or interest therein, and any
and all awards made for the taking by eminent domain, or by any proceeding or
purchase in lieu thereof, of the whole or any part of such property, including
without limitation, any award resulting from a change of any streets (whether as
to grade, access, or otherwise) and any award for severance damages.
10. All right, title, and interest of Debtor in and to all contracts,
permits, certificates, licenses, approvals, utility deposits, utility capacity,
and utility rights issued, granted, agreed upon, or otherwise provided by any
governmental or private authority, person or entity relating to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Premises and/or the Improvements, including all of the Debtor's rights and
privileges hereto or hereafter otherwise arising in connection with or
pertaining to the Premises and/or the Improvements, including, without limiting
the generality of the foregoing, all water and/or sewer capacity, all water,
sewer and/or other utility deposits or prepaid fees, and/or all water and/or
sewer and/or other utility tap rights or other utility rights, any right or
privilege of Debtor under any loan commitment, lease, contract, Declaration of
Covenants, Restrictions and Easements or like instrument, Developer's Agreement,
or other agreement with any third party pertaining to the ownership,
development, construction, operation, maintenance, marketing, sale, or use of
the Premises and/or the Improvements.
AND ALL PROCEEDS AND PRODUCTS OF THE FOREGOING PERSONAL PROPERTY DESCRIBED IN
THIS EXHIBIT B.
A PORTION OF THE ABOVE DESCRIBED GOODS ARE OR ARE TO BE AFFIXED TO THE REAL
PROPERTY DESCRIBED IN EXHIBIT A.
THE DEBTOR IS THE RECORD TITLE HOLDER AND OWNER OF THE REAL PROPERTY DESCRIBED
IN EXHIBIT A.
<PAGE>
Exhibit C
PERMITTED EXCEPTIONS
1. Taxes and assessments for the year 1997 and subsequent years.
2. Petition filed in Official Records Books 1948, page 639, Public Records of
Orange County, Florida.
3. Notice of Restrictions on Real Estate files in official Records Book 2244,
page 736, Public Records of Orange County, Florida.
4. Declaration of Covenants Conditions and Restrictions for "Westwood Lakes
Subdivision", filed in Official Records Book 3790, page 2732, amended by
Amendment in Official Records Book 3827, page 1018 and amended by Amendment
in Official Records Book 4115, page 4648, of the Public Records of Orange
County, Florida.
5. Amendment to a Resolution, for a Special Purpose Lighting District for
Orangewood, Westwood Unit One, filed in Official Records Book 3799, page
2320, Public Records of Orange County, Florida, said Resolution further
amended in Restated Resolution recorded in Official Records Book 5077,
page 3941.
6. Matters Per Plat as set forth in that certain plat thereof recorded in Plat
Book 17, Pages 81 through 87, of the Public Records of Orange County,
Florida.
7. Grant of Easement by Florida Land Company, a Florida corporation, filed in
Official Records Book 3819, page 439, Public Records of Orange County,
Florida.
8. Distribution Easement by Cambridge Development Group, Inc., a Florida
corporation, filed in Official Records Book 4082, page 3233, Public Records
of Orange County, Florida.
9. Cable Television Installation Agreement by American Television and
Communication Corporation d/b/a Cablevision of Central Florida and Cambridge
Development Group, Inc., filed in Official Records Book 4123, page 3744,
Public Records of Orange County, Florida.
10. Rstrictive Convenants as set forth in that certain Special Warranty Deed,
filed in Official Records Book 4039, page 3812, Public Records of Orange
County, Florida.
11. Rights of tenants under recorded leases.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,280,200
<SECURITIES> 0
<RECEIVABLES> 153,215
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35,300,042
<DEPRECIATION> 7,961,783
<TOTAL-ASSETS> 29,316,509
<CURRENT-LIABILITIES> 0
<BONDS> 21,452,351
0
0
<COMMON> (1,591,789)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,316,509
<SALES> 0
<TOTAL-REVENUES> 3,852,529
<CGS> 0
<TOTAL-COSTS> 2,641,062
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,732,932
<INCOME-PRETAX> (521,465)
<INCOME-TAX> 0
<INCOME-CONTINUING> (521,465)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (521,465)
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