<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES ACT OF 1934
Date of Report (Date of earliest event reported): August 31, 1998
WELLINGTON PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Maryland 33-82888C 39-6594066
(State of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
18650 W. Corporate Drive, Suite 300, P.O. Box 0919, Brookfield, Wisconsin 53008-0919
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (414) 792-8900
<PAGE>
Item 5. Other Events.
------------
Wellington Properties Trust, a Maryland Real Estate Investment Trust, is filing
this Form 8-K in order to file the following material contracts.
Item 7. Financial Statements and Exhibits
---------------------------------
(c) Exhibits
--------
10.1 Business Credit Agreement by and between Milwaukee Western Bank
and Wellington Properties Trust, dated March 6, 1998.
10.2 Letter from Credit Suisse First Boston Mortgage Capital LLC to
Wellington Properties Trust, dated March 2, 1998.
10.3 Guaranty by Wellington Properties Trust for the benefit of
Credit Suisse First Boston Mortgage Capital LLC, dated March 5,
1998.
10.4 Promissory Note for $2,750,000 by Lake Pointe Apartment Homes,
Inc. to Credit Suisse First Boston Mortgage Capital LLC, dated
March 5, 1998.
10.5 Mortgage, Assignment of Leases and Rents and Security Agreement
by and between Lake Pointe Apartment Homes, Inc. and Credit
Suisse First Boston Mortgage Capital LLC, dated March 5, 1998.
10.6 Common Stock Purchase Warrant by Wellington Properties Trust to
Credit Suisse First Boston Mortgage Capital LLC, dated March 5,
1998.
10.7 Registration Rights Agreement by and between Wellington
Properties Trust and Credit Suisse First Boston Mortgage Capital
LLC, dated March 5, 1998.
10.8 Note by and between Maple Grove Apartment Homes, Inc. and
American Property Financing, Inc., dated May 6, 1997.
10.9 Mortgage, Assignment of Leases and Rents and Security Agreement
by and between Maple Grove Apartment Homes, Inc. and American
Property Financing, Inc., dated May 6, 1997.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
WELLINGTON PROPERTIES TRUST,
a Maryland Real Estate Investment Trust
By: /s/ ARNOLD K. LEAS
---------------------------
Name: Arnold K. Leas
Title: Chief Executive Officer
Date: August 31, 1998
3
<PAGE>
EXHIBIT 10.1
Business
W.B.A. 448BCA (4/14/97) F11238 Boxes not checked
Wisconsin Bankers Association 1997 are inapplicable
Note No.
BUSINESS CREDIT AGREEMENT
(Business Loans)
The undersigned ("Customer", whether one or more) agrees with the
undersigned lender ("Lender") as follows:
1. LOANS. Customer requests that Lender lend to Customer from time to
time such amounts as Customer may request in accordance with this Agreement
(the "Loans"), and, subject to the terms of this Agreement, Lender agrees to
lend such amounts up to (a) [X] the aggregate principal amount of $300,000.00 at
any time outstanding, within which amount Customer may borrow, repay and
reborrow under this Agreement (b) [_] the aggregate principal amount of $ n/a
(the "Credit Limit"), Lender is not obligated to but may make Loans in excess of
the Credit Limit, and in any event Customer is liable for and agrees to pay all
Loans and other charges made to or imposed on Customer under this Agreement.
2. LOAN PROCEDURES. Customer may obtain Loans under this Agreement only
as provided below;
(a) [_] Customer shall give Lender at least n/a business days'
prior notice of any Loan requested under this Agreement,
specifying the date and amount of the Loan, Lender will
make the Loan available to Customer [_] by crediting the
amount of the Loan to Customer's deposit account no. n/a [_]
by n/a.
(b) [_] Whenever the ledger balances in Customer's deposit account
no. n/a is less than $ n/a on any business day ("Trigger
Amount"), for whatever reason, Customer requests Lender to
automatically advance funds in increments of $ n/a to
Customer's deposit account in an amount sufficient to
increase the balance to the Trigger amount, or such lesser
amount as may be available to Customer under this Agreement.
(c) [X] by Cashier's check or deposit to Demand Deposit Account to
be determined
3. FEES. Customer agrees to pay the following nonrefundable fees as a
condition of access to credit under this Agreement:
(a) [_] Commitment fee in the amount of $ n/a payable n/a.
(b) [_] Commitment fee in an amount equal to n/a % per year of
the average daily unused portion of the Credit Limit from
the date of this Agreement until the Termination Date
specified in section 6 payable [_] at the times interest is
payable under section 5 [_] on the n/a day of each
n/a [_] n/a.
(c) [_] Annual fee of n/a payable n/a
(d) [_] n/a
Customer agrees to repay any fees and charges described above as Loans under
this Agreement if such fees and charges are not required by Lender to be paid in
cash by Customer at the time the fee or charge is incurred under this
Agreement. Furthermore, charges for credit insurance if separately requested by
Customer may be charged by Lender as Loans to Customer under this Agreement.
4. INTEREST RATE AND OTHER CHARGES. Customer agrees to pay interest to
Lender on the unpaid principal balance outstanding from time to time under this
agreement [Check (a) or (b); only one shall apply.];
(a) [_] At the rate of n/a% per year.
(b) [X] At the annual rate which is equal to the following Index
Rate [X] plus [_] minus 0.500 percentage points. The Index
Rate is Milwaukee Western Bank Reference Rate. The Index
Rate may or may not be the lowest rate charged by Lender.
Any change in the interest rate resulting from a change in
the Index Rate shall become effective without notice to
Customer as of the change in the Index Rate. A change in the
interest rate will apply both to the outstanding principal
balance and to new Loans. If the Index Rate ceases to be
made available to Lender during the term of this Agreement
Lender may substitute a comparable Index.
Interest under (a) or (b) is computed on the basis of the actual number of days
the principal balance, is unpaid based upon a year of [X] 360 days [_] 365 days,
if any payment (other than the final payment) is not made on or before the 15th
day after its due date, Lender may collect a delinquency change of [X] 5.00%
of the unpaid amount [_] $ n/a. Unpaid principal and interest bear interest
after maturity (whether by acceleration or lapse of time) until paid at the rate
[X] which would otherwise be applicable plus 4,000 percentage points [_] of
n/a% per year, computed on the same basis, Customer agrees to pay a
charge of $15.00 for each check presented for payment under this Agreement
which is returned unsatisfied.
5. PAYMENT SCHEDULE. Customer agrees to pay to lender unpaid principal
balance and accrued interest as follows: [Check (a), (b), (c) or (d); only one
shall apply.]
(a) [_] in one payment on [_] demand [_] the termination Date.
(b) [X] in payments of accrued interest, beginning March 30, 1998, and on
the same day(s) of each successive month thereafter, plus a final
payment of unpaid principal and accrued interest due on the Termination
Date specified in section 6.
(c) [_] in payments each equal to n/a% of the unpaid principal balance,
plus accrued interest, beginning n/a and on the same day(s) of each
n/a month thereafter, plus a final payment of unpaid principal
and accrued interest due on the Termination Date specified in section
6.
(d) [_] n/a
--------------------------------------------------------------------
n/a
--------------------------------------------------------------------
n/a
--------------------------------------------------------------------
In addition, Customer shall immediately pay any amount by which the Loans exceed
the Credit Limit, any prior unpaid payments and any unpaid fees and charges.
Lender is authorized to automatically charge payments due under this Agreement
to any account of Customer with Lender. If payments are not automatically
charged to Customers account, payments must be made to Lender at its address
shown below and are not credited until received in Lender's office. Lender is
authorized to make book entries evidencing Loans and payments under this
Agreement and the aggregate unpaid amount of all Loans as evidenced by those
entries is presumptive evidence that those amounts are outstanding and unpaid to
Lender.
6. TERMINATION. Unless sooner terminated under section 11, Customer's right
to obtain Loans and Lender's obligations to extend credit under this Agreement
terminate on the date payment is due under section 5(a), if applicable, or on
December 31, 1998 whichever is earlier (the "Termination Date"). [_] if checked
here, the Termination Date shall be automatically extended from year to year for
one year periods after this date unless Lender gives Customer notice to the
contrary at least 30 days prior to the Termination Date, as extended from year
to year. Customer may terminate Customer's right to obtain Loans under this
Agreement at any time and for any reason by written notice to the lender. Such
notice of termination signed by a Customer shall be binding on each Customer who
signs this Agreement. Termination, for whatever reason, does not affect Lender's
rights power and privileges, nor Customer duties and liabilities, with regard to
the then existing balance under this Agreement. Lender may refuse to grant any
Loan request received by Lender on or after the Termination Date.
7. PERSONS BOUND AND OTHER PROVISIONS. This Agreement shall be binding upon
and inure to the benefit of Lender and Customer and their respective heirs,
personal representatives, successors and assigns, except that Customer may not
assign or transfer any of Customer's rights under this Agreement without the
prior written consent of Lender. This Agreement includes the Additional
Provisions on the reverse side, Dated as of March 6, 1998.
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<S> <C>
MILWAUKEE WESTERN BANK WELLINGTON PROPERTIES TRUST
- --------------------------------------(SEAL) -----------------------------------------(SEAL)
(Name of Lender)
_______________________________________________
6001 W. CAPITOL DRIVE
MILWAUKEE WT 53216 By /s/ Arnold B. Leas
- -------------------------------------------- -----------------------------------------------
(Address) Arnold K. Leas President
-----------------------------------------(SEAL)
By__________________________________________ By /s/ Robert F. Rice
Mark P. Schaus -----------------------------------------(SEAL)
( Vice President ) Robert F. Rice, Secretary
- -------------------------------------------- -----------------------------------------------
(Title)
By__________________________________________ _________________________________________(SEAL)
(__________________________________________) _______________________________________________
(Title)
_________________________________________(SEAL)
_______________________________________________
18650 W. Corporate Drive
Brookfield, WI 53008
-----------------------------------------------
(Address)
</TABLE>
<PAGE>
ADDITIONAL PROVISIONS
8. SECURITY INTEREST. This Agreement is secured by all existing and
future security agreements, assignments and mortgages from any Customer to
Lender, from any guarantor of this Agreement to Lender, and from any other
person providing collateral security for Customer's obligation to Lender (all
called "Security Documents"), and payment of the loans may be accelerated
according to any of them. Unless a lien would be prohibited by law or would
render a nontaxable account taxable, Customer also grants to lender a security
interest and lien in any deposit account Customer may at any time have with
Lender. Lender may at any time after the occurrence of an event of default set-
off any amount unpaid under this Agreement against any deposit balances or other
money now or hereafter owed to Customer by Lender.
9. VENUE. To the extent not prohibit by law, venue for any legal
proceeding relating to enforcement of this Agreement shall be, at lender's
option, the county in which Lender has its principal office in this state, the
county in which customer resides, or the county in which this Agreement was
executed by Customer.
10. FINANCIAL STATEMENT. Customer shall furnish to lender financial
statements at least annually and such other financial information respecting
Customer at such times and in such form as lender may request from time to time.
11. DEFAULT AND ACCELERATION. Upon the occurrence of any one or more of
the following events of default: (a) Customer fails to pay any amount when due
under this Agreement or under any other instrument evidencing any indebtedness
of Customer, (b) any information provided by Customer in connection with this
Agreement is or was false or fraudulent in any material respect, (c) a material
adverse change occurs in Customer's financial condition, (d) Customer fails to
timely observe or perform any of the duties contained in this Agreement, (e) any
guaranty of Customers's obligations under this Agreement is revoked or becomes
unenforceable for any reason or any such guarantor dies or ceases to exist, or
(f) an event of default occurs under any Security Document; then, at lender's
Option, and upon written or verbal notice to Customer, Lender's obligation to
make Loans under this Agreement shall terminate and the total unpaid balance
shall become immediately due and payable without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by
Customer. Lender's obligation to make Loans under this Agreement shall
automatically terminate and the total unpaid balance shall automatically become
due and payable in the event Customer becomes the subject of bankruptcy or other
insolvency proceedings. Lender may waive any default without waiving any other
subsequent or prior default. Customer agrees to pay all costs of collection
before and after judgment, including reasonable attorneys' fees (including those
incurred in successful defense of settlement of any counterclaim brought by
Customer or incident to any action or proceeding involving Customer brought
pursuant to the United States Bankruptcy Code). Customer agrees to indemnity and
hold harmless Lender, its officers, directors, employees and agents, from and
against any and all claims, damages, judgments, penalties and expenses,
including reasonable attorneys' fees, arising directly or indirectly from credit
extended under this Agreement or the activities of Customer. This indemnity
shall survive termination of this Agreement, the repayment of all Loans and the
discharge and release or any collateral for the Loans.
12. AMENDMENT. No Amendment, modification, termination or waiver of any
provision of the Agreement shall in any event be affective unless it is in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purposes for which given.
13. ENTIRE AGREEMENT; USE OF PROCEEDS. This Agreement and the Security
Documents are intended by Customer and Lender as a final expression of their
agreement and as a complete and exclusive statement of its terms, there being no
conditions to the full effectiveness of this Agreement except as set forth in
this Agreement and the Security Documents. Customer represents and warrants to
Lender that no part of any Loan will be used for personal, family, household or
agricultural purposes.
14. NO WAIVER; REMEDIES. No failure on the part of Lender to exercise,
and no delay in exercising, any right, power or remedy under this Agreement
shall operate as a waiver of such right, power or remedy; nor shall any single
or partial exercise of any right under this Agreement preclude any other or
further exercise of the right or the exercise of any other right. The remedies
provided in this Agreement are cumulative and not exclusive of any remedies
provided by law.
15. MORE THAN ONE CUSTOMER. If more than one person signs this Agreement
as Customer, Lender may at its option and without notice refuse any Loan request
of any Customer. Any Customer may request Loans under this Agreement. Each
Customer is jointly and severally liable for all Loans and other obligations
under this Agreement.
16. NOTICE. Except as otherwise provided in this Agreement, all notices
required or provided for under this Agreement shall be in writing and mailed,
sent or delivered, if to Customer, at any Customer's last known address as shown
on the records of Lender, and if to Lender, at its address shown on the reverse
side, or, as to each party, at such other address as shall be designated by such
party in a written notice to the other party. All such notices shall be deemed
duly given when delivered by hand or courier, or three business days after being
deposited in the mail (including any private mail service), postage prepaid,
provided that notice to Lender pursuant to section 6 shall be effective until
received by Lender and Lender has a reasonable opportunity to set on the notice.
17. ADDRESS. Customer's address is shown on the reverse side. Customer
shall immediately notify Lender in writing of any change of address.
18. INTERPRETATION. The validity, construction and enforcement of this
Agreement are governed by the internal laws of Wisconsin. Invalidity or
unenforceability or any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement.
19. OTHER PROVISIONS. (If none stated, there are no other provisions.)
<PAGE>
EXHIBIT 10.2
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
11 Madison Avenue
5th Floor
New York, New York 10010
March 2, 1998
Wellington Properties Trust
18650 West Corporate Drive, Suite 300
Brookfield, Wisconsin 53045
Attention: Arnold K. Leas, President
RE: $17,000,000 LINE OF CREDIT TO WELLINGTON PROPERTIES TRUST
---------------------------------------------------------
Gentlemen:
1. This letter (this "Letter") will confirm the agreement of
------
Wellington Properties Trust ("Wellington") and Credit Suisse First Boston
----------
Mortgage Capital LLC ("CSFB"; CSFB, its affiliates and their respective
----
successors and assigns are hereinafter collectively referred to as the
"Lender") to proceed with a permanent mortgage loan (the "Permanent Loan") with
------ --------------
respect to the property commonly known as Lake Pointe (the "Lake Pointe
Property") and first priority line of credit facility (the "Facility" and,
--------
together with the Permanent Loan, the "Loans) in an aggregate amount not to
exceed $17,000,000 proposed to be made available by Lender to bankruptcy remote,
single-purpose entities owned and controlled by Wellington (together with
Wellington, individually, a "Borrower" and collectively, the "Borrowers") in
accordance with and pursuant to the terms and conditions of that certain term
sheet attached hereto as Exhibit A (the "Term Sheet") and made a part hereof.
--------- ----------
All capitalized terms not defined in this Letter shall have the meanings
ascribed to such terms in the Term Sheet. By the execution of this Letter,
Wellington and Lender agree to proceed with the underwriting and preparation of
documentation with respect to the Permanent Loan and the Facility with due
diligence and good faith so that the Permanent Loan and the Facility can be made
available in a timely and expeditious manner.
2. The execution of this Letter shall be a condition precedent
to Lender's obligation to begin the final underwriting and the preparation of
the necessary documentation (which will include obtaining credit reports on
Wellington and the principals of Wellington and the Borrowers). Thereafter, it
is contemplated that Lender will make the Permanent Loan and execute the
documents for the Facility substantially in accordance with this Letter, the
Term Sheet and pursuant to appropriate documentation satisfactory to Lender and
executed by Wellington and the Borrowers (collectively, the "Facility
--------
Documents").
- ---------
<PAGE>
3. Upon the execution of this Letter by Wellington, a fee (the
"Structuring Advisory Fee") in the amount of $212,500 shall be deemed earned by
------------------------
CSFB and shall be payable by Wellington for CSFB's structuring of the Loans.
Except as provided to the contrary herein, the Structuring Advisory Fee shall be
non-refundable in all circumstances. A portion of the Structuring Advisory Fee
in the amount of $25,000 shall be payable upon the execution of this Letter with
the balance in amount of $187,500 shall be payable upon the closing of the
financing of the Lake Pointe Property (as hereinafter defined). Additionally,
upon the closing of the Loans, Wellington shall pay to Sandcastle Investment
Ltd. (Paul Cutler) a brokerage commission equal to $170,000 pursuant to a
separate agreement. Wellington by its execution hereof hereby represents and
warrants that it has not dealt with any brokers, finders or agents other than
Sandcastle Investment Ltd. and Paul Cutler in connection with the Permanent Loan
and the Facility.
4. Wellington agrees to use its good faith efforts to cooperate with
CSFB, and its counsel, agents and representatives, and provide CSFB, and its
counsel, agents and representatives, with all reasonably requested information
in order that CSFB may conduct its due diligence investigation and consummate
the Loans and to negotiate in good faith with Lender's counsel to finalize the
Facility Documents. Wellington further agrees to pay all out-of-pocket expenses
actually incurred by CSFB in any way relating to the Loans (including, without
limitation, CSFB's reasonable counsel's fees (which counsel estimates will
approximate between $8,500 and $10,000 plus disbursements for each individual
loan closing) and due diligence expenses in connection therewith and the costs
associated with all future advances of portions of the Facility) and to
indemnify, defend and hold Lender harmless against all costs, expenses and
damages incurred by such party as a result of or arising out of the Loans.
Wellington hereby agrees that CSFB's out-of-pocket expenses will include the
fees and disbursements of CSFB's external legal counsel and auditors, CSFB's
expenses and the fees of all third parties relating to the due diligence review
and the costs of appraisals, environmental reports and a structural engineering
reports for the Lake Pointe Property and each of the Proposed Properties (as
hereinafter defined) and any property which Wellington or the Borrowers present
to Lender for potential inclusion within the Facility. Wellington hereby agrees
that the Additional Expense Deposit will be used to reimburse CSFB or otherwise
pay for those expenses. If the Loans are not made as a result of Lender's
willful or negligent failure to perform as herein provided or, alternatively,
upon the consummation of the Loans, the unapplied portion of the Additional
Expense Deposit will be promptly returned to Wellington. The obligations in this
paragraph will survive in the event the Loans are terminated for any reason.
5. Wellington hereby acknowledges and represents that it is working
solely with Lender to procure the Loans and agrees not to, and will not cause
or permit the Borrowers or its principals, affiliates or related entities to
obtain or attempt to arrange financing for the Lake Pointe Property or any
properties which Wellington, the Borrowers or any of their principals or related
or affiliated entities acquire or contemplate acquiring (whether in the form of
a permanent mortgage, bridge financing or otherwise) with any party other than
CSFB. Should Wellington, the Borrowers or any of their principals or related or
affiliated entities breach or violate the preceding sentence, CSFB will be
entitled to retain the unapplied balance of Additional Expense Deposit and any
expense deposits previously received by CSFB and receive immediate
-2-
<PAGE>
payment, upon demand, of a break-up fee equal to $100,000, which break up fee,
the Structuring Advisory Fee, the Additional Expense Report and any expense
deposits previously received by CSFB shall constitute liquidated damages, it
being expressly acknowledged and agreed that CSFB's actual damages in such
instance will be impossible to calculate.
6. Without limiting the other provisions of this Letter or the Term
Sheet, Lender's agreement to enter into the Facility Documents or to fund the
Loans are further subject to the completion (in a manner and with results
satisfactory to Lender) of Lender's due diligence with respect to properties
which are to be subject of the Loans and all of those other matters and items
referred to in the Term Sheet. The parties acknowledge and agree that the Term
Sheet does not purport to contain all of the terms and conditions of the Loans
which will be described in greater detail (in a manner consistent with the Term
Sheet and this Letter) in the Facility Documents to be prepared with respect to
the Loans and must be agreed upon the parties hereto. Wellington understands and
acknowledges that Lender has not obtained final internal investment committee
approval for the Loans and that its agreement to make the Loans is subject to
investment committee approval and the following conditions:
(a) CSFB's satisfactory completion of due diligence and underwriting
on each property to be acquired and which is the subject of a
portion of the Facility (each a "Proposed Property" and
-----------------
collectively, the "Proposed Properties") and the Lake Pointe
Property (the "Lake Pointe Property" and together with the
--------------------
Proposed Properties, the "Collateral") and CSFB's agreement to
----------
include same in the Facility;
(b) the absence of any development occurring with respect to the
Collateral, the Borrowers or Wellington prior to the date of the
closing of the Loans and the closing with respect to each
Proposed Property, occurs which could, in CSFB's opinion,
materially and adversely affect the net operating income or value
of the Collateral or the ability of Wellington or the Borrowers
to service the Loans;
(c) the execution and delivery of definitive agreements and other
documentation relating to the Loans, the Lake Pointe Property and
each Proposed Property satisfactory to CSFB and its counsel;
(d) the receipt of financial statements from the Borrowers,
Wellington and each of the Key Principals identified on the
attached term sheet for both the last concluded financial year
and last concluded financial quarter preceding the date hereof,
which financial statements shall be audited by an accounting firm
acceptable to CSFB, including Grant Thornton;
(e) the receipt of valid certificates of occupancy and zoning
confirmation letters with respect to all of the improvements
constructed upon the Proposed Property; and
-3-
<PAGE>
(f) the satisfaction of loan closing conditions customary for
loans of this type, including, without limitation, receipt
of satisfactory counsel's opinion letters (which, for
loans in amounts less than $10,000,000 may be provided by
Wellington's in-house counsel) an updated certified survey
and a "clean" policy of mortgagee title insurance with
respect to the Lake Pointe Property and each Proposed
Property.
7. Notwithstanding anything to the contrary in this Letter or
the Term Sheet, it is understood and agreed that (a) Lender shall not be under
any obligation for the payment of any brokerage or other commission,
compensation or fee of any kind with respect to this Letter, the Term Sheet, the
Loans or the Facility Documents and (b) by the execution of this Letter,
Wellington agrees to defend, indemnify and hold Lender and its parents,
affiliates, subsidiaries, agents, consultants and attorneys harmless from and
against any and all claims (and all costs and expenses in connection therewith,
including, but not limited to, attorney's fees and disbursements) by any person
or entity for any brokeage or other commission, compensation or fee of any kind
with respect to this Letter, Term Sheet, the Loans or the Facility Documents.
The parties hereto each warrant and represent to each other that none of the
parties hereto has had any dealings (and that no person or entity on behalf of
the parties hereto has had any dealings) with any broker, finder or agent in
connection with this Letter, the Term Sheet or the Loans.
8. By the execution of this Letter, the parties hereto (a)
confirm their willingness to undertake the Loans upon the terms and conditions
set forth in this letter and the Term Sheet, (b) indicate their authorization to
each other to proceed with further due diligence and (c) hereby instruct
Lender's counsel to commence with the drafting and the preparation of the
Facility Documents.
9. This letter constitutes the entire agreement between the
parties with respect to the matters contained herein. No amendment,
modification, change or discharge of any term or provision hereof shall be valid
or binding unless the same is in writing and signed by the parties hereto. The
terms and provisions of this Letter and the other Facility Documents shall
survive the closing and funding of each of the Loans and the Permanent Loan.
10. This letter shall be governed by and construed and
interpreted in accordance with the internal laws of the State of New York.
11. Wellington hereby acknowledges its acceptance of and agreement with the
provisions of this Letter and the Term Sheet, by signing the enclosed copy of
this Letter where indicated and returning same, together with the Structuring
Advisory Fee and the Expense Deposit to the attention of the undersigned by the
close of business on March 10, 1998.
-4-
<PAGE>
Very truly yours,
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
By: /s/ Lance S. Graber
-----------------------
Name: Lance S. Graber
Title: Director
Acknowledged and Agreed to as of
this 5th day of March, 1998:
WELLINGTON PROPERTIES TRUST
By: /s/ Arnold K. Leas
------------------------
Name: Arnold K. Leas
Title: President
-5-
<PAGE>
TERM SHEET
This Term Sheet is attached to, and forms a part of, that certain
letter (the "Cover Letter") dated March 2, 1998 from Credit Suisse First Boston
------------
Mortgage Capital LLC to Wellington Properties Trust ("Wellington"). All
----------
capitalized terms used and not otherwise defined in this Term Sheet have the
meanings given to such terms in the Cover Letter.
BORROWER: The owner of each of the Proposed Properties and the Lake
Pointe Property (together with Wellington, individually,
a "Borrower" and collectively, the "Borrowers") shall be
---------
single-purpose, bankruptcy-remote corporations, limited
liability companies or limited partnerships controlled by
Wellington and meeting the requirements of S&P and
acceptable to Lender. In addition, the general partner or
managing members of each Borrower shall also be single-
purpose, bankruptcy-remote corporations controlled by
Wellington and meeting the requirements of S&P and
acceptable to Lender.
KEY PRINCIPAL: Wellington Properties Trust
MANAGER: All of the Collateral will be managed by WMC Realty Inc.,
(the "Manager"), which will be entitled to receive a fee
-------
of no more than 5% of effective gross revenues. The
Manager must subordinate its rights under the related
management agreement to Lender's lien and related debt
service.
Each property management agreement and the Facility
Documents will provide that Lender may terminate and
replace the Manager with an independent third party
manager acceptable to Lender if (i) a monetary event of
default on either the Permanent Loan or the Facility
occurs, (ii) if an event of default under any property
management agreement occurs, or (iii) if, at the end of
any calendar quarter, the DSCR (as defined below) for all
Collateral for the preceding 12 month period is less than
1.10:1.0.
TERMS OF THE LOANS:
- ------------------
FINANCING AMOUNT: The amount of the non-revolving Facility will be no
greater than $17,000,000 less the principal amount of the
Permanent Loan.
For the Permanent Loan, the loan amount will be based
upon a minimum DSCR for the Lake Pointe Property of
1.15:1.0 using an adjusted net cash flow determined by
CSFB using its then current underwriting criteria and a
constant payment reflecting the higher of the actual rate
with a 30-year amortization and an 8.81%
1
<PAGE>
constant (or 9.26% if the Lake Pointe Property is more
than 10 years old) (the "Constant").
--------
For Proposed Properties being acquired, the allocated
amount of the Facility will be based on the lesser of
(i) a 1.03:1.0 DSCR using a net cash flow determined by
CSFB using its then current underwriting criteria and
the Constant and (ii) a year-2 proforma net cash flow
acceptable to CSFB and a 1.25:1.0 DSCR using the
Constant.
Notwithstanding the above, the aggregate DSCR for all
of the Proposed Properties securing the Facility from
time to time shall not be less than 1.18:1.0 using a
net cash flow determined by CSFB in accordance with its
then current underwriting criteria, and a weighted
average constant.
"DSCR" shall mean the ratio of (a) adjusted net
----
operating income ("NOI") for the applicable Collateral
---
(as determined by CSFB in accordance with its then
current underwriting criteria) for a twelve-month
period to (b) an amount equal to the then outstanding
principal amount of the Facility (or the Permanent
Loan, if applicable) multiplied by the then applicable
Constant as described above.
ADVANCE AMOUNTS: The amount of the Permanent Loan shall not exceed an
80% loan to value ratio with respect to the Lake Pointe
Property. Any net proceeds (the "Net Proceeds") to be
received by Wellington in connection with the financing
of the Lake Pointe Property will be held by CSFB in an
interest bearing escrow account for application as
"borrower equity" for the acquisition of the Proposed
Properties or expenses of CSFB in connection with the
underwriting and/or closing or attempted closings of
additional advances of the Facility with respect to the
Proposed Properties.
The Facility amount to be made available for each
acquired Proposed Property shall not exceed 100% of
Total Acquisition Costs for each acquired Proposed
Property and a 100% loan to value ratio with respect to
such acquired Proposed Property.
TOTAL ACQUISITION COSTS: All capital costs of an acquisition (e.g. the sum of
the purchase price, transaction costs, deferred
maintenance, capital improvements) to be included in
each acquired Proposed Property's capitalization as
determined by Lender and Wellington.
CLOSING DATE: Portions of the Facility will become available and be
funded with respect to a Proposed Property (each a
"Funding") only after,
-------
2
<PAGE>
among other things, Lender and its counsel are fully
satisfied with the terms of the Facility Documents with
respect to such Proposed Property, including, without
limitation, mortgages, assignments of leases and rents, UCC-
1 financing statements, guarantees and reaffirmations of
guarantees, and other property specific documents, and the
results of CSFB's due diligence investigation with respect
to such Proposed Property. Satisfactory appraisals,
environmentals and engineering reports shall be provided for
each Proposed Property prior to the Funding thereof with
respect thereto. Lender shall not be obligated to make any
Funding after the first anniversary of the closing of the
Permanent Loan.
The closing of the Permanent Loan and the initial execution
of the Facility Documents must occur simultaneously and, in
any event, on or before March 10, 1998 or the Cover Letter
and this Term Sheet shall be deemed terminated and of no
further force or effect except to the extent same is to
survive termination pursuant to the terms hereof.
DRAW DOWN FEE: 0.75% of each portion of the Facility drawn down by a
Borrower shall be payable by such Borrower to Lender upon
each Funding with respect thereto.
MATURITY DATE: The anticipated repayment date for the Permanent Loan shall
be the 10th anniversary of the first monthly payment date
with respect thereto (the "Anticipated Repayment Date").
--------------------------
The maturity date for the Permanent Loan (the "Permanent
---------
Loan Maturity Date") shall be the date which is the 30-year
------------------
anniversary of the eleventh (11th) day of the first monthly
payment date with respect to the Permanent Loan.
The maturity date for the Facility will be the date that is
the 2nd anniversary of the initial execution of the Facility
Documents and the closing of the Permanent Loan.
EXTENSIONS: Provided no default has occurred the maturity date of the
Facility can be extended for up to six months upon written
notice to Lender no less than 30 days prior to the stated
maturity date. There shall be no Fundings during the
extension period.
CROSS DEFAULT: The Loans shall be cross-defaulted and cross-collateralized
in a manner satisfactory to the Lender. At the time of each
Funding of a portion of the Facility each Borrower and
Wellington shall execute documentation satisfactory to the
Lender evidencing such cross-default and cross-
collateralization.
3
<PAGE>
INTEREST RATE: The interest rate for the Permanent Loan will be equal to
the yield on the 10-year U.S. Treasury security (which yield
shall be determined upon the earlier to occur of a rate lock
and the closing of the Permanent Loan) plus 185 basis
points. Interest will be payable monthly in arrears and
calculated on an actual/360 basis.
The interest rate for the Facility will be equal to one-
month LIBOR, reset monthly, plus 325 basis points. Interest
will be payable monthly in arrears and will be payable on
the actual amount outstanding of the Facility on an
actual/360 basis. The interest rate for the Facility during
the extension period will be equal to one-month LIBOR, reset
monthly, plus 375 basis points.
DEFAULT INTEREST: Upon the occurrence of an event of default, the Permanent
Loan and the Facility will each accrue interest at a rate
per annum equal to the then applicable interest rate (the
Interest Rate or the Revised Interest Rate, as defined
herein) plus 500 basis points.
AMORTIZATION: During the extension period, 50% of the excess cash flow
from the Collateral after debt service and approved
operating expenses will go towards amortization of the
Facility.
PAYMENT DATE: Monthly payments on the Permanent Loan will be due on the
eleventh (11th) day of each calendar month (each, an "Owned
-----
Payment Date"), commencing on the eleventh (11th) day of the
------------
first calendar month next succeeding the closing of the
Permanent Loan.
Monthly payments on the Facility will be due on the first
day of each calendar month (each, an "Acquisitions Payment
--------------------
Date"), with five days grace, commencing on the first day of
----
the calendar month next succeeding the closing of the
Facility.
CASH MANAGEMENT: The Borrowers will be required to establish one or more
accounts (collectively, the "Clearing Account") at one or
---------------
more banks (collectively, the "Lock Box Bank") into which
all proceeds from the Collateral will be deposited. The Lock
Box Bank will be selected by the Borrowers but must be
acceptable to Lender. Following the earlier to occur of (i)
an event of default on the Loans, (ii) an event of default
under any property management agreement, or (iii) the end of
any calendar quarter, if at such time Lender determines that
the DSCR for the Collateral for the preceding 12 month
period was less than 90% of the DSCR at the time of the
closing of the Permanent Loan or the Funding of each portion
of the Facility, as applicable to each portion of the
Collateral, the Borrowers and the Manager shall be required
to
4
<PAGE>
remit all receipts and income from the Collateral directly
to a lock box maintained by the Lock Box Bank or to wire
such amounts directly into the Clearing Account.
RESERVES: For the Lake Pointe Property and each of the Proposed
Properties, the Borrowers will establish and maintain
reserves for deferred maintenance, ongoing taxes and
insurance premiums, ongoing capital expenditures and such
other purposes as CSFB shall determine to be necessary as a
result of its due diligence review. The deferred maintenance
reserve will be funded at the closing of the Permanent Loan
and on the date of each Funding and will be equal to 125% of
the amount specified in the property condition report
obtained by CSFB during its due diligence review. The
capital expenditure reserve will be funded monthly at $200
per unit for residential properties (or such other amounts
determined by CSFB for other properties or as determined
based upon its due diligence review).
Replacement reserves may be withdrawn monthly in amounts not
less than $5,000 and shall be interest bearing with the
interest accrued thereon added to the reserve account.
HYPER-AMORTIZATION: If the Permanent Loan is not repaid on the Anticipated
Repayment Date, the Permanent Loan will accrue interest from
such date at a rate (the "Revised Interest Rate") per annum
---------------------
equal to the greater of (i) the Interest Rate plus 500 basis
points and (ii) the yield as of the Anticipated Repayment
Date, calculated by linear interpolation of the yields of
U.S Treasury constant maturities with terms (one longer and
one shorter) most nearly approximating that of noncallable
U.S Treasury obligations having maturities as close as
possible to the Permanent Loan Maturity Date, plus 500 basis
points. Interest that accrues on the Permanent Loan at the
Revised Interest Rate in excess of that accruing at the
Interest Rate ("Excess Interest") shall be due and payable
---------------
on the Permanent Loan Maturity Date unless paid earlier out
of excess cash flow from the Lake Pointe Property. Unpaid
Excess Interest will accrue interest at the Revised Interest
Rate and shall be payable by Wellington on the Permanent
Loan Maturity Date.
MEZZANINE: Upon maturity and the absence of repayment of the Facility,
CSFB, at its sole option, may create fixed rate first
mortgage loans with respect to each Proposed Property on
rates and terms to-be-determined by CSFB with the balance of
any Facility amount applicable to each Proposed Property, if
any, to be provided by
5
<PAGE>
mezzanine or corporate debt with rates and terms
to be determined by CSFB prior to each such
closing.
PREPAYMENT AND DEFEASANCE:
- -------------------------
PREPAYMENT: For Prepayment of the Permanent Loan will be
locked-out for the lesser of (i) 4 years from
closing or (ii) 2 years from the REMIC start-up
date. Thereafter, prepayment is available through
defeasance only by providing substitute collateral
in the form of securities as provided for in the
Facility Documents.
The Facility shall be prepayable at par if prepaid
in full at any time after eighteen (18) months
following the execution of the Facility Documents.
Partial prepayment will be permitted only to the
extent that such prepayment is of an entire
Funding with respect to a Proposed Property and
the source of prepayment is from a CSFB permanent
loan with respect to such Proposed Property. All
proceeds of any refinance of any Proposed Property
shall be applied in repayment of the Facility. No
partial prepayment of the Facility shall be
permitted unless the adjusted net cash flow as
determined by the Lender for the remaining
Proposed Properties securing the Facility,
provides for at least a 1.30:1.0 DSCR for the
remaining balance of the Facility. No partial
prepayments shall be permitted during the
extension period.
SERVICER: Lender shall appoint one or more servicers of the
Loans in its sole and absolute discretion. The
cost of the servicers shall be paid by Lender.
RATED TRANSACTION: Lender intends to transfer the Permanent Loan and
any portion of the Facility converted to a fixed
rate loan (collectively, the "Fixed Rate Loans")
----------------
to a trust or other similar securitization vehicle
in a public or private offering. Wellington and
each Borrower shall agree to cooperate with Lender
to effect each such securitization, but shall not
be responsible for any out-of-pocket expenses in
connection therewith in excess of a di minimus
amount.
NO OTHER DEBT: None of the Borrowers or Wellington will be
permitted to have any indebtedness (secured or
unsecured) other than the Loans, short term
unsecured indebtedness with respect to the
Collateral incurred in the ordinary course of
business and such other debt as may be
specifically approved by Lender in its sole
discretion; provided, however, that Wellington
shall be entitled to maintain (i) its existing
non-recourse mortgage debt secured by the Maple
Grove Apartments located in Madison, Wisconsin and
(ii) subject to review and approval by Lender, not
more than an $800,000
6
<PAGE>
corporate unsecured line or lines of credit issued
by Milwaukee Western Bank or other lenders
approved by Lender. If any Borrower is not a
corporation, the general partner or managing
member of such Borrower will not be permitted to
have any indebtedness or make any loans.
Notwithstanding the above, in connection with the
acquisition of additional properties Wellington
may assume non-recourse debt with respect to such
acquired properties so long as same have a
remaining term of no less than three (3) years and
a loan-to-value ratio of no more than 80% in
conjunction with a property acquisition where
Wellington's equity is provided solely through the
issuance of additional stock in Wellington.
REPORTING: Each Borrower and Wellington will provide Lender
with unaudited monthly and quarterly and audited
annual income statements. The annual income
statements shall be audited by an accounting firm
acceptable to Lender including Grant Thornton. The
monthly and quarterly statements will be prepared
on a cash basis and will be required to be
delivered to Lender within 30 and 45 days,
respectively, of the end of the applicable period,
and the annual audited statement will be required
to be delivered within 120 days of the end of each
fiscal year. In addition, each Borrower will
provide a monthly calculation of DSCR, an updated
rent roll and revised occupancy statistics, as
applicable.
RECOURSE LIABILITY: The Loans will be recourse to the Borrowers and
Wellington. The recourse will include, without
limitation, the following:
(a) monthly principal and interest payments and
the final principal payment;
(b) environmental matters;
(c) fraud and misrepresentation;
(d) misapplication of rents, security deposits,
insurance and condemnation awards or other
proceeds;
(e) misappropriation of any personal property
which constitutes a portion of the collateral
for the Loans;
(f) breach of transfer restrictions, title
related covenants, single purpose covenants
and financing restrictions;
(g) waste due to willful misconduct or gross
negligence; and
7
<PAGE>
(h) bankruptcy, insolvency or interference with
Lender's pursuit of its rights or remedies.
DOCUMENTATION: The Loans and each Funding will be evidenced by
financing documentation customary for similar
transactions (including, without limitation, a
hazardous substances indemnity agreement and a
guaranty of recourse obligations) and in any event
in form and substance satisfactory to CSFB. Unless
otherwise required by Lender or its counsel all
documentation evidencing the Loans and each
Funding will be governed by New York law, except
for the mortgage and other security documents
which will be governed by local law. Documentation
for each Funding shall be substantially the same.
ASSIGNMENT: The Loans may not be transferred or assigned by
the Borrowers unless the Borrowers meet the
criteria set forth in the Facility Documents and
pay to Lender an assumption fee equal to 0.5% of
the outstanding principal balance of the Loans and
any out-of-pocket costs in connection with such
assumption.
NOI CALCULATION: The NOI for the Lake Pointe Property and each
Proposed Property shall be the NOI which will be
determined by CSFB prior to the closing of the
Permanent Loan or the Funding, as applicable, in
accordance with CSFB's then current underwriting
criteria for financings of this type and in
conformity to the extent possible with the
standards of the "Rating Agencies". The
underwriting criteria currently includes a minimum
vacancy equal to the greater of actual, 5% or
market, a management fee equal to the greater of
actual, 4% or market and a replacement reserve of
$200 to $250 per unit per year.
INSURANCE: The Collateral will be covered by fire and
casualty, machine and boiler, business
interruption and liability insurance, all in form
and substance satisfactory to CSFB. Additional
insurance, such as flood, windstorm and
earthquake, may be required. In general, the
amount of the coverage relating to damage to the
Collateral shall be in an amount not less than the
greater of the full replacement cost of the
Collateral and the principal balance of the loan
for the Property, shall contain deductibles not in
excess of the lesser of $25,000, 5% of such
replacement cost and 5% of annual NOI. All
insurance (except for earthquake or flood
insurance) shall be written by carriers with an
S&P rating of at least "AA". Business interruption
insurance shall cover a period of not less than 18
months.
8
<PAGE>
CONFIDENTIALITY: This term sheet and the letter to which it is
attached is being delivered with the understanding
that neither it nor its substance will be
disclosed to any third person, except those who
are in confidential relationships to Wellington
(i.e., Wellington's principals, counsel,
accountants and other retained business advisors)
or as may be required by law. Wellington may issue
a press release announcing the Facility upon the
closing of the financing of the Lake Pointe
Property.
COLLATERAL: The Loans will be secured by, among other things,
guarantees from Wellington, a first mortgage lien
on the Lake Pointe Property and each Proposed
Property, assignments of leases and rents for the
Lake Pointe Property and each Proposed Property, a
first priority security interest in the reserve
accounts, an assignment of cash flows or excess
cash flows from the properties securing the
Permanent Loan and the Fixed Rate Loans and other
collateral related to the Lake Pointe Property and
the Proposed Properties requested by CSFB.
The Collateral shall not be encumbered by any
mortgage, lien, claim or encumbrance other than
those that are acceptable to CSFB. In addition,
the Facility Documents will restrict the ability
of Wellington to pledge its ownership interests.
WARRANTS: At the closing of the financing of the Lake Pointe
Property Lender will receive 30,000 detachable
warrants (the "Warrants"), in form and substance
satisfactory to Lender, to acquire the voting
capital stock of Wellington, with a strike price
equal to the market price of the Wellington stock
(as determined by taking the average of the
bid/ask price for the stock over the prior two
week period, three days prior to such closing).
The Warrants shall include customary anti-
dilution, registration, first refusal, tag-along
and drag-along rights, and shall be exercisable
for a period of ten (10) years.
REIT RESTRICTIONS: While any amounts remain outstanding under the
Facility (not including the Permanent Loan),
Wellington will be prohibited from completing any
non-accretive acquisitions without the prior
written consent of Lender, which consent may be
granted or denied at Lender's discretion within
fifteen (15) business days of delivery of complete
information and documentation to Lender.
MINIMUM ASSETS: No less than three (3) and no more than five (5)
assets shall provide collateral for the Facility,
including the Lake Pointe Property. No allocation
of the Facility with respect to a Proposed
Property shall be in an amount less than $4
million and the Lender
9
<PAGE>
shall be entitled to reject any such Proposed
Property. Notwithstanding the above, the Permanent
Loan is expected to be less than $4 million.
EXIT FEE: 1% of any portion of the Facility being repaid
unless repayment is through a permanent fixed
rate loan being provided by CSFB.
RIGHT OF LAST OFFER: CSFB will have the right of last offer to
refinance or match any written offer to refinance
the Proposed Properties individually or together
should any Borrower or Wellington propose such
refinancing. Upon any refinancing of any of the
Proposed Properties by any party other than CSFB,
the entire Facility shall be immediately due and
payable and if repayment is not then permitted
pursuant to the Facility Documents then, in
addition to the payment of all sums due and
payable under the Facility Documents and the Exit
Fee, the Borrower or Wellington shall also pay to
the Lender an additional fee equal to 1% of the
outstanding principal amount of the Facility.
FACILITY CONDITION
PRECEDENT: CSFB's obligation to proceed with the Facility is
conditioned upon the closing of the financing of
the Lake Pointe Property simultaneously herewith.
PRE-CONDITION TO
CSFB'S CONSIDERATION
OF A PROPOSED PROPERTY: As a pre-condition to CSFB considering inclusion
of any Proposed Properties in the Facility, the
Borrower and Wellington shall, as the time of
their submission of information with respect to
each Proposed Property, deposit with CSFB expense
deposits in the amount of $30,000 each (the
"Subsequent Expense Deposits") to be applied by
CSFB in payment of CSFB's expenses in connection
with counsel's fees, due diligence reports,
underwriting and the preparation of the documents
with respect to the proposed advance of portions
of the Facility with respect to such Proposed
Property. To the extent CSFB continues to retain
any portion of the Net Proceeds, CSFB shall use
same for the Subsequent Expense Deposits prior to
requiring any further funds from Wellington or the
Borrower. In connection with each submission of a
Proposed Property to CSFB for its consideration,
the Borrower or Wellington shall submit to CSFB
or, in the alternative, CSFB shall obtain on the
Borrower's behalf, each of the items set forth on
Schedule A annexed hereto and made a part hereof
(collectively, the "Underwriting Items"). All such
Underwriting Items shall be prepared by third
party professionals satisfactory to CSFB in its
10
<PAGE>
sole and absolute discretion. CSFB's approval of each
Underwriting Item shall be in its sole and absolute
discretion as shall CSFB's decision to include any Proposed
Property in the Facility.
11
<PAGE>
EXHIBIT 10.3
GUARANTY
THIS GUARANTY ("GUARANTY") is executed as of March 5, 1998, by
WELLINGTON PROPERTIES TRUST, a Maryland real estate investment trust, having its
principal place of business at 18650 West Corporate Drive, Suite 300,
Brookfield, Wisconsin 53045 (whether one or more collectively referred to as
"GUARANTOR"), for the benefit of CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL
LLC, a Delaware limited liability company, having its principal office at 11
Madison Avenue, 5th Floor, New York, New York 10010 ("LENDER").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Promissory Note, dated of even date
herewith, executed by LAKE POINTE APARTMENT HOMES, INC., a Wisconsin corporation
("BORROWER"), and payable to the order of Lender in the original principal
amount of $2,750,000.00 (together with all renewals, modifications, increases
and extensions thereof, the "NOTE"), Borrower has become indebted, and may from
time to time be further indebted, to Lender with respect to a loan ("LOAN")
which is secured by the lien and security interest of a Mortgage, Assignment of
Leases and Rents and Security Agreement, of even date herewith (the "SECURITY
INSTRUMENT"), and further evidenced, secured or governed by other instruments
and documents executed in connection with the Loan (together with the Note and
Security Instrument, the "LOAN DOCUMENTS"); and
WHEREAS, Lender is not willing to make the Loan, or otherwise extend
credit, to Borrower unless Guarantor unconditionally guarantees payment and
performance to Lender of the Guaranteed Obligations (as herein defined); and
WHEREAS, Guarantor is the owner of a direct or indirect interest in
Borrower, and Guarantor will directly benefit from Lender's making the Loan to
Borrower.
NOW, THEREFORE, as an inducement to Lender to make the Loan to
Borrower, and to extend such additional credit as Lender may from time to time
agree to extend under the Loan Documents, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties do hereby agrees as follows:
ARTICLE I
NATURE AND SCOPE OF GUARANTY
----------------------------
1.1 GUARANTY OF OBLIGATION. Guarantor hereby irrevocably and
----------------------
unconditionally guarantees to Lender and its successors and assigns the payment
and performance of the Guaranteed Obligations as and when the same shall be
due and payable, whether by lapse of time, by acceleration of maturity or
otherwise. Guarantor hereby irrevocably
<PAGE>
and unconditionally covenants and agrees that it is liable for the Guaranteed
Obligations as a primary obligor.
1.2 DEFINITION OF GUARANTEED OBLIGATIONS. As used herein, the term
------------------------------------
"GUARANTEED OBLIGATIONS" means the obligations or liabilities of Borrower to
Lender for any loss, damage, cost, expense, liability, claim or other obligation
incurred by Lender (including attorneys' fee and costs reasonably incurred)
arising out of or in connection with the following:
(a) fraud or intentional misrepresentation by Borrower or
Guarantor in connection with the Loan;
(b) the gross negligence or willful misconduct by Borrower;
(c) physical waste of the Mortgaged Property (as defined in the
Security Instrument and hereinafter referred to as the "Property");
(d) the breach of any representation, warranty, covenant or
indemnification provision in that certain Environmental and Hazardous
Substances Indemnification Agreement of even date herewith given by
Borrower to Lender or in the Security Instrument concerning
environmental laws, hazardous substances or asbestos;
(e) the removal or disposal of any portion of the Property after
an Event of Default (as defined in the Security Instrument);
(f) the misapplication or conversion by Borrower of (i) any
insurance proceed paid by reason of any loss, damage or destruction to
the Property, (ii) any awards or other amounts received in connection
with the condemnation of all or a portion of the Property, (iii) any
Rents (as defined in the Security Instrument) following an Event of
Default, and (iv) any Rents paid more than one month in advance;
(g) failure to pay charges for labor or materials or other
charges that can create liens on any portion of the Property; and
(h) any security deposits collected with respect to the Property
which are not delivered to Lender upon a foreclosure of the Property
or action in lieu thereof, except to the extent any such security
deposits were applied in accordance with the terms and conditions of
any of the Leases (as defined in the Security Instrument) prior to the
occurrence of the Event of Default that gave rise to such foreclosure
or action in lieu thereof.
Notwithstanding anything to the contrary in any of the Loan Documents,
(i) Lender shall not be deemed to have waived any right which Lender may have
under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the Debt secured by the
Security Instrument or to require that all collateral
2
<PAGE>
shall continue to secure all of the Debt owing to Lender in accordance with the
Loan Documents, and (ii) Guarantor shall be liable for the full amount of the
Debt in the event that (A) the first full monthly payment of principal and
interest on the Note is not paid when due; (B) Borrower fails to maintain its
status as a single purpose entity, as required by, and in accordance with, the
Security Instrument; (C) Borrower fails to obtain Lender's prior written consent
to any subordinate financing or other voluntary lien encumbering the Property;
(D) Borrower fails to obtain Lender's prior written consent to any assignment,
transfer, or conveyance of the Property or any interest therein as required by
the Security Instrument; or (E) a receiver, liquidator or trustee of Borrower or
Guarantor shall be appointed or if Borrower or Guarantor shall be adjudicated a
bankrupt or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state law, shall
be filed by or against, consented to, or acquiesced in by, Borrower or Guarantor
or if any proceeding for the dissolution or liquidation of Borrower or Guarantor
shall be instituted; however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower or Guarantor, upon
the same not being discharged, stayed or dismissed within sixty (60) days.
1.3 NATURE OF GUARANTY. This Guaranty is an irrevocable, absolute,
------------------
continuing guaranty of payment and performance and not a guaranty of collection.
This Guaranty may not be revoked by Guarantor and shall continue to be
effective with respect to any Guaranteed Obligations arising or created after
any attempted revocation by Guarantor and after (if Guarantor is a natural
person) Guarantor's death (in which event this Guaranty shall be binding upon
Guarantor's estate and Guarantor's legal representatives and heirs). The fact
that at any time or from time to time the Guaranteed Obligations may be
increased or reduced shall not release or discharge the obligation of Guarantor
to Lender with respect to the Guaranteed Obligations. This Guaranty may be
enforced by Lender and any subsequent holder of the Note and shall not be
discharged by the assignment or negotiation of all or part of the Note.
1.4 GUARANTEED OBLIGATIONS NOT REDUCED BY OFFSET. The Guaranteed
--------------------------------------------
Obligations and the liabilities and obligations of Guarantor to Lender
hereunder, shall not be reduced, discharged or released because or by reason of
any existing or future offset, claim or defense of Borrower, or any other party,
against Lender or against payment of the Guaranteed Obligations, whether such
offset, claim or defense arises in connection with the Guaranteed Obligations
(or the transactions creating the Guaranteed Obligations) or otherwise.
1.5 PAYMENT BY GUARANTOR. If all or any part of the Guaranteed
--------------------
Obligations shall not be punctually paid when due, whether at demand, maturity,
acceleration or otherwise, Guarantor shall, immediately upon demand by Lender,
and without presentment, protest, notice of protest, notice of non-payment,
notice of intention to accelerate the maturity, notice of acceleration of the
maturity, or any other notice whatsoever, pay in lawful money of the United
States of America, the amount due on the Guaranteed Obligations to Lender at
Lender's address as set forth herein. Such demand(s) may be made at any time
coincident with or after the time for payment of all or part of the Guaranteed
Obligations, and may be made from time to time with respect to the same or
different items of Guaranteed Obligations. Such demand shall be deemed made,
given and received in accordance with the notice provisions hereof.
3
<PAGE>
1.6 NO DUTY TO PURCHASE OTHERS. It shall not be necessary for
--------------------------
Lender (and Guarantor hereby waives any rights which Guarantor may have to
require Lender), in order to enforce the obligations of Guarantor hereunder,
first to (i) institute suit or exhaust its remedies against Borrower or others
liable on the Loan or the Guaranteed Obligations or any other person, (ii)
enforce Lender's rights against any collateral which shall ever have been given
to secure the Loan, (iii) enforce Lender's rights against any other guarantors
of the Guaranteed Obligations, (iv) join Borrower or any others liable on the
Guaranteed Obligations in any action seeking to enforce this Guaranty, (v)
exhaust any remedies available to Lender against any collateral which shall ever
have been given to secure the Loan, or (vi) resort to any other means of
obtaining payment of the Guaranteed Obligations. Lender shall not be required to
mitigate damages or take any other action to reduce, collect or enforce the
Guaranteed Obligations.
1.7 WAIVERS. Guarantor agrees to the provisions of the Loan
-------
Documents, and hereby waives notice of (i) any loans or advances made by Lender
to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension
of the Note, the Security Instrument or of any other loan or credit agreement or
of Borrower's execution and delivery of any promissory notes or other documents
arising under the Loan Documents or in connection with the Property, (v) the
occurrence of any breach by Borrower or an Event of Default, (vi) Lender's
transfer or disposition of the Guaranteed Obligations, or any part thereof,
(vii) sale or foreclosure (or posting or advertising for sale or foreclosure) of
any collateral for the Guaranteed Obligations, (viii) protest, proof of non-
payment or default by Borrower, or (ix) any other action at any time taken or
omitted by Lender, and, generally, all demands and notices of every kind in
connection with this Guaranty, the Loan Documents, any documents or agreements
evidencing, securing or relating to any of the Guaranteed Obligations hereby
guaranteed.
1.8 PAYMENT OF EXPENSES. In the event that Guarantor should breach
-------------------
or fail to timely perform any provisions of this Guaranty, Guarantor shall,
immediately upon demand by Lender, pay Lender all costs and expenses (including
court costs and attorneys' fees) incurred by Lender in the enforcement hereof or
the preservation of Lender's rights hereunder. The covenant contained in this
Section shall survive the payment and performance of the Guaranteed Obligations.
1.9 EFFECT OF BANKRUPTCY. In the event that, pursuant to any
--------------------
insolvency, bankruptcy, reorganization, receivership or other debtor relief law,
or any judgement, order or decision thereunder, Lender must rescind or restore
any payment, or any part thereof, received by Lender in satisfaction of the
Guaranteed Obligations, as set forth herein, any prior release or discharge from
the terms of this Guaranty given to Guarantor by Lender shall be without effect,
and this Guaranty shall remain in full force and effect. It is the intention of
Borrower and Guarantor that Guarantor's obligations hereunder shall not be
discharged except by Guarantor's performance of such obligations and then only
to the extent of such performance.
1.10 WAIVER OF SUBROGATION, REIMBURSEMENT AND CONTRIBUTION.
-----------------------------------------------------
Nothwithstanding anything to the contrary contained in this Guaranty, Guarantor
hereby unconditionally and irrevocably waives, releases and abrogates any and
all rights it may now or
4
<PAGE>
hereafter have under any agreement, at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of Lender), to
assert any claim against or seek contribution indemnification or any other form
of reimbursement from Borrower or any other party liable for payment of any or
all of the Guaranteed Obligations for any payment made by Guarantor under or in
connection with this Guaranty or otherwise.
1.11 BORROWER. The term "BORROWER" as used herein shall include any
--------
new or successor corporation, association, partnership (general or limited),
joint venture, trust or other individual or organization formed as a result of
any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower
or any interest in Borrower.
ARTICLE II
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
--------------------------------------
Guarantor hereby consents and agrees to each of the following, and
agrees that Guarantor's obligations under this Guaranty shall not be released,
diminished, impaired, reduced or adversely affected by any of the following, and
waives any common law, equitable, statutory or other rights (including without
limitation rights to notice) which Guarantor might otherwise have as a result of
or in connection with any of the following:
2.1 MODIFICATIONS. Any renewal, extension, increase, modification,
-------------
alteration or rearrangement of all or any part of the Guaranteed Obligations,
the Note, the Security Instrument, the other Loan Documents, or any other
document, instrument, contract or understanding between Borrower and Lender, or
any other parties, pertaining to the Guaranteed Obligations or any failure of
Lender to notify Guarantor of any such action.
2.2 ADJUSTMENT. Any adjustment, indulgence, forbearance or compromise
----------
that might be granted or given by Lender to Borrower or any Guarantor.
2.3 CONDITION OF BORROWER OR GUARANTOR. The insolvency, bankruptcy,
----------------------------------
arrangement, adjustment, composition, liquidation, disability, dissolution or
lack of power of Borrower, Guarantor or any other party at any time liable for
the payment of all or part of the Guaranteed Obligations; or any dissolution of
Borrower or Guarantor, or any sale, lease or transfer of any or all of the
assets of Borrower or Guarantor, or any changes in the shareholders, partners or
members of Borrower or Guarantor; or any reorganization of Borrower or
Guarantor.
2.4 INVALIDITY OF GUARANTEED OBLIGATIONS. The invalidity, illegality
------------------------------------
or unenforceability of all or any part of the Guaranteed Obligations, or any
document or agreement executed in connection with the Guaranteed Obligations,
for any reason whatsoever, including without limitation the fact that (i) the
Guaranteed Obligations, or any part thereof, exceeds the amount permitted by
law, (ii) the act of creating the Guaranteed Obligations or any part thereof is
ultra vires, (iii) the officers or representatives executing the Note, the
- ----- -----
Security Instrument or the other Loan Documents or otherwise creating the
Guaranteed Obligations acted in excess of their
5
<PAGE>
authority, (iv) the Guaranteed Obligations violate applicable usury laws, (v)
the Borrower has valid defenses, claims or offsets (whether at law, in equity or
by agreement) which render the Guaranteed Obligations wholly or partially
uncollectible from Borrower, (vi) the creation, performance or repayment of the
Guaranteed Obligations (or the execution, delivery and performance of any
document or instrument representing part of the Guaranteed Obligations or
executed in connection with the Guaranteed Obligations, or given to secure the
repayment of the Guaranteed Obligations) is illegal, uncollectible or
unenforceable, or (vii) the Note, the Security Instrument or any of the other
Loan Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that Guarantor shall remain liable hereon regardless
of whether Borrower or any other person be found not liable on the Guaranteed
Obligations or any part thereof for any reason.
2.5 RELEASE OF OBLIGORS. Any full or partial release of the liability
-------------------
of Borrower on the Guaranteed Obligations, or any part thereof, or of any
co-guarantors, or any other person or entity now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and severally, to pay,
perform, guarantee or assure the payment of the Guaranteed Obligations, or any
part thereof, it being recognized, acknowledged and agreed by Guarantor that
Guarantor may be required to pay the Guaranteed Obligations in full without
assistance or support of any other party, and Guarantor has not been induced to
enter into this Guaranty on the basis of a contemplation, belief, understanding
or agreement that other parties will be liable to pay or perform the Guaranteed
Obligations, or that Lender will look to other parties to pay or perform the
Guaranteed Obligations.
2.6 OTHER COLLATERAL. The taking or accepting of any other security,
----------------
collateral or guaranty, or other assurance of payment, for all or any part of
the Guaranteed Obligations.
2.7 RELEASE OF COLLATERAL. Any release, surrender, exchange,
---------------------
subordination, deterioration, waste, loss or impairment (including without
limitation negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations.
2.8 CARE AND DILIGENCE. The failure of Lender or any other party to
------------------
exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, property or security, including but not limited to any neglect,
delay, omission, failure or refusal of Lender (i) to take or prosecute any
action for the collection of any of the Guaranteed Obligations or (ii) to
foreclose, or initiate any action to foreclose, or, once commenced, prosecute to
completion any action to foreclose upon any security therefor, or (iii) to take
or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Guaranteed Obligations.
2.9 UNENFORCEABILITY. The fact that any collateral, security,
----------------
security interest or lien contemplated or intended to be given, created or
granted as security for the repayment of the Guaranteed Obligations, or any
part thereof, shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other security interest or lien, it being
6
<PAGE>
recognized and agreed by Guarantor that Guarantor is not entering into this
Guaranty in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectibilty or value of any of the collateral for the
Guaranteed Obligations.
2.10 OFFSET. The Note, the Guaranteed Obligations and the
------
liabilities and obligations of the Guarantor to Lender hereunder shall not be
reduced, discharged or released because of or by reason of any existing or
future right or offset, claim or defense of Borrower against Lender, or any
other party, or against payment of the Guaranteed Obligations, whether such
right of offset, claim or defense arises in connection with the Guaranteed
Obligations (or the transactions creating the Guaranteed Obligations) or
otherwise.
2.11 MERGER. The reorganization, merger or consolidation of Borrower
------
into or with any other corporation or entity.
2.12 PREFERENCE. Any payment by Borrower to Lender is held to
----------
constitute a preference under bankruptcy laws, or for any reason Lender is
required to refund such payment or pay such amount to Borrower or someone else.
2.13 OTHER ACTIONS TAKEN OR OMITTED. Any other action taken or
------------------------------
omitted to be taken with respect to the Loan Documents, the Guaranteed
Obligations, or the security and collateral therefor, whether or not such action
or omission prejudices Guarantor or increases the likelihood that Guarantor will
be required to pay the Guaranteed Obligations pursuant to the terms hereof, it
is the unambiguous and unequivocal intention of Guarantor that Guarantor shall
be obligated to pay the Guaranteed Obligations when due, notwithstanding any
occurrence, circumstance, event, action, or omission whatsoever, whether
contemplated or uncontemplated, and whether or not otherwise or particularly
described herein, which obligation shall be deemed satisfied only upon the full
and final payment and satisfaction of the Guaranteed Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to enter into the Loan Documents and extend credit to
Borrower, Guarantor represents and warrants to Lender as follows:
3.1 BENEFIT. Guarantor is an affiliate of Borrower, is the owner of
-------
a direct or indirect interest in Borrower, and has received, or will receive,
direct or indirect benefit from the making of this Guaranty with respect to the
Guaranteed Obligations.
3.2 FAMILIARITY AND RELIANCE. Guarantor is familiar with, and has
------------------------
independently reviewed books and records regarding, the financial condition of
the Borrower and is familiar with the value of any and all collateral intended
to be created as security for the payment of the Note or Guaranteed Obligations;
however, Guarantor is not relying on such financial condition or the collateral
as an inducement to enter into this Guaranty.
7
<PAGE>
3.3 NO REPRESENTATION BY LENDER. Neither Lender nor any other party
---------------------------
has made any representation, warranty or statement to Guarantor in order to
induce the Guarantor to execute this Guaranty.
3.4 GUARANTOR'S FINANCIAL CONDITION. As of the date hereof, and after
-------------------------------
giving effect to this Guaranty and the contingent obligation evidenced hereby,
Guarantor is, and will be, solvent, and has and will have assets which, fairly
valued, exceed its obligations, liabilities (including contingent liabilities)
and debts, and has and will have property and assets sufficient to satisfy and
repay its obligations and liabilities.
3.5 LEGALITY. The execution, delivery and performance by Guarantor of
--------
this Guaranty and the consummation of the transactions contemplated hereunder do
not, and will not, contravene or conflict with any law, statute or regulation
whatsoever to which Guarantor is subject or constitute a default (or an event
which with notice or lapse of time or both would constitute a default) under, or
result in the breach of, any indenture, Security Instrument, charge, lien, or
any contract, agreement or other instrument to which Guarantor is a party or
which may be applicable to Guarantor. This Guaranty is a legal and binding
obligation of Guarantor and is enforceable in accordance with its terms, except
as limited by bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights.
3.6 NON-ACCRETIVE ACQUISITIONS. For so long as any amounts (with the
--------------------------
exception of amounts due under the Loan) remain outstanding on that certain line
of credit in the maximum amount of $17,000,000.00 by Lender to Guarantor or any
subsidiary of Guarantor, Guarantor will not complete any non-accretive
acquisitions without the prior written consent of Lender, which consent may be
granted or denied at Lender's discretion within fifteen (15) business days of
Lender's receipt of complete and accurate information and documentation
regarding any such transaction.
3.7 SURVIVAL. All representations and warranties made by Guarantor
--------
herein shall survive the execution hereof.
ARTICLE IV
SUBORDINATION OF CERTAIN INDEBTEDNESS
-------------------------------------
4.1 SUBORDINATION OF ALL GUARANTOR CLAIMS. As used herein, the term
-------------------------------------
"GUARANTOR CLAIMS" shall mean all debts and liabilities of Borrower to
Guarantor, whether such debts and liabilities now exist or are hereafter
incurred or arise, or whether the obligations of Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or liabilities be evidenced by note,
contract, open account, or otherwise, and irrespective of the person or persons
in whose favor such debts or liabilities may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by Guarantor. The Guarantor Claims shall include without limitation
all rights and claims of Guarantor against Borrower (arising as a result of
subrogation or otherwise) as a result of Guarantor's payment of all or a portion
of the
8
<PAGE>
Guaranteed Obligations. Upon the occurrence of an Event of Default or the
occurrence of an event which would, with the giving of notice or the passage of
time, or both, constitute an Event of Default, Guarantor shall not receive or
collect, directly or indirectly, from Borrower or any other party any amount
upon the Guarantor Claims.
4.2 CLAIMS IN BANKRUPTCY. In the event of receivership, bankruptcy,
--------------------
reorganization, arrangement, debtor's relief, or other insolvency proceedings
involving Guarantor as debtor, Lender shall have the right to prove its claim in
any such proceeding so as to establish its rights hereunder and receive directly
from the receiver, trustee or other court custodian dividends and payments which
would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such
dividends and payments to Lender. Should Lender receive, for application upon
the Guaranteed Obligations, any such dividend or payment which is otherwise
payable to Guarantor, and which, as between Borrower and Guarantor, shall
constitute a credit upon the Guarantor Claims, then upon payment to Lender in
full of the Guaranteed Obligations, Guarantor shall become subrogated to the
rights of Lender to the extent that such payments to Lender on the Guarantor
Claims have contributed toward the liquidation of the Guaranteed Obligations,
and such subrogation shall be with respect to that proportion of the Guaranteed
Obligations which would have been unpaid if Lender had not received dividends or
payments upon the Guarantor Claims.
4.3 PAYMENTS HELD IN TRUST. In the event that, notwithstanding
----------------------
anything to the contrary in this Guaranty, Guarantor should receive any funds,
payment, claim or distribution which is prohibited by this Guaranty, Guarantor
agrees to hold in trust for Lender an amount equal to the amount of all funds,
payments, claims or distributions so received, and agrees that it shall have
absolutely no dominion over the amount of such funds, payments, claims or
distributions so received except to pay them promptly to Lender, and Guarantor
covenants promptly to pay the same to Lender.
4.4 LIENS SUBORDINATE. Guarantor agrees that any liens, security
-----------------
interests, judgment liens, charges or other encumbrances upon Borrower's assets
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any liens, security interests, judgment liens, charges or other
encumbrances upon Borrower's assets securing payment of the Guaranteed
Obligations, regardless of whether such encumbrances in favor of Guarantor or
Lender presently exist or are hereafter created or attach. Without the prior
written consent of Lender, Guarantor shall not (i) exercise or enforce any
creditor's right it may have against Borrower, or (ii) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceedings
(judicial or otherwise, including without limitation the commencement of, or
joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security
interests, collateral rights, judgments or other encumbrances on assets of
Borrower held by Guarantor.
ARTICLE V
MISCELLANEOUS
-------------
9
<PAGE>
5.1 WAIVER. No failure to exercise, and no delay in exercising, on
------
the part of Lender, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of Lender
hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor consent to
departure therefrom, shall be effective unless in writing and no such consent or
waiver shall extend beyond the particular case and purpose involved. No notice
or demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.
5.2 NOTICES. Any notice, demand, statement, request or consent made
-------
hereunder shall be in writing and shall be deemed to be received by the
addressee on the third day following the day such notice is deposited with the
United States Postal Service first class certified mail, return receipt
requested, addressed to the address, as set forth below, of the party to whom
such notice is to be given, or to such other addressee as either party shall in
like manner designate in writing. The addresses of the parties hereto are as
follows:
Guarantor: Wellington Properties Trust
---------
18650 West Corporate Drive
Suite 300
Brookfield, Wisconsin 53045
Lender: Credit Suisse First Boston
------
Mortgage Capital LLC
11 Madison Avenue
5th Floor
New York, New York 10010
Attention: Dean S. Benjamin, Esq.
5.3 GOVERNING LAW. This Guaranty shall be governed by and construed
-------------
in accordance with the laws of the State in which the real property encumbered
by the Security Instrument is located and the applicable laws of the United
States of America.
5.4 INVALID PROVISIONS. If any provision of this Guaranty is held to
------------------
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Guaranty, such provision shall be fully severable and
this Guaranty shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Guaranty, and the
remaining provisions of this Guaranty shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Guaranty, unless such continued effectiveness of this
Guaranty, as modified, would be contrary to the basic understandings and
intentions of the parties as expressed herein.
5.5 AMENDMENTS. This Guaranty may be amended only by an instrument in
----------
writing executed by the party or an authorized representative of the party
against whom such amendment is sought to be enforced.
10
<PAGE>
5.6 PARTIES BOUND: ASSIGNMENT: JOINT AND SEVERAL. This Guaranty shall
--------------------------------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns and legal representatives; provided, however,
that Guarantor may not, without the prior written consent of Lender, assign any
of its rights, powers, duties or obligations hereunder. If Guarantor consists of
more than one person or party, the obligations and liabilities of each such
person or party shall be joint and several.
5.7 HEADINGS. Section headings are for convenience of reference only
--------
and shall in no way affect the interpretation of this Guaranty.
5.8 RECITALS. The recital and introductory paragraphs hereof are a
--------
part hereof, form a basis for this Guaranty and shall be considered prima facie
----- -----
evidence of the facts and documents referred to therein.
5.9 COUNTERPARTS. To facilitate execution, this Guaranty may be
------------
executed in as many counterparts as may be convenient or required. It shall not
be necessary that the signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear on each counterpart.
All counterparts shall collectively constitute a single instrument. It shall not
be necessary in making proof of this Guaranty to produce or account for more
than a single counterpart containing the respective signatures of, or on behalf
of, each of the parties hereto. Any signature page to any counterpart may be
detached from such counterpart without impairing the legal effect of the
signatures thereon and thereafter attached to another counterpart identical
thereto except having attached to it additional signature pages.
5.10 RIGHTS AND REMEDIES. If Guarantor becomes liable for any
-------------------
indebtedness owing by Borrower to Lender, by endorsement or otherwise, other
than under this Guaranty, such liability shall not be in any manner impaired or
affected hereby and the rights of Lender hereunder shall be cumulative of any
and all other rights that Lender may ever have against Guarantor. The exercise
by Lender of any right or remedy hereunder or under any other instrument, or at
law or in equity, shall not preclude the concurrent or subsequent exercise of
any other right or remedy.
5.11 OTHER DEFINED TERMS. Any capitalized term utilized herein shall
-------------------
have the meaning as specified in the Security Instrument, unless such term is
otherwise specifically defined herein.
5.12 ENTIRETY. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF
--------
GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED
OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A
FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF
DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF PRIOR,
11
<PAGE>
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC
EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY
ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN
GUARANTOR AND LENDER.
5.13 WAIVER OF RIGHT TO TRIAL BY JURY. GUARANTOR HEREBY AGREES NOT TO
--------------------------------
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE SECURITY INSTRUMENT,
OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.
5.14 COOPERATION. Guarantor acknowledges that Lender and its
-----------
successors and assigns may (i) sell this Guaranty, the Note and other Loan
Documents to one or more investors as a whole loan, (ii) participate the Loan
secured by this Guaranty to one or more investors, (iii) deposit this Guaranty,
the Note and other Loan Documents with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (iv) otherwise sell the Loan or interest therein to investors (the
transactions referred to in clauses (i) through (iv) are hereinafter each
referred to as "SECONDARY MARKET TRANSACTION"). Guarantor shall cooperate with
Lender in effecting any such Secondary Market Transaction and shall cooperate to
implement all requirements imposed by any Rating Agency (as defined in the
Security Instrument) involved in any Secondary Market Transaction. Guarantor
shall provide such information and documents relating to Guarantor, Borrower,
the Property and any tenants of the Improvements as Lender may reasonably
request in connection with such Secondary Market Transaction. In addition,
Guarantor shall make available to Lender all information concerning its business
and operations that Lender may reasonably request. Lender shall be permitted to
share all such information with the investment banking firms, Rating Agencies,
accounting firms, law firms and other third-party advisory firms involved with
the Loan and the Loan Documents or the applicable Secondary Market Transaction.
It is understood that the information provided by Guarantor to Lender may
ultimately be incorporated into the offering documents for the Secondary Market
Transaction and thus various investors may also see some or all of the
information. Lender and all of the aforesaid third-party advisors and
professional firms shall be entitled to rely on the information supplied by, or
on behalf of, Guarantor in the form as provided by Guarantor. Lender may
publicize the existence of the Loan in connection with its marketing for a
secondary Market Transaction or otherwise as part of its business development.
12
<PAGE>
5.15 REINSTATEMENT IN CERTAIN CIRCUMSTANCES. If at any time any
--------------------------------------
payment of the principal of or interest under the Note or any other amount
payable by the Borrower under the Loan Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Borrower or otherwise, the Guarantor's obligations hereunder with respect
to such payment shall be reinstated as though such payment has been due but not
made at such time.
[SIGNATURE PAGE FOLLOWS]
13
<PAGE>
EXECUTED as of the day and year first above written.
WELLINGTON PROPERTIES TRUST,
a Maryland real estate investment trust
By: /s/ Arnold K. Leas
-------------------------
Name: Arnold K. Leas
Title: President
Attest: /s/ Robert F. Rice
---------------------
Name: Robert F. Rice
Title: Secretary
STATE OF WISCONSIN )
)ss.:
COUNTY OF WAUKESHA )
Personally came before me this 5/th/ day of March, 1998, the above
named ARNOLD K. LEAS and ROBERT F. RICE, President and Secretary, respectively,
of WELLINGTON PROPERTIES TRUST, a Maryland real estate investment trust, to me
known to be the persons who executed the foregoing instrument and acknowledge
the same.
/s/ [SIGNATURE ILLEGIBLE] ^^
- ---------------------------------------------
Notary Public Waukesha County, Wisconsin
My Commission 1-9-2000
--------------------
[Seal]
14
<PAGE>
EXHIBIT 10.4
PROMISSORY NOTE
$2,750,000.00 As of March 5, 1998
For value received, LAKE POINTE APARTMENT HOMES, INC., a Wisconsin
corporation, having its principal place of business at 18650 West Corporate
Drive, Suite 300, Brookfield, Wisconsin 53045 (hereinafter referred to as
"Maker"), promises to pay to the order of CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited liability company ("Lender" and also sometimes
"Payee"), having its principal office at 11 Madison Avenue, 5th Floor, New York,
New York 10010, or at such place as the holder hereof may from time to time
designate in writing, the principal sum of TWO MILLION SEVEN HUNDRED AND FIFTY
THOUSAND and NO/100 DOLLARS ($2,750,000.00), in lawful money of the United
States of America, with interest thereon to be computed on the unpaid principal
balance from time to time outstanding at the Applicable Interest Rate (as
hereinafter defined), and to be paid in installments as follows:
A. A payment of interest only on the date hereof for interest
accruing through and including March 10, 1998;
B. A constant payment of $19,417.06 (such amount hereinafter the
"Monthly Payment Amount"), on the eleventh (11th) day of April,
1998 and on the eleventh (11th) day of each calender month
thereafter up to and including the eleventh (11th) day of
February, 2028; (each a "Payment Date"); each of such payments to
be applied (a) to the payment of interest computed at the Initial
Term Interest Rate (as hereinafter defined); and (b) the balance
applied toward the reduction of the principal sum;
and the balance of said principal sum together with all accrued and unpaid
interest thereon shall be due and payable on the eleventh (11th) day of March,
2028 (the "Maturity Date"). Interest on the principal sum of this Note shall be
calculated on the basis of the actual number of days elapsed and a
three-hundred-sixty (360) day year. The constant payment required hereunder is
based on an amortization schedule of 360 months. For purposes of making
payments hereunder, but not for purposes of calculating interest accrual periods
if the eleventh (11th) day of a given month is not a Business Day (as
hereinafter defined), then the Payment Date for such month shall be the next
succeeding Business Day. All amounts due under this Note shall be payable
without setoff, counterclaim or any other deduction whatsoever.
1. As used in this Note:
. (a) The term "Annual Budget" shall mean an annual budget
submitted by Maker to Payee in accordance with the terms of paragraph 8(b)
herein.
<PAGE>
(b) The term "Anticipated Repayment Date" shall mean, March 11,
2008.
(c) The term "Applicable Interest Rate" shall mean from (a) the
date of this Note through but not including the Anticipated Repayment Date, the
Initial Term Interest Rate, and (b) from and after the Anticipated Repayment
Date through and including the date this Note is paid in full, the Extended Term
Rate.
(d) The term "Approved Annual Budget" shall mean each Annual
Budget approved by Payee in accordance with terms herein.
(e) The term "Assignment of Leases" shall mean that certain
Assignment of Leases and Rents of even date herewith executed by Maker in favor
of Payee.
(f) The term "Business Day" shall mean a day other than (i) a
Saturday or Sunday, or (ii) any day on which commercial banks in New York City
are not open for general banking business.
(g) The term "Capital Expenditures" shall mean for any period,
the amount expended for items capitalized under generally accepted accounting
principles including expenditures for building improvements or major repairs,
leasing commissions and tenant improvements.
(h) The term "Cash Expenses" shall mean for any period, the
operating expenses for the Mortgaged Property (as defined in the Security
Instrument and hereinafter referred to as the "Property") as set forth in an
Approved Annual Budget to the extent that such expenses are actually incurred by
Maker minus payments into the Tax and Insurance Impound Fund (as defined in the
Security Instrument) and the Replacement EScrow Fund (as defined in the Security
Instrument).
(i) The term "Cash Management Agreement" shall mean that certain
Cash Management Agreement of even date herewith executed by Maker, WMC Realty,
Inc., and Payee in connection with the Loan.
(j) The term "Debt" shall mean, collectively, the whole of the
principal sum of this Note, together with all interest accrued and unpaid
thereon and all other sums due under the Loan Documents
(k) The term "Default Rate" shall mean, a rate per annum which
equal to the lesser of (a) maximum rate permitted by applicable law, or (b) five
percent (5%) above the Applicable Interest Rate.
(l) The term "Defeasance Option" shall mean the right and option
of maker to release the Property from the lien of the Security Instrument in
accordance with the provision set forth in Paragraph 55 of the Security
Instrument.
-2-
<PAGE>
(m) The term "Extended Term Rate" shall mean a rate per annum
equal to the greater of (i) the Initial Term Interest Rate plus five (5)
percentage points or (ii) the Treasury Rate plus five (5) percentage points,
except during such time as the Loan is held by a trust which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
during which time the rate shall equal the greater of (i) the Initial Term
Interest Rate plus two (2) percentage points or (ii) the Treasury Rate plus two
(2) percentage points.
(n) The term "Excess Cash Flow" shall mean, for any period, the
sum (determined in accordance with generally accepted accounting principles,
consistently applied) of (a) net operating income (calculated as all income
derived from the operation of the Property after payment of taxes and expenses),
plus (b) depreciation and amortization (to the extent deducted in determining
net operating income) for such period, plus (c) disbursements from the Tax and
Insurance Impound Fund, the Replacement Escrow Fund, or any other escrows or
reserves approved by Payee or provided for under the Loan Documents, but only
to the extent disbursed by Maker and not applied to the payment of, or
reimbursement for, taxes, insurance and other amounts for which such reserves
were set aside, minus (d) actual payments of the regularly scheduled principal
and interest payments (calculated at the Applicable Interest Rate, or at the
Default Rate, if applicable) due and payable in accordance with this Note during
an applicable period, minus (e) actual capital improvement expenditures in
excess of payments from the Replacement Escrow Fund, and funding of reserves for
working capital and extraordinary expenses as approved by Lender in its sole
discretion, and minus (f) payments into the Replacement Escrow Fund, the Tax and
Insurance Impound Fund, and other reserves required under the Loan Documents.
(o) The term "Extraordinary Expense" shall mean an extraordinary
operating expense or capital expense not set forth in the Approved Annual Budget
or allotted for in the Replacement Escrow Fund.
(p) The term "Initial Term Interest Rate" shall mean a rate of
Seven and Six-Tenths percent (7.60%) per annum.
(q) The term "Loan" shall mean that certain loan made by Payee
to Maker contemporaneously herewith.
(r) The term "Loan Document" shall mean collectively this Note,
the Security Instrument, the Assignment of Leases, the Cash Management Agreement
and any and all other documents securing, evidencing, or guaranteeing all or any
portion of the Loan or otherwise executed and/or delivered in connection with
this Note and the Loan.
(s) The term "Net Capital Expenditures" shall mean for any
period the amount by which Capital Expenditures during such period exceeds
reimbursements for such items during such period from any fund established
pursuant to the Loan Documents.
(t) The term "Security Instrument" shall mean that certain
Mortgage, Assignment of Leases and Rents and Security Agreement of even date
herewith in the amount of
-3-
<PAGE>
this Note given by Maker for the use and benefit of Payee covering the fee
estate of Maker in certain premises as more particularly described therein.
(u) The term "Treasury Rate" shall mean, as of the Anticipated
Repayment Date, the yield, calculated by linear interpolation (rounded to the
nearest one-thousandth of one percent (i.e., 0.001%)) of the yields of
noncallable United States Treasury obligations with terms (one longer and one
shorter) most nearly approximating the period from the Anticipated Repayment
Date to the Maturity Date, as determined by Payee on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by Payee.
2. This Note is evidence of the Loan and of the obligation of the
Maker to repay the Loan in accordance with the terms hereof. This Note is
secured inter alia by (a) the Security Instrument, (b) an Assignment of Leases,
and (c) the other Loan Documents.
3. If any sum payable under this Note is not paid on or before the
date on which it is due, Maker shall pay to Payee upon demand an amount equal to
the lesser of five percent (5.00%) of such unpaid sum or the maximum amount
permitted by applicable law in order to defray a portion of the expenses
incurred by Payee in handling and processing such delinquent payment and to
compensate Payee for the loss of the use of such delinquent payment. If the day
when any payment required under this Note is due is not a Business Day, then
payment shall be due on the first Business Day thereafter.
4. The Debt or any portion thereof, shall without notice become
immediately due and payable at the option of Payee if any payment required in
this Note is not paid on or before the date on which it is due or upon the
happening of any other Event of Default (as defined in the Security Instrument).
In the event that it should become necessary to employ counsel to collect or
enforce the Debt or to protect or foreclose the security therefor, Maker also
shall pay on demand all costs of collection incurred by Payee, including
attorneys' fees and costs reasonably incurred for the services of counsel
whether or not suit be brought.
5. Maker does hereby agree that upon the occurrence of an Event of
Default (including upon the failure of Maker to pay the Debt in full on the
Maturity Date), Payee shall be entitled to receive and Maker shall pay interest
on the entire unpaid principal sum and any other amounts due at the Default
Rate.
6. Maker hereby agrees that upon the occurrence of an Event of
Default, Maker shall pay to Payee on the eleventh (11th) day of each month while
such Event of Default continues, an aggregate amount equal to the Excess Cash
Flow for the period from the eleventh (11th) day of the prior month through and
including the tenth (10th) day of the month in question, such Excess Cash Flow
to be applied by Payee to the payment of the Debt in such order as Payee shall
determine in its sole discretion, including, without limitation, alternating
applications thereof between interest and principal. Interest at the Default
Rate and Excess Cash Flow shall both be computed from the occurrence of the
Event of Default until the actual receipt and collection of the Debt. Interest
at the Default Rate shall be added to the Debt and shall be
-4-
<PAGE>
secured by the Security Instrument. This paragraph, however, shall not be
construed as an agreement or privilege to extend the date of the payment of the
Debt, nor as a waiver of any other right or remedy accruing to Payee by reason
of the occurrence of any Event of Default; the acceptance of any payment of
Excess Cash Flow shall not be deemed to cure or constitute a waiver of any Event
of Default; and Payee retains its rights under this Note to accelerate and to
continue to demand payment of the Debt upon the happening of any Event of
Default despite any payment of Excess Cash Flow.
7. This Note may not be prepaid prior to the Anticipated Repayment
Date; provided, however, Maker shall have the right and option to release the
Property from the lien of the Security Instrument in accordance with the terms
and provisions of the Defeasance Option. Notwithstanding the foregoing sentence,
Maker shall have the privilege to prepay the entire principal balance of this
Note and any other amounts outstanding on any Payment Date during the thirty
(30) days preceding the Anticipated Repayment Date without payment of the Yield
Maintenance Premium (as defined in the Security Instrument) or any other
premium or penalty. In addition, on the Anticipated Repayment Date or on any
Payment Date thereafter, the Maker may, at its option and upon thirty (30) days
prior written notice from Maker to Payee, prepay in whole or in part in
increments of $100,000 the outstanding principal balance of this Note and any
other amounts outstanding without payment of the Yield Maintenance Premium or
any other premium or penalty. If prior to the Anticipated Repayment Date and
following the occurrence of and Event of Default, Maker shall tender payment of
an amount sufficient to satisfy the Debt at any time prior to a sale of the
Property, either through foreclosure or the exercise of the other remedies
available to Payee under the Security Instrument, such tender by Maker shall be
deemed to be voluntary and Maker shall pay, in addition to the Debt, the Yield
Maintenance Premium, if any, that would be required under the Defeasance Option.
8. (a) During a Sweep Period (as defined in the Cash Management
Agreement) occurring prior to the Anticipated Repayment Date, Maker shall cause
the Rents (as defined in the Security Instrument) to be deposited in the
applicable accounts required by the Cash Management Agreement and such sums
shall be applied on the eleventh (11th) day of each calendar month in the
following listed order of priority:
(i) First, payments to the Tax and Insurrance Impound
Fund in accordance with terms and conditions of the
Security Instrument;
(ii) Second, the payment of the Monthly Payment Amount;
(iii) Third, payments of any other amounts due under the
Loan Documents;
(iv) Fourth, payments to the Replacement Escrow Fund in
accordance with the terms and conditions of the
Security Instrument; and
(v) Lastly, payment to the Maker of any excess amounts.
-5-
<PAGE>
(b) For each fiscal year commencing with the fiscal year in
which the Anticipated Repayment Date occurs, the Maker shall submit to the Payee
for the Payee's written approval an Annual Budget not later than sixty (60) days
prior to the commencement of such fiscal year, in form satisfactory to Payee
setting forth in reasonable detail budgeted monthly operating income and monthly
operating capital and other expenses for the Property. Each Annual Budget shall
contain, among other things, limitations on management fees, third party service
fees, and other expenses as the Maker may reasonably determine. Payee shall have
the right to approve such Annual Budget which approval shall not be unreasonably
withheld, and in the event that Payee objects to the proposed Annual Budget
submitted by Maker, Payee shall advise Maker of such objections within fifteen
(15) days after receipt thereof (and deliver to Maker a reasonably detailed
description of such objections) and Maker shall within three (3) days after
receipt of notice of any such objections revise such Annual Budget and resubmit
the same to Payee. Payee shall advise Maker of any objections to such revised
Annual Budget within ten (10) days after receipt thereof (and deliver to Maker a
reasonably detailed description of such objections) and Maker shall revise the
same in accordance with the process described in this subparagraph until the
Payee approves an Annual Budget, provided, however, that if Payee shall not
advise Maker of its objections to any proposed Annual Budget within the
applicable time period set forth in this paragraph, then such proposed Annual
Budget shall be deemed approved by Payee. Until such time that Payee approves a
proposed Annual Budget, the most recently Approved Annual Budget shall apply;
provided that, such Approved Annual Budget shall be adjusted to reflect actual
increases in real estate taxes, insurance premiums and utilities expenses.
9. In the event that the Maker does not pay the Debt in full
prior to the Anticipated Repayment Date, the provisions of paragraph 8 as set
forth above shall remain in full force and effect, and the following
subparagraphs also shall apply:
(a) From and after the Anticipated Repayment Date, interest
shall accrue on the unpaid principal balance from time to time outstanding on
this Note at the Extended Term Rate. Interest accrued at the Extended Term Rate
and not paid pursuant to this paragraph 9 shall be deferred and added to the
Debt and shall earn interest at the Extended Term Rate to the extent permitted
by applicable law (such accrued interest is hereinater defined as "Accrued
Interest"). All of the Debt, including and Accrued Interest, shall be due and
payable on the Maturity Date.
(b) Maker shall cause all Rents to be deposited directly
into the applicable accounts required by the Cash Management Agreement and
Maker shall pay on the Anticipated Repayment Date and the eleventh (11th) day of
each calendar month thereafter up to and including the Maturity Date following
payments from Rents received on or before such day in the listed order of
priority:
(i) First, payments to the Tax and Insurance Impound
Fund in accordance with the terms and conditions
of the Security Instrument;
-6-
<PAGE>
(ii) Second, the payment of the Monthly Payment Amount to
be applied first to the payment of interest computed
at the Initial Term Interest Rate with the remainder
applied to the reduction of the outstanding principal
balance of this Note;
(iii) Third, payments to the Payee of any other amounts due
under the Loan Documents;
(iv) Fourth, payments to the Replacement Escrow Fund
accordance with the terms and conditions of the
Security Instrument;
(v) Fifth, payments for monthly Cash Expenses, less
management fees payable to affiliates of Maker,
pursuant to the terms and conditions of the related
Approved Annual Budget;
(vi) Sixth, payment for monthly Net Capital Expenditures,
pursuant to the terms and conditions of the related
Approved Annual Budget;
(vii) Seventh, payment for Extraordinary Expenses approved
by Payee, if any;
(viii) Eighth, payments to the Payee to be applied against
the outstanding principal due under this Note until
such principal amount is paid in full;
(ix) Ninth, payments to the Payee for Accrued Interest;
and
(x) Lastly, payment to the Maker of any excess amounts.
(c) In the event that the Maker must incur an Extraordinary
Expense, then the Maker shall promptly deliver to Payee a reasonably detailed
explanation of such proposed Extraordinary Expense for the Payee's approval.
(d) Nothing in this paragraph 9 shall limit, reduce or otherwise
affect Maker's obligations to make payments of the Monthly Payment Amount,
payments to the Tax and Insurance Impound Fund, or the Replacement Escrow Fund
due hereunder and under the other Loan Documents, whether or not Rents are
available to make such payments.
10. It is expressly stipulated and agreed to be the intent of Maker
and Payee at all times to comply with applicable state law or applicable United
States federal law (to the extent that it permits Payee to contract for, charge,
take, reserve, or receive a greater amount of interest than under state law) and
that this paragraph (and the similar paragraph contained in the Security
Instrument) shall control every other covenant and agreement in this Note and
the other
-7-
<PAGE>
Loan Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under this Note or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved, or received with respect to the Debt, or if Payee's exercise of the
option to accelerate the Maturity Date, or if any prepayment or the exercise of
any Defeasance Option by Maker results in Maker having paid any interest in
excess of that permitted by applicable law, then it is Payee's express intent
that all excess amounts theretofore collected by Payee shall be credited on the
principal balance of this Note and all other Debt and the provisions of this
Note and the other Loan Documents immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new documents, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid or agreed to be paid to Payee for the
use, forbearance, or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Debt until payment in full so that the rate or amount
of interest on account of the Debt does not exceed the maximum lawful rate from
time to time in effect and applicable to the Debt for so long as the Debt is
outstanding. Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents, it is not the intention of Payee to accelerate
the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
11. This Note may not be modified, amended, waived, extended,
changed, discharged or terminated orally or by any act or failure to act on the
part of Maker or Payee, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought. Whenever used, the singular number
shall include the plural, the plural the singular, and the words "Payee" and
"Maker" shall include their respective successors, assigns, heirs, executors and
administrators. If Maker consists of more than one person or party, the
obligations and liabilities of each such person or party shall be joint and
several.
12. Maker and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest, notice of protest, notice of nonpayment,
notice of intent to accelerate the maturity hereof and of acceleration. No
release of any security for the Debt or any person liable for payment of the
Debt, no extension of time for payment of this Note or any installment hereof,
and no alteration, amendment or waiver of any provision of the Loan Documents
made by agreement between Payee and any other person or party shall release,
modify, amend, waive, extend, change, discharge, terminate or affect the
liability of Maker, and any other person or party who may become liable under
the Loan Documents for the payment of all or any part of the Debt.
13. Maker (and the undersigned representative of Maker, if any)
represents that Maker has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note, the Security
Instrument and the other Loan Documents and that this Note, the Security
Instrument and the other Loan Documents constitute valid and binding obligations
of Maker.
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<PAGE>
14 All notices or other communications required or permitted to
be given pursuant hereto shall be given in the manner specified in the Security
Instrument directed to the parties at their respective addresses as provided
therein.
15. MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER.
16. This Note shall be governed by and construed in accordance
with the laws of the State in which the Property is located and the applicable
laws of the United States of America.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, Maker has duly executed this Note the day and year
first above written.
MAKER:
LAKE POINTE APARTMENT HOMES, INC.,
a Wisconsin corporation
By: /s/ Arnold K. Leas
------------------------------
Arnold K. Leas
President
Attest: /s/ Robert F. Rice
------------------------------
Robert F. Rice
Secretary
STATE OF WISCONSIN )
)ss.:
COUNTY OF WAUKESHA )
Personally came before me this 5th day of March, 1998, the above named
ARNOLD K. LEAS and ROBERT F. RICE, President and Secretary, respectively, of
LAKE POINTE APARTMENT HOMES, INC., to me known to be the persons who executed
the foregoing instrument and acknowledge the same.
/s/ Lisa Wiegert
- ------------------------------------------
Notary Public Waukesha County, Wisconsin
My Commission 1-9-2000
-------------------
[Seal]
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<PAGE>
EXHIBIT 10.5
-----------------------------------
This Document was Prepared by and
When Recorded Return to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New york 10022
Attn: Nicholas Athanail, Esq.
-----------------------------------
BRC 37-281-4-2807-124-11;
-----------------------------------
Parcel Identification Number
LAKE POINTE APARTMENT HOMES, INC.
(Mortgagor)
and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
(Mortgagee)
MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
As of March 5, 1998
PROPERTY LOCATION:
1100 Grand Avenue
Schofield, Wisconsin
<PAGE>
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
(this "MORTGAGE"), made as of March 5, 1998, by LAKE POINTE APARTMENT HOMES,
INC., A WISCONSIN CORPORATION ("MORTGAGOR"), having its principal place of
business at 18650 West Corporate Drive, Suite 300, Brookfield, Wisconsin 53045,
and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, a Delaware limited
liability company ("MORTGAGEE"), having its principal office at 11 Madison
Avenue, 5th Floor, New York, New York 10010.
W I T N E S S E T H:
To secure the payment of an indebtedness in the original principal sum
of TWO MILLION SEVEN HUNDRED AND FIFTY THOUSAND and NO/100 DOLLARS
($2,750,000.00), lawful money of the United States of America, to be paid with
interest according to a certain mortgage note of even date herewith made by
Mortgagor to Mortgagee (the mortgage note together with all extensions, renewals
or modifications thereof being hereinafter collectively called the "NOTE", and
the loan evidence by the Note hereinafter being referred to as the "LOAN") and
all other sums due hereunder, under the other Loan Documents (hereinafter
defined) and under the Note (said indebtedness and interest due under the Note
and all other sums due hereunder under the Note and the other Loan Documents
being hereinafter collectively referred to as the "DEBT"), Mortgagor has
mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed,
confirmed, warranted, pledge, assigned, and hypothecated and by these presents
does hereby deed, mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm, warrant, pledge, assign and hypothecate unto Mortgagee, the real
property described in Exhibit A attached hereto (the "PREMISES") and the
---------
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and improvements now or hereafter located
thereon (the "IMPROVEMENTS");
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements, and such property,
rights, interests and estates hereinafter described are collectively referred to
herein as the "MORTGAGED PROPERTY"):
GRANTING CLAUSE ONE
All easements, rights-of-way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, water, water courses, water rights and powers,
air rights and development rights, all rights to oil, gas, minerals, coal and
other substances of any kind or character, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to the
Premises and the Improvements and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road, highway, alley or
avenue, opened, vacated or proposed, in front of or adjoining the Premises, to
the center line thereof and all the estates, rights, titles, interests, dower
and rights of dower, curtsey and rights of curtsey, property, possession, claim
and demand whatsoever, both at law and in equity, of Mortgagor of, in and to the
Premises and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
2
<PAGE>
GRANTING CLAUSE TWO
All machinery, furniture, furnishings, equipment, computer software and
hardware, fixtures (including, without limitation, all heating, air
conditioning, plumbing, lighting, communications and elevator fixtures) and
other property of every kind and nature, whether tangible or intangible,
whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an
interest, now or hereafter located upon the Premises and the Improvements, or
appurtenant thereto, and usable in connection with the present or future
operation and occupancy of the Premises and the Improvements and all building
equipment, materials and supplies of any nature whatsoever owned by Mortgagor,
or in which Mortgagor has or shall have an interest, now or hereafter located
upon the Premises and the Improvements, or appurtenant thereto, or usable in
connection with the present or future operation, enjoyment and occupancy of the
Premises and the Improvements (hereinafter collectively referred to as the
"EQUIPMENT"), including any leases of any of the foregoing, any deposits
existing at any time in connection with any of the foregoing, and the proceeds
of any sale or transfer of the foregoing, and the right, title and interest of
Mortgagor in and to any of the Equipment that may be subject to any "security
interests" as defined in the Uniform Commercial Code, as adopted and enacted by
the State or States where any of the Mortgaged Property is located (the "UNIFORM
COMMERCIAL CODE"), superior in lien to the lien of this Mortgage;
GRANTING CLAUSE THREE
Awards or payments, including interest thereon, that may heretofore and
hereafter be made with respect to the Premises and the Improvements, whether
from the exercise of the right of eminent domain or condemnation (including,
without limitation, any transfer made in lieu of or in anticipation of the
exercise of said rights), or for a change of grade, or for any other injury to
or decrease in the value of the Premises and Improvements;
GRANTING CLAUSE FOUR
All leases and other agreements or arrangements heretofore or hereafter
entered into affecting the use, enjoyment or occupancy of, or the conduct of any
activity upon or in, the Premises and the Improvements, including any
extensions, renewals, modifications or amendments thereof (the "LEASES") and all
rents, rent equivalents, moneys payable as damages or in lieu of rent or rent
equivalents, royalties (including, without limitation, all oil and gas or other
mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Mortgagor or its agents or employees from any and all
sources arising from or attributable to the Premises and the Improvements (the
"RENTS"), together with all proceeds from the sale or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the Debt;
3
<PAGE>
GRANTING CLAUSE FIVE
All proceeds of and any unearned premiums on any insurance policies
covering the Mortgaged Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements made
in lieu thereof, for damage to the Mortgaged Property;
GRANTING CLAUSE SIX
The right, in the name and on behalf of Mortgagor, to appear in and
defend any action or proceeding brought with respect to the Mortgaged Property
and to commence any action or proceeding to protect the interest of Mortgagee in
the Mortgaged Property;
GRANTING CLAUSE SEVEN
All accounts, escrows, documents, instruments, chattel paper, claims,
deposits and general intangibles, as the foregoing terms are defined in the
Uniform Commercial Code, and all franchises, trade names, trademarks,
symbols, service marks, books, records, plans, specifications, designs,
drawings, permits, consents, licenses, management agreements, contract rights
(including, without limitation, any contract with any architect or engineer or
with any other provider of goods or services for or in connection with any
construction, repair, or other work upon the Mortgaged Property), approvals,
actions, refunds of real estate taxes and assessments (and any other
governmental impositions related to the Mortgaged Property), and causes of
action that now or hereafter relate to, are derived from or are used in
connection with the Mortgaged Property, or the use, operation, maintenance,
occupancy or enjoyment thereof or the conduct of any business or activities
thereon (hereinafter collectively referred to as the "INTANGIBLES"); and
GRANTING CLAUSE EIGHT
All proceeds, products, offspring, rents and profits from any of the
foregoing, including, without limitation, those from sale, exchange, transfer,
collection, loss, damage, disposition, substitution or replacement of any of the
foregoing.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the use and benefit of Mortgagee, forever;
PROVIDED, HOWEVER, these presents are upon the express condition that,
if Mortgagor shall well and truly pay to Mortgagee the Debt at the time and in
the manner provided in the Note and this Mortgage and shall well and truly
abide by and comply with each and every covenant and condition set forth herein,
in the Note and in the other Loan Documents (hereinafter defined) in a timely
manner, these presents and the estate hereby granted shall cease, terminate and
be void;
AND Mortgagor represents and warrants to and covenants and agrees with
Mortgagee as follows:
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PART I
GENERAL PROVISIONS
1. PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND
AGREEMENTS. Mortgagor shall pay the Debt at the time and in the manner provided
in the Note and in this Mortgage. All the covenants, conditions and agreements
contained in (a) the Note and (b) all and any of the documents including the
Note and this Mortgage now or hereafter executed by Mortgagor and/or others and
by or in favor of Mortgagee, which evidences, secures or guarantees all or any
portion of the payments due under the Note or otherwise is executed and/or
delivered in connection with the Note and this Mortgage (the "LOAN DOCUMENTS")
are hereby made a part of this Mortgage to the same extent and with the same
force as if fully set forth herein.
2. WARRANTY OF TITLE. Mortgagor warrants that Mortgagor has good,
marketable and insurable title to the Mortgaged Property and has the full power,
authority and right to execute, deliver and perform its obligations under this
Mortgage and to deed, encumber, mortgage, give, grant, bargain, sell, alienate,
enfeoff, convey, confirm, pledge, assign and hypothecate the same and that
Mortgagor possess an unencumbered fee estate in the Premises and the
Improvements and that it owns the Mortgaged Property free and clear of all
liens, encumbrances and charges whatsoever except for those exceptions shown in
the title insurance policy insuring the lien of this Mortgage and that this
Mortgage is and will remain a valid and enforceable first lien on and security
interest in the Mortgaged Property, subject only to said exceptions. Mortgagor
shall forever warrant, defend and preserve such title and the validity and
priority of the lien of this Mortgage and shall forever warrant and defend the
same to Mortgagee against the claims of all persons whomsoever.
3. INSURANCE.
(a) Mortgagor, at its sole cost and expense, for the mutual benefit
of Mortgagor and Mortgagee, shall obtain and maintain during the entire term of
this Mortgage (the "TERM") policies of insurance against loss or damage by fire,
lightning and such other perils as are included in a standard "all-risk"
endorsement, and against loss or damage by all other risks and hazards covered
by a standard extended coverage insurance policy including, without limitation,
riot and civil commotion, vandalism, malicious mischief, burglary and theft.
Such insurance shall be in an amount equal to the greatest of (i) the then full
replacement cost of the Improvements and Equipment, without deduction for
physical depreciation, (ii) the outstanding principal balance of the Loan, and
(iii) such amount that the insurer would not deem Mortgagor a co-insurer under
said policies. The policies of insurance carried in accordance with this
paragraph shall be paid annually in advance and shall contain a "Replacement
Cost Endorsement" with a waiver of depreciation, and shall have a deductible no
greater than $25,000.00 unless so agreed by mortgagee.
(b) Mortgagor, at its sole cost and expense, for the mutual benefit
of Mortgagor and Mortgagee, shall also obtain and maintain during the Term the
following policies of insurance:
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(i) Flood insurance if any part of the Mortgaged Property
is located in an area identified by the Federal Emergency Management as an area
having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Program in an amount at least equal
to the outstanding principal amount of the Loan or the maximum limit of coverage
available with respect to the Improvements and Equipment under said Program,
whichever is less.
(ii) Comprehensive public liability insurance, including
broad form property damage, blanket contractual and personal injuries (including
death resulting therefrom) coverages and containing minimum limits per
occurrence of $1,000,000 and $2,000,000 in the aggregate for any policy year. In
addition, at least $5,000,000 excess and/or umbrella liability insurance shall
be obtained and maintained for any and all claims, including all legal liability
imposed upon Mortgagor and all court costs and attorneys' fee incurred in
connection with the ownership, operation and maintenance of the Mortgaged
Property.
(iii) Rental loss and/or business interruption insurance in
an amount equal to the greater of (A) estimated gross revenues for eighteen(18)
months from the operations of the Mortgaged Property or (B) the projected
operating expenses (including debt service) for eighteen (18) months for the
maintenance and operation of the Mortgaged Property. The amount of such
insurance shall be increased from time to time during the Term as and when new
Leases and renewal Leases are entered into and the Rents increase or the
estimate of (or the actual) gross revenue, as may be applicable, increases.
(iv) Insurance against loss or damage from (A) leakage of
sprinkler systems and (B) explosion of steam boilers, air conditioning
equipment, high pressure piping, machinery and equipment, pressure vessels or
similar apparatus now or hereafter installed in the Improvements (without
exclusion for explosions), to the extent that such items now or hereafter exist
upon the Mortgaged Property, in an amount at least equal to the outstanding
principal amount of the Note or $2,000,000, whichever is less.
(v) If the Mortgaged Property includes commercial
property, worker's compensation insurance with respect to any employees of
Mortgagor, as required by any governmental authority or legal requirement.
(vi) During any period of repair or restoration, builder's
"all risk" insurance in an amount equal to not less than the full insurable
value of the Mortgaged Property insuring against such risks (including, without
limitation, fire and extended coverage and collapse of the Improvements to
agreed limits) as Mortgagee may request, in form and substance acceptable to
Mortgagee.
(vii) Ordinance or law coverage to compensate for the cost
of demolition and the increased cost of construction.
(viii) Intentionally deleted prior to excution.
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(ix) Such other insurance as may from time to time be reasonably
required by Mortgagee in order to protect its interests.
(c) All policies of insurance (the "POLICIES") required pursuant to
this paragraph: (i) shall be issued by companies approved by Mortgagee and
licensed to do business in the state where the Mortgaged Property is located,
with a claims paying ability rating of "AA" or better by Standard & Poor's
Rating Services, a division of the McGraw Hill Companies, Inc. and/or a rating
of "A:X" or better in the current Best's Insurance Reports; (ii) shall name
Mortgagee and its successors and/or assigns as their interest may appear as the
beneficiary/mortgagee; (iii) shall contain a non-contributory standard mortgagee
clause and lender's loss payable endorsement or their equivalents, naming
Mortgagee as the person to which all payments made by such insurance company
shall be paid; (iv) shall contain a waiver of subrogation against Mortgagee; (v)
shall be maintained throughout the Term without cost to Mortgagee; (vi) shall be
assigned and the originals delivered to Mortgagee; (vii) shall contain such
provisions as Mortgagee deems reasonably necessary or desirable to protect its
interest including, without limitation, endorsements providing that neither
Mortgagor, Mortgagee nor any other party shall be a co-insurer under said
Policies and that Mortgagee shall receive at least thirty (30) days prior
written notice of any modification, reduction or cancellation; and (viii) shall
be satisfactory in form and substance to Mortgagee and shall be approved by
Mortgagee as to amounts, form, risk coverage, deductibles, loss payees and
insureds. Mortgagor shall pay the premiums for such Policies (the "INSURANCE
PREMIUMS") as the same become due and payable and shall furnish to Mortgagee
evidence of the renewal of each of the Policies with receipts for the payment of
the Insurance Premiums or other evidence of such payment reasonably satisfactory
to Mortgagee (provided, however, that Mortgagor is not required to furnish such
evidence of payment to Mortgagee in the event that such Insurance Premiums have
been paid by Mortgagee pursuant to Paragraph 5 hereof). If Mortgagor does not
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furnish such evidence and receipts at least thirty (30) days prior to the
expiration of any expiring Policy, then Mortgagee may procure, but shall not be
obligated to procure, such insurance and pay the Insurance Premiums therefor,
and Mortgagor agrees to reimburse Mortgagee for the cost of such Insurance
Premiums promptly on demand. Within thirty (30) days after request by Mortgagee,
Mortgagor shall obtain such increases in the amounts of coverage required
hereunder as may be reasonably requested by Mortgagee, taking into consideration
changes in the value of money over time, changes in liability laws, changes in
prudent customs and practices.
4. CASUALTY.
(a) If the Mortgaged Property shall be damaged or destroyed, in whole
or in part, by fire or other casualty (as "INSURED CASUALTY"), Mortgagor shall
give prompt notice thereof to Mortgagee. Following the occurrence of an Insured
Casualty, Mortgagor, regardless of whether insurance proceeds are available,
shall promptly proceed to restore, repair, replace or rebuild the same to be of
at least equal value and of substantially the same character as prior to such
damage or destruction, all to be effected in accordance with applicable law. The
expenses incurred by Mortgagee in the adjustment and collection of insurance
proceeds shall become part of the Debt and be secured hereby and shall be
reimbursed by Mortgagor to Mortgagee upon demand.
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(b) In case of loss or damages covered by any of the Policies, the
following provisions shall apply:
(i) In the event of an Insured Casualty that does not exceed the
lesser of (a) $250,000.00 or (b) ten percent (10%) of the then outstanding
principal balance of the Note, Mortgagor may settle and adjust any claim without
the consent of Mortgagee and agree with the insurance company or companies on
the amount to be paid upon the loss; provided that such adjustment is carried
out in a competent and timely manner. In such case, Mortgagor is hereby
authorized to collect and receipt for any such insurance proceeds.
(ii) In the event an Insured Casualty shall exceed the lesser of (a)
$250,000.00 or (b) ten percent (10%) of the then outstanding principal balance
of the Note, then and in that event, Mortgagee may settle and adjust any claim
without the consent of Mortgagor and agree with the insurance company or
companies on the amount to be paid on the loss and the proceeds of any policy
shall be due and payable solely to Mortgagee and held in escrow by Mortgagee in
accordance with the terms of this Mortgage.
(iii) In the event of an Insured Casualty where the loss is in an
aggregate amount less than fifth percent (50%) of the original principal balance
of the Note, and if, in the reasonable judgment of Mortgagee, the Mortgaged
Property can be restored within twelve (12) months and prior to the Anticipated
Repayment Date (as defined in the Note) of the Note to an economic unit not
materially less valuable (including an assessment of the impact of the
termination of any Leases due to such Insured Casualty) and not less useful than
the same was prior to the Insured Casualty, and after such restoration will
adequately secure the outstanding balance of the Debt, then, if no Event of
Default (as hereinafter defined) shall have occurred and be then continuing, the
proceeds of insurance (after reimbursement of any expenses incurred by
Mortgagee) shall be applied to reimburse Mortgagor for the cost of restoring,
repairing, replacing or rebuilding the Mortgaged Property or part thereof
subject to the Insured Casualty, in the manner set forth below. Mortgagor hereby
covenants and agrees to commence and diligently to prosecute such restoring,
repairing, replacing or rebuilding; provided always, that Mortgagor shall pay
all costs (and if required by Mortgagee, Mortgagor shall deposit the total
thereof with Mortgagee in advance) of such restoring, repairing, replacing or
rebuilding in excess of the net proceeds of insurance made available pursuant to
the terms hereof.
(iv) Except as provided above, the proceeds of insurance collected
upon any Insured Casualty shall, at the option of Mortgagee in its sole
discretion, be applied to the payment of the Debt or applied to reimburse
Mortgagor for the cost of restoring, repairing, replacing or rebuilding the
Mortgaged Property or part thereof subject to the Insured Casualty, in the
manner set forth below. Any such application to the Debt shall be without any
prepayment consideration except that if an Event of Default, or an event with
notice and/or the passage of time would constitute an Event of Default, has
occurred, then the Mortgagor shall pay to Mortgagee an additional amount equal
to the Yield Maintenance Premium (hereinafter defined), if any, that would be
required under Paragraph 55 hereof if Defeasance Collateral (hereinafter
defined) was to be purchased by Mortgagor. Any such application to the Debt
shall be applied to
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those payments of principal and interest last due under the Note but shall not
postpone or reduce any payments otherwise required pursuant to the Note other
than such last due payments.
(v) In the event Mortgagor is entitled to reimbursement out of
insurance proceeds held by Mortgagee, such proceeds shall be disbursed from time
to time upon Mortgagee being furnished with (1) evidence satisfactory to it of
the estimated cost of completion of the restoration, repair, replacement and
rebuilding, (2) funds or, at Mortgagee's option, assurances satisfactory to
Mortgagee that such funds are available, sufficient in addition to the proceeds
of insurance to complete the proposed restoration, repair, replacement and
rebuilding, and (3) such architect's certificates, waivers of lien, contractor's
sworn statements, title insurance endorsements, bonds, plats of survey and such
other reasonable evidences of cost, payment and performance as Mortgagee may
reasonably require and approve. Mortgagee may, in any event, require that all
plans and specifications for such restoration, repair, replacement and
rebuilding be submitted to and approved by Mortgagee prior to commencement of
work. No payment made prior to the final completion of the restoration, repair,
replacement and rebuilding shall exceed ninety percent (90%) of the value of the
work performed from time to time; funds other than proceeds of insurance shall
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Mortgagee,
together with funds deposited for that purpose or irrevocably committed to the
satisfaction of Mortgagee by or on behalf of Mortgagor for that purpose, shall
be at least sufficient in the reasonable judgment of Mortgagee to pay for the
cost of completion of the restoration, repair, replacement or rebuilding, free
and clear of all liens or claims for lien. Any surplus which may remain out of
insurance proceeds held by Mortgagee after payment of such costs of restoration,
repair, replacement or rebuilding shall be paid to any party entitled thereto.
5. PAYMENT OF TAXES, ETC. Mortgagor shall pay all taxes, assessments,
water rates and sewer rents, now or hereafter levied or assessed or imposed
against the Mortgaged Property or any part thereof (the "TAXES") and all ground
rents, maintenance charges, other impositions, and other charges, including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Premises, now or hereafter levied or assessed or
imposed against the Mortgaged Property or any part thereof (the "OTHER CHARGES")
as the same become due and payable. Mortgagor will deliver to Mortgagee receipts
for payment or other evidence satisfactory to Mortgagee that the Taxes and Other
Charges have been so paid or are not then delinquent no later than thirty (30)
days prior to the date on which the Taxes and/or Other Charges would otherwise
be delinquent if not paid. Mortgagor shall not suffer and shall promptly cause
to be paid and discharged any lien or charge whatsoever which may be or become a
lien or charge against the Mortgaged Property, and shall promptly pay for all
utility services provided to the Mortgaged Property. Mortgagor shall furnish to
Mortgagee receipts for the payment of the Taxes and the Other Charges prior to
the date the same shall become delinquent (provided, however, that Mortgagor is
not required to furnish such receipts for payment of Taxes in the event that
such Taxes have been paid for by Mortgagee pursuant to Paragraph 6 hereof).
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6. TAX AND INSURANCE IMPOUND FUND; REPLACEMENT ESCROW FUND.
(a) Mortgagor shall pay to Mortgagee on the eleventh day of each
calendar month (a) one-twelfth of the Taxes that Mortgagee estimates will be
payable during the next ensuing twelve (12) months in order to accumulate with
Mortgagee sufficient funds to pay all such Taxes at least thirty (30) days prior
to their respective due dates, and (b) one-twelfth of the Insurance Premiums
that Mortgagee estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof in order to accumulate with
Mortgagee sufficient funds to pay all such Insurance Premiums at least thirty
(30) days prior to the expiration of the Policies (said amounts in (a) and (b)
above hereinafter called the "TAX AND INSURANCE IMPOUND FUND"). The Tax and
Insurance Impound Fund and the payments of interest or principal or both,
payable pursuant to the Note, shall be added together and shall be paid as an
aggregate sum by Mortgagor to Mortgagee. Mortgagee will apply the Tax and
Insurance Impound Fund to payments of Taxes and Insurance Premiums required to
be made by Mortgagor pursuant to Paragraphs 3 and 5 hereof. In making any
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payment relating to the Tax and Insurance Impound Fund, Mortgagee may do so
according to any bill, statement or estimate procured from the appropriate
public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry 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. If the amount of the Tax and Insurance Impound
Fund shall exceed the amounts due for Taxes and Insurance Premiums pursuant to
Paragraphs 3 and 5 hereof, Mortgagee shall, in its sole discretion, return any
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excess to Mortgagor or credit such excess against future payments to be made to
the Tax and Insurance Impound Fund. In allocating such excess, Mortgagee may
deal with the person shown on the records of Mortgagee to be the owner of the
Mortgaged Property. If at any time Mortgagee determines that the Tax and
Insurance Impound Fund is not or will not be sufficient to pay the items set
forth in (a) or (b) above, Mortgagee shall notify Mortgagor of such
determination and Mortgagor shall increase its monthly payments to Mortgagee by
the amount that Mortgagee estimates is sufficient to make up the deficiency at
least thirty (30) days prior to the delinquency of the Taxes and/or expiration
of the Policies, as the case may be. Until expended or applied as above
provided, any amounts in the Tax and Insurance Impound Fund shall constitute
additional security for the Debt. The Tax and Insurance Impound Fund shall not
constitute a trust fund and may be commingled with other monies held by
Mortgagee. No earnings or interest on the Tax and Insurance Impound Fund shall
be payable to Mortgagor. If Mortgagee so elects at any time, Mortgagor shall
provide, at Mortgagor's expense, a tax service contract for the Term issued by a
tax reporting agency acceptable to Mortgagee. If Mortgagee does not so elect,
Mortgagor shall reimburse Mortgagee for the cost of making annual tax searches
throughout the Term.
(b) Mortgagor shall pay to Mortgagee on the eleventh day of each
calendar month the sum of one thousand four hundred thirty-four and 00/100
Dollars ($1,434.00) which shall be deposited with and held by Mortgagee for
replacement and repairs required to be made to the Mortgaged Property during the
calendar year and for any work approved by Mortgagee ("REPLACEMENT ESCROW
FUND"). Mortgagee may in its reasonable discretion reassess its estimate of the
amount necessary for the Replacement Escrow Fund from time to time and in its
discretion, and may adjust the monthly amounts required to be deposited into the
Replacement Escrow Fund by thirty (30) days notice to Mortgagor. Mortgagee shall
make disbursements from
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the Replacement Escrow Fund as requested by Mortgagor, and approved by Mortgagee
in its sole discretion, no more frequently than once in any thirty (30) day
period of no less than $5,000.00 upon delivery by Mortgagor of Mortgagee's
standard form of draw request accompanied by copies of paid invoices for the
amounts requested and, if required by Mortgagee for requests in excess of
$10,000.00, lien waivers and releases from all parties furnishing materials
and/or services in connection with the requested payment. Mortgagee may require
an inspection of the Mortgaged Property at Mortgagor's expense prior to making a
monthly disbursement in order to verify completion of replacements and repairs
of items in excess of $10,000.00 for which reimbursement is sought. The
Replacement Escrow Fund shall be held in an interest bearing account in
Mortgagee's name at a financial institution selected by Mortgagee in its sole
discretion. All earnings or interest on the Replacement Escrow Fund shall be and
become part of such Replacement Escrow Fund and shall be disbursed as provided
in this Paragraph 6(b). Until expended or applied as above provided, the
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Replacement Escrow Fund shall constitute additional security for the Debt. The
Replacement Escrow Fund shall not constitute a trust fund and may be commingled
with other monies held by Mortgagee.
(c) Intentionally Omitted.
(d) Mortgagor hereby pledges to Mortgagee and grants to Mortgagee a
security interest in any and all monies now or hereafter deposited in the Tax
and Insurance Impound Fund and Replacement Escrow Fund as additional security
for the payment of the Debt. Upon the occurrence of an Event of Default,
Mortgagee may apply any sums then present in the Tax and Insurance Impound Fund
and the Replacement Escrow Fund to the payment of the Debt in any order in its
sole discretion.
7. CONDEMNATION. Mortgagor shall promptly give Mortgagee written
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding (a "CONDEMNATION") and shall deliver to Mortgagee copies of
any and all papers served in connection with such Condemnation. Following the
occurrence of a Condemnation, Mortgagor, regardless of whether an Award
(hereinafter defined) is available, shall promptly proceed to restore, repair,
replace or rebuild the same to the extent practicable to be of at least equal
value and of substantially the same character as prior to such Condemnation, all
to be effected in accordance with applicable law.
(a) Mortgagee is hereby irrevocably appointed as Mortgagor's
attorney-in-fact, coupled with an interest, with exclusive power to collect,
receive and retain any award or payment ("AWARD") for any taking accomplished
through a Condemnation (a "TAKING") and to make any compromise or settlement in
connection with such Condemnation, subject to the provisions of this Mortgage.
Notwithstanding any Taking by any public or quasi-public authority (including,
without limitation, any transfer made in lieu of or in anticipation of such a
Taking), Mortgagor shall continue to pay the Debt at the time and in the manner
provided for in the Note, in this Mortgage and the other Loan Documents and the
Debt shall not be reduced unless and until any Award shall have been actually
received and applied by Mortgagee to expenses of collecting the Award and to
discharge of the Debt. Mortgagee shall not be limited to the interest paid on
the Award by the condemning authority but shall be entitled to received out of
the Award interest at the
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rate or rates provided in the Note. Mortgagor shall cause any Award that is
payable to Mortgagor to be paid directly to Mortgagee.
(b) In the event of any Condemnation where the Award is in an
aggregate amount less than the lesser of (i) $250,000.00 or (ii) ten percent
(10%) of the then outstanding original principal balance of the Note, and if, in
the reasonable judgment of Mortgagee, the Mortgaged Property can be restored
within twelve (12) months and prior to Anticipated Repayment Date to an economic
unit not less valuable (including an assessment of the impact of the termination
of any Leases due to such Condemnation) and not less useful than the same was
prior to the Condemnation, and after such restoration will adequately secure the
outstanding balance of the Debt, then, if no Event of Default shall have
occurred and be then continuing, the proceeds of the Award (after reimbursement
of any expenses incurred by Mortgagee) shall be applied to reimburse Mortgagor
for the cost of restoring, repairing, replacing or rebuilding the Mortgaged
Property or part thereof subject to Condemnation, in the manner set forth below.
Mortgagor hereby covenants and agrees to commence and diligently to prosecute
such restoring , repairing, replacing or rebuilding; provided always, that
Mortgagor shall pay all costs (and if required by Mortgagee, Mortgagor shall
deposit the total thereof with Mortgagee in advance) of such restoring,
repairing, replacing or rebuilding in excess of the Award made available
pursuant to the terms hereof.
(c) Except as provided above, the Award collected upon any
Condemnation shall, at the option of Mortgagee in its sole discretion, be
applied to the payment of the Debt or applied to reimburse Mortgagor for the
cost of restoring, repairing, replacing or rebuilding the Mortgaged Property or
part thereof subject to the Condemnation, in the manner set forth below. Any
such application to the Debt shall be without any prepayment consideration
except that if an Event of Default, or an event with notice and/or the passage
of time would constitute an Event of Default, has occurred then the Mortgagor
shall pay to Mortgagee an additional amount equal to the Yield Maintenance
Premium, if any, that would be required under Paragraph 55 hereof if Defeasance
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Collateral was to be purchased by Mortgagor. Any such application to the Debt
shall be applied to those payments of principal and interest last due under the
Note but shall not postpone or reduce any payments otherwise required pursuant
to the Note other than such last due payments. If the Mortgaged Property is
sold, through foreclosure or otherwise, prior to the receipt by Mortgagee of
such Award, Mortgagee shall have the right, whether or not a deficiency
judgment on the Note shall be recoverable or shall have been sought, recovered
or denied, to receive all or a portion of said Award sufficient to pay the Debt.
(d) In the event Mortgagor is entitled to reimbursement out of
the Award received by Mortgagee, such proceeds shall be disbursed from time to
time upon Mortgagee being furnished with (1) evidence satisfactory to it of the
estimated cost of completion of the restoration, repair, replacement and
rebuilding resulting from such condemnation, (2) funds or, at Mortgagee's
option, assurances satisfactory to Mortgagee that such funds are available,
sufficient in addition to the proceeds of the Award to complete the proposed
restoration, repair, replacement and rebuilding, and (3) such architect's
certificates, waivers of lien, contractor's sworn statements, title insurance
endorsements, bonds, plats of survey and such other evidences of costs, payment
and performance as Mortgagee may reasonably require and approve; and Mortgagee
may, in any event,
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require that all plans and specifications for such restoration, repair,
replacement and rebuilding be submitted to and approved by Mortgagee prior to
commencement of work. No payment made prior to the final completion of the
restoration, repair, replacement and rebuilding shall exceed ninety percent
(90%) of the value of the work performed from time to time; funds other than
proceeds of the Award shall be disbursed prior to disbursement of such proceeds;
and at all times, the undisbursed balance of such proceeds remaining in hands of
Mortgagee, together with funds deposited for that purpose or irrevocably
committed to the satisfaction of Mortgagee by or on behalf of Mortgagor for that
purpose, shall be at least sufficient in the reasonable judgment of Mortgagee to
pay for the costs of completion of the restoration, repair, replacement or
rebuilding, free and clear of all liens or claims for lien. Any surplus which
may remain out of the Award received by Mortgagee after payment of such costs of
restoration, repair, replacement or rebuilding shall, in the sole and absolute
discretion of Mortgagee, be retained by Mortgagee and applied to payment of the
Debt.
8. LEASES AND RENTS
(a) Mortgagor does hereby absolutely and unconditionally assign
to Mortgagee, all Mortgagor's right, title and interest in all current and
future Leases and Rents, it being intended by Mortgagor that this assignment
constitutes a present, absolute assignment and not an assignment for additional
security only. Such assignment to Mortgagee shall not be construed to bind
Mortgagee to the performance of any of the covenants, conditions or provisions
contained in any such Lease or otherwise impose any obligation upon Mortgagee.
Mortgagor agrees to execute and deliver to Mortgagee such additional
instruments, in form and substance satisfactory to Mortgagee, as may hereafter
be requested by Mortgagee to further evidence and confirm such assignment.
Nevertheless, subject to the terms of this paragraph, Mortgagee grants to
Mortgagor a revocable license to operate and manage the Mortgaged Property and
to collect the Rents. Mortgagor shall hold the Rents, or a portion thereof,
sufficient to discharge all current sums due on the Debt, in trust for the
benefit of Mortgagee for use in the payment of such sums. Upon an Event of
Default, without the need for notice or demand, the license granted to Mortgagor
herein shall automatically be revoked, and Mortgagee shall immediately be
entitled to possession of all Rents, whether or not Mortgagee enters upon or
takes control of the Mortgaged Property. Mortgagee is hereby granted and
assigned by Mortgagor the right, at its option, upon revocation of the license
granted herein, to enter upon the Mortgaged Property in person, by agent or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license may be applied toward payment of the Debt in such
priority and proportions as Mortgagee in its sole discretion shall deem proper.
(b) All Leases shall provide that they are subordinate to this
Mortgage and that the tenant agrees to attorn to Mortgagee. None of the Leases
shall contain any option to purchase, any right of first refusal to lease or
purchase or any right to terminate the lease term (except in the event of the
destruction of all or substantially all of the Mortgaged Property). Leases
executed after the date hereof shall not contain any provisions which adversely
affect the Mortgaged Property or which might adversely affect the rights of any
holder of the Loan without the prior written consent of Mortgagee. Each tenant
shall conduct business only in that portion of
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the Mortgaged Property covered by its lease. Upon request, Mortgagor shall
furnish Mortgagee with executed copies of all Leases.
(c) Mortgagor shall not, without the prior consent of Mortgagee
(i) enter into any Lease of all or any part of the Mortgaged Property in excess
of 25% of gross leasable area rentable square feet (a "Major Lease"), (ii)
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cancel, terminate, abridge or otherwise modify the terms of any Major Lease, or
accept a surrender thereof, (iii) consent to any assignment of or subletting
under any Major Lease not in accordance with its terms, (iv) cancel, terminate,
abridge or otherwise modify any guaranty of any Major Lease or the terms
thereof, (v) accept prepayments of installments of Rents for a period of more
than one (1) month in advance or (vi) further assign the whole or any part of
the Leases or the Rents. In addition to, Mortgagor shall not (A) lease all or
any part of the Mortgaged Property, (B) cancel, terminate, abridge or otherwise
modify the terms of any Lease, or accept a surrender thereof, (C) consent to any
assignment of or subletting under any Lease not in accordance with its terms
or (D) cancel, terminate, abridge or otherwise modify any guaranty of any Lease
or the terms thereof unless such actions are exercised for a commercially
reasonable purpose in arms-length transactions for market rate terms.
(d) Mortgagor (i) shall observe and perform all the obligations
imposed upon the lessor under the Leases and shall not do or permit to be done
anything to impair the value of the Leases as security for the Debt; (ii) shall
promptly send copies to Mortgagee of all notices of default which Mortgagor
shall send or receive thereunder; (iii) shall enforce all the terms, covenants
and conditions contained in the Leases upon the part of the lessee thereunder to
be observed or performed, short of termination thereof; (iv) shall not collect
any of the Rents more than one (1) month in advance; (v) shall not execute any
other assignment of the lessor's interest in the Leases or the Rents; (vi) shall
deliver to Mortgagee, upon request, tenant estoppel certificates from each
commercial tenant at the Mortgagee Property in form and substance reasonably
satisfactory to Mortgagee, provided that Mortgagor shall not be required to
deliver such certificates more frequently than two (2) times in any calendar
year; and (vii) shall execute and deliver at the request of Mortgagee all such
further assurances, confirmations and assignments in connection with the
Mortgaged Property as Mortgagee shall form time to time require.
(e) All security deposits of tenants, if held in the form of
cash, shall be deposited by Mortgagor at such commercial or savings bank or
banks, and, whether held in cash or any other form, shall be held in compliance
with applicable law, as may be reasonably satisfactory to Mortgagee. Any bond or
other instrument which Mortgagor is permitted to hold in lieu of cash security
deposits under any applicable legal requirements shall be maintained in full
force and effect in the full amount of such deposits unless replaced by cash
deposits as hereinabove described, shall be issued by an institution reasonably
satisfactory to Mortgagee, shall, if permitted pursuant to any legal
requirements, name Mortgagee as payee or mortgagee thereunder (or at Mortgagee's
option, be fully assignable to Mortgagee) and shall, in all respects, comply
with any applicable legal requirements and otherwise be reasonably satisfactory
to Mortgagee. Mortgagor shall, upon request, provide Mortgagee with evidence
reasonably satisfactory to Mortgagee of Mortgagor's compliance with the
foregoing. Following the occurrence and during the continuance of any Event of
Default, Mortgagor shall, upon Mortgagee's request, if permitted by any
applicable legal requirements, turn over to Mortgagee the security deposits (and
any interest theretofore earned
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<PAGE>
thereon) with respect to all or any portion of the Mortgaged Property, to be
held by Mortgagee subject to the terms of the Leases.
9. MAINTENANCE AND USE OF MORTGAGED PROPERTY. Mortgagor shall cause
the Mortgaged Property to be maintained in a good and safe condition and repair.
The Improvements and the Equipment shall not be removed, demolished or
materially altered (except for normal replacement of the Equipment) without the
consent of Mortgagee. Mortgagor shall promptly comply with all laws, orders and
ordinances affecting the Mortgaged Property, or the use thereof. Mortgagor shall
promptly repair, replace or rebuild any part of the Mortgaged Property that is
destroyed by any casualty, or becomes damaged, worn or dilapidated or that is
affected by any proceeding of the character referred to in Paragraph 7 hereof
-----------
and shall complete and pay for any structure at any time in the process of
construction or repair on the Premises. Mortgagor shall not initiate join in,
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the uses
which may be made of the Mortgaged Property or any part thereof. If under
applicable zoning provisions the use of all or any portion of the Mortgaged
Property is or shall become a nonconforming use, Mortgagor will not cause or
permit such nonconforming use to be discontinued or abandoned without the
express written consent of Mortgagee. Mortgagor shall not (i) change the use of
the Mortgaged Property, (ii) permit or suffer to occur any waste on or to the
Mortgaged Property or to any portion thereof or (iii) take any steps whatsoever
to convert the Mortgaged Property, or any portion thereof, to a condominium or
cooperative form of management. Mortgagor will not install or permit to be
installed on the Premises any underground storage tank.
10. TRANSFER OR ENCUMBRANCE OF THE MORTGAGED PROPERTY.
(a) Mortgagor acknowledges that Mortgagee has examined and
relied on the creditworthiness and experience of Mortgagor in owning and
operating properties such as the Mortgaged Property in agreeing to make the
Loan, and that Mortgagee will continue to rely on Mortgagor's ownership of the
Mortgaged Property as a means of maintaining the value of the Mortgaged Property
as security for repayment of the Debt. Mortgagor acknowledges that Mortgagee has
a valid interest in maintaining the value of the Mortgaged Property so as to
ensure that, should Mortgagor default in the repayment of the Debt, Mortgagee
can recover the Debt by a sale of the Mortgaged Property. Mortgagor shall not,
without the prior written consent of Mortgagee, sell, convey, alienate,
mortgage, encumber, pledge or otherwise transfer the Mortgaged Property or any
part thereof, or permit the Mortgaged Property or any party thereof to be sold,
conveyed, alienate mortgaged, encumbered, pledged or otherwise transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer within the meaning of this Paragraph 10 shall be deemed to
------------
include (i) an installment sales agreement wherein Mortgagor agrees to sell the
Mortgaged Property or any part thereof for a price to be paid in installments;
(ii) an agreement by Mortgagor leasing all or a substantial part of the
Mortgaged Property for other than actual occupancy by a space tenant thereunder
or a sale, assignment or other transfer of, or the grant of a security interest
in, Mortgagor's right, title and interest in and to any Leases or any Rents;
(iii) if Mortgagor, Guarantor, or any general partner or managing member of
Mortgagor or Guarantor is a corporation, the voluntary or involuntary sale,
15
<PAGE>
conveyance or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by operation of
law or otherwise) or the creation or issuance of new stock in one or a series of
transactions by which an aggregate of more than 10% of such corporation's stock
shall be vested in a party or parties who are not now stockholders or any change
in the control of such corporation; (iv) if Mortgagor, any Guarantor or any
general partner of Mortgagor or any Guarantor is a limited or general
partnership, joint venture or limited liability company, the change, removal,
resignation or addition of a general partner, managing partner, joint venturer
or the transfer, of any ownership interest of any general partner, managing
partner or joint venturer or the transfer, assignment or pledge of any ownership
interest of any general partner, managing partner or joint venturer; (v) if
Mortgagor or any Guarantor is a limited partnership, the voluntary or
involuntary sale, conveyance, transfer or pledge of any limited partnership
interests or the creation or issuance of new limited partnership interests, by
which an aggregate of more than 49% of such limited partnership interests are
held by parties who are not currently limited partners; or (vi) if Mortgagor or
any Guarantor is a limited liability company, the voluntary or involuntary sale,
conveyance or transfer of a member's interest.
(c) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Mortgagor's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property without Mortgagee's consent. This provision shall apply to
every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the Mortgaged Property regardless of whether voluntary or not, or whether or not
Mortgagee has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property.
(d) Mortgagee's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Mortgaged Property shall not be
deemed to be a waiver of Mortgagee's right to require such consent to any future
occurrence of same. Any sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the Mortgaged Property made in contravention of this
paragraph shall be null and void and of no force and effect.
(e) Mortgagor agrees to bear and shall pay or reimburse Mortgagee on
demand for all reasonable expenses (including, without limitation, reasonable
attorney's fees and disbursements, title search costs and title insurance
endorsement premiums) incurred by Mortgagee in connection with the review,
approval and documentation of any such sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer.
(f) Mortgagee's consent to the sale or transfer of the Mortgaged
Property will not be unreasonably withheld after consideration of all relevant
factors, provided that:
(i) no Event of Default or event which with the giving of
notice or the passage or time would constitute an Event of Default shall have
occurred and remain uncured;
(ii) the proposed transferee ("TRANSFEREE") shall be a reputable
entity or person of good character, creditworthy, with sufficient financial
worth considering the
16
<PAGE>
obligations assumed and undertaken, as evidenced by financial statements and
other information reasonably requested by Mortgagee;
(iii) the Transferee and its property manager shall have
sufficient experience in the ownership and management of properties similar to
the Mortgaged Property, and Mortgagee shall be provided with reasonable evidence
thereof (and Mortgagee reserves the right to approve the Transferee without
approving the substitution of the property manager);
(iv) At Mortgagee's option, Mortgagee shall have received
recommendations in writing from the Rating Agencies to the effect that such
transfer will not result in a requalification, reduction or withdrawal of any
rating initially assigned or to be assigned in a Secondary Market Transaction.
The term "RATING AGENCIES" as used herein shall mean each of Standard & Poor's
Ratings Group, a division of the McGraw-Hill Companies, Inc., Moody's Investors
Service, Inc., Duff and Phelps Credit Rating Co. and Fitch Investors Service,
L.P., or any other nationally-recognized statistical rating agency which has
been approved by Mortgagee;
(v) the Transferee shall have executed and delivered to
Mortgagee an assumption agreement in form and substance acceptable to Mortgagee,
evidencing such Transferee's agreement to abide and be bound by the terms of the
Note, this Mortgage and the other Loan Documents, together with such legal
opinions and title insurance endorsements as may be reasonably requested by
Mortgagee; and
(vi) Mortgagee shall have received the payment of all costs
and expenses incurred by Mortgagee in connection with such assumption (including
reasonable attorneys' fees and costs).
11. REPRESENTATIONS AND COVENANTS OF MORTGAGOR. Mortgagor represents,
warrants and covenants as follows:
(a) Organization and Existence. Mortgagor is duly organized and
--------------------------
validly existing as a corporation in good standing under the laws
of Wisconsin and in all other jurisdictions in which Mortgagor is
transacting business. Mortgagor has the power and authority to
execute, deliver and perform the obligations imposed on it under
the Loan Documents and to consummate the transactions
contemplated by the Loan Documents.
(b) Authorization. Mortgagor has taken all necessary actions for the
-------------
authorization of the borrowing on account of the Loan and for the
execution and delivery of the Loan Documents, including, without
limitation, that those partners of Mortgagor whose approval is
required by the terms of Mortgagor's organizational documents
have duly approved the transactions contemplated by the Loan
Documents and have authorized execution and delivery thereof by
the respective signatories. To the best of Mortgagor's
knowledge, no other consent by any local, state or federal agency
is required in connection with the execution and delivery of the
Loan Documents.
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<PAGE>
(c) Valid Execution and Delivery. All of the Loan Documents requiring
----------------------------
execution by Mortgagor have been duly and validly executed and
delivered by Mortgagor.
(d) Enforceability. All of the Loan Documents constitute valid, legal
--------------
and binding obligations of Mortgagor and are fully enforceable
against Mortgagor in accordance with their terms by Mortgagee and
its successors, transferees and assigns, subject only to
bankruptcy laws and general principles of equity.
(e) No Defenses. The Note, this Mortgage and the other Loan Documents
-----------
are not subject to any right of rescission, set-off, counterclaim
or defense, including the defense of usury, nor would the
operation of any of the terms of the Note, this Mortgage or any
of the other Loan Documents, or the exercise of any right
thereunder, render this Mortgage unenforceable, in whole or in
part, or subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury.
(f) Defense of Usury. Mortgagor knows of no facts that would support
----------------
a claim of usury to defeat or avoid its obligation to repay the
principal of, interest on, and other sums or amounts due and
payable under, the Loan Documents.
(g) No Conflict/Violation of Law. The execution, delivery and
----------------------------
performance of the Loan Documents by the Mortgagor will not cause
or constitute a default under or conflict with the organizational
documents of Mortgagor, any Guarantor or any general partner or
managing member of Mortgagor or any Guarantor. The execution,
delivery and performance of the obligations imposed on Mortgagor
under the Loan Documents will not cause Mortgagor to be in
default, including after due notice or lapse of time or both,
under the provisions of any agreement, judgment or order to which
Mortgagor is a party or by which Mortgagor is bound.
(h) Compliance with Applicable Laws and Regulations. All of the
-----------------------------------------------
Improvements and the use of the Mortgaged Property comply with,
and shall remain in compliance with, all applicable statutes,
rules, regulations and private covenants now or hereafter
relating to the ownership, construction, use or operation of the
Mortgaged Property, including all applicable statutes, rules and
regulations pertaining to requirements for equal opportunity,
anti-discrimination, fair housing, environmental protection,
zoning and land use. The Improvements comply with, and shall
remain in compliance with, applicable health, fire and building
codes. There is no evidence of any illegal activities relating to
controlled substances on the Mortgaged Property. All
certifications, permits, licenses and approvals, including,
without limitation, certificates of completion and
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<PAGE>
occupancy permits required for the legal use, occupancy and
operation of the Mortgaged Property as a multifamily apartment
complex have been obtained and are in full force and effect. All
of the Improvements comply with all material requirements of any
applicable zoning and subdivision laws and ordinances.
(i) Consents Obtained. All consents, approvals, authorizations,
-----------------
orders or filings with any court or governmental agency or body,
if any, required for the execution, delivery and performance of
the Loan Documents by Mortgagor have been obtained or made.
(j) No Litigation. There are no pending actions, suits or
-------------
proceedings, arbitrations or governmental investigations against
the Mortgaged Property, an adverse outcome of which would
materially affect the Mortgagor's performance under the Note,
the Mortgage or the other Loan Documents.
(k) Title. The Mortgagor has good and marketable fee simple title to
-----
the Mortgaged Property, and good title to the Equipment, subject
to no liens, charges or encumbrances other than the Permitted
Exceptions. The possession of the Mortgaged Property has been
peaceful and undisturbed and title thereto has not been disputed
or questioned to the best of Mortgagor's knowledge.
(l) Permitted Exceptions. The Permitted Exceptions do not and will
--------------------
not materially and adversely affect (1) the ability of the
Mortgagor to pay in full the principal and interest on the Note
in a timely manner or (2) the use of the Mortgaged Property for
the use currently being made thereof, the operation of the
Mortgaged Property as currently being operated or the value of
the Mortgaged Property.
(m) First Lien. Upon the execution by the Mortgagor and the recording
----------
of this Mortgage, and upon the execution and filing of UCC-1
financing statements or amendments thereto, the Mortgagee will
have a valid first lien on the Mortgaged Property and a valid
security interest in the Equipment subject to no liens, charges
or encumbrances other than the Permitted Exceptions.
(n) ERISA. The Mortgagor has made and shall continue to make all
-----
required contributions to all employee benefit plans, if any, and
the Mortgagor has no knowledge of any material liability which
has been incurred by the Mortgagor which remains unsatisfied for
any taxes or penalties with respect to any employee benefit plan
or any multi-employer plan, and each such plan has been
administered in compliance with its terms and the applicable
provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and any other federal or state law.
19
<PAGE>
(o) Contingent Liabilities. The Mortgagor has no known material
----------------------
contingent liabilities.
(p) No Other Obligations. Mortgagor has no material financial
--------------------
obligation under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Mortgagor
is a party or by which the Mortgagor or the Mortgaged Property is
otherwise bound, other than obligations incurred in the ordinary
course of the operation of the Mortgaged Property and other than
obligations under this mortgage and the other Loan Documents.
(q) No Other Debt. Mortgagor has not borrowed or received other debt
-------------
financing that has not been heretofore repaid in full.
(r) Fraudulent Conveyance. The Mortgagor (1) has not entered into the
---------------------
Loan or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor and (2) received reasonably
equivalent value in exchange for its obligations under the Loan
Documents. Giving effect to the Loans contemplated by the Loan
Documents, the fair saleable value of the Mortgagor's assets
exceed and will, immediately following the execution and delivery
of the Loan Documents, exceed the Mortgagor's total liabilities,
including, without limitation, subordinated, unliquidated,
disputed or contingent liabilities. The fair saleable value of
the Mortgagor's assets is and will, immediately following the
execution and delivery of the Loan Documents, be greater than the
Mortgagor's probable liabilities, including the maximum amount of
its contingent liabilities or its debts as such debts become
absolute and matured. The Mortgagor's assets do not and,
immediately following the execution and delivery of the Loan
Documents will not, constitute unreasonably small capital to
carry out its business as conducted or as proposed to be
conducted. The Mortgagor does not intend to, and does not believe
that it will, incur debts and liabilities (including, without
limitation, contingent liabilities and other commitments) beyond
its ability to pay such debts as they mature (taking into account
the timing and amounts to be payable on or in respect of
obligations of the Mortgagor).
(s) Investment Company Act. The Mortgagor is not (1) an "investment
----------------------
company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as
amended; (2) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company"
or a " subsidiary company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (3) subject
to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
20
<PAGE>
(t) Access/Utilities. The Mortgaged Property has adequate rights of
----------------
access to public ways and is served by adequate water, sewer,
sanitary sewer and storm drain facilities. All public utilities
necessary to the continued use and enjoyment of the mortgaged
property as presently used and enjoyed are located in the public
right-of-way abutting the mortgaged property, and all such
utilities are connected so as to serve the mortgaged property
without passing over other property. All roads necessary for the
full utilization of the mortgaged property for its current
purpose have been completed and dedicated to public use and
accepted by all governmental authorities or are the subject of
access easements for the benefit of the mortgaged property.
(u) Taxes Paid. Mortgagor has filed all federal, state, county and
----------
municipal tax returns required to have been filed by Mortgagor,
and has paid all taxes which have become due pursuant to such
returns or to any notice of assessment received by Mortgagor, and
Mortgagor has no knowledge of any basis for additional assessment
with respect to such taxes.
(v) Single Tax Lot. The Premises consists of a single lot or multiple
--------------
tax lots; no portion of said tax lot(s) covers property other
than the Premises or a portion of the Premises and no portion of
the Premises lies in any other tax lot.
(w) Special Assessments. Except as disclosed in the title insurance
-------------------
policy, there are no pending or, to the knowledge of the
Mortgagor, proposed special or other assessments for public
improvements or otherwise affecting the Mortgaged Property, nor,
to the knowledge of the Mortgagor, are there any contemplated
improvements to the Mortgaged that may result in such special or
other assessments.
(x) Flood Zone. The Mortgaged Property is located in a flood hazard
----------
area as defined by the Federal Insurance Administration.
(y) Seismic Exposure. The Premises are not located Zone 3 or Zone 4
----------------
of the "Seismic Zone Map of the U.S.".
(z) Misstatements of Fact. No statement of fact made in the Loan
---------------------
Documents contains any untrue statement of a material fact or
omits to state any material fact necessary to make statements
contained herein or therein not misleading. There is no fact
presently known to the Mortgagor which has not been disclosed
which adversely affects, nor as far as the Mortgagor can foresee,
might adversely affect the business, operations or condition
(financial or otherwise) of the representing party.
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<PAGE>
(aa) Condition of Improvements. The Mortgaged Property has not been damaged by
-------------------------
fire, water, wind or other cause of loss or any previous damage to the
Mortgaged Property has been fully restored.
(bb) No Insolvency or Judgment. Neither Mortgagor nor any guarantor of the loan
-------------------------
is currently (a) the subject of or a party to any completed or pending
bankruptcy, reorganization or insolvency proceeding; or (b) the subject of
any judgment unsatisfied of record or docketed in any court of the state in
which the Mortgaged Property is located or in any other court located in
the United States. The purposed Loan will not render the Mortgagor
insolvent. As used herein, the term "insolvent" means that the sum total of
all of an entity's liabilities (whether secured or unsecured, contingent or
fixed, or liquidated or unliquidated) is in excess of the value of all such
entity's non-exempt assets, i.e., all of the assets of the entity that are
available to satisfy claims of creditors.
(cc) No Condemnation. No part of any property subject to the Mortgage has been
---------------
taken in condemnation or other like proceeding to an extent which would
impair the value of the Mortgaged Property, the Mortgage or the Loan or the
usefulness of such property for the purposes contemplated by the loan
application relating to the Loan (the "LOAN APPLICATION"), nor is any
proceeding pending, threatened or known to be contemplated for the partial
or total condemnation or taking of the Mortgaged Property.
(dd) No Subordinate Financing. Except as otherwise expressly approved by
------------------------
Mortgagee in writing, no part of any property subject to the Mortgage is,
or will become, subject to a second mortgage, deed of trust or other type
of subordinate lien.
(ee) No Labour or Materialmen Claims. All parties furnishing labor and materials
-------------------------------
have been paid in full and, except for such liens or claims insured against
by the policy of title insurance to be issued in connection with the Loan,
there are no mechanics', laborers' or materialmens' liens or claims
outstanding for work, labor or materials affecting the Mortgaged Property,
whether prior to, equal with or subordinate to the lien of the Mortgage.
(ff) No Purchase Options. No tenant, person, party, firm, corporation or other
-------------------
entity has an option to purchase the Mortgaged Property, any portion
thereof or any interest therein.
(gg) Leases. The Mortgaged Property is not subject to any Leases other than the
------
Leases described in the rent roll delivered to Mortgagee in connection with
this Mortgage. No person has any possessory interest in the Mortgaged
Property or right to occupy the same except under and pursuant to the
provisions of the Leases. As of the date hereof, (i) the Mortgagor is
22
<PAGE>
the owner and holder of the landlord's interest under each Lease;
(ii) there are no prior assignments of any Lease or any portion
of Rents which are presently outstanding and have priority over
the Assignment of Leases and Rents (the "ASSIGNMENTS OF LEASES
AND RENTS"), dated the date hereof, given by Mortgagor to
Mortgagee and intended to be duly recorded; (iii) the Leases are
on the standard form of lease approved by Mortgagee and have not
been modified or amended, except as disclosed to Mortgagee in
writing on the date hereof; (iv) each Lease is in full force and
effect; (v) neither Mortgagor nor any tenant under any Lease is
in default under any of the terms, covenants or provisions of the
Lease, and Mortgagor knows of no event which, but for the passage
of time or the giving of notice or both, would constitute an
event of default under any Lease; (vi) there are no offsets or
defenses to the payment of any portion of the Rents; and (vii)
all Rents due and payable under each Lease have been paid in full
and no said Rents have been paid more than one (1) month in
advance of the due dates thereof.
(hh) Appraisal. All requirements and conditions of the appraisal of
---------
the Property submitted to Mortgagee as part of the Loan
Application, upon which the value of the Mortgaged Property was
conditioned, have been fully satisfied.
(ii) Boundary Lines. All of the Improvements which were included in
--------------
determining the appraised value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of
the Mortgaged Property, and no improvements on adjoining
properties encroach upon the Mortgaged Property, and no easements
or other encumbrances upon the Premises encroach upon any of the
Improvements, so as to affect the value or marketability of the
Mortgaged Property except those which are insured against by
title insurance.
(jj) Survey. The survey of the Mortgaged Property delivered to
------
Mortgagee in connection with this Mortgage, has been performed by
a duly licensed surveyor or registered professional engineer in
the jurisdiction in which the Mortgaged Property is situated, is
certified to the Mortgagee, its successors and assigns, and the
title insurance company, and is in accordance with the most
current minimum standards for title surveys as determined by the
American Land Title Association, with the signature and seal of a
licensed engineer or surveyor affixed thereto, and does not fail
to reflect any material matter affecting the Mortgaged Property
or the title thereto.
(kk) Forfeiture. There has not been and shall never be committed by
----------
Mortgagor or any other person in occupancy of or involved with
the operation or use of the Mortgaged Property any act or
omission affording the federal government or any state or local
government the right of forfeiture as against
23
<PAGE>
the Mortgaged Property or any part thereof or any monies paid in
performance of Mortgagor's obligations under any of the Loan
Documents.
(ll) Management Agreement. The Management Agreement dated February
--------------------
20, 1996 (the "MANAGEMENT AGREEMENT") between Mortgagor and WMC
Realty, Inc. ("MANAGER") pursuant to which Manager operates the
Mortgaged Property is in full force and effect and there is no
default or violation by any party thereunder. The fee due under
the Management Agreement, which shall in no event exceed five
percent (5.00%) of Gross Income from Operations (hereinafter
defined), and the terms and provisions of the Management
Agreement, are subordinate to this Mortgage and Manager shall
attorn to Mortgagee. Mortgagor shall not terminate, cancel,
modify, renew or extend the Management Agreement, or enter into
any agreement relating to the management or operation of the
Mortgaged Property with Manager or any other party without the
express written consent of Mortgagee, which consent shall not be
unreasonably withheld. If at any time Mortgagee consents to the
appointment of a new Manager, such new Manager and Mortgagor
shall, as a condition of Mortgagee's consent, execute a Consent
and Agreement of Manager in the form then used by Mortgagee.
(mm) No Broker. No Broker other than Sandcastle Investments, Ltd., no
---------
financial advisors, brokers, underwriters, placement agents,
agents or finders have been dealt with by the Mortgagor in
connection with the Loan.
12. SINGLE PURPOSE ENTITY/SEPARATENESS. Mortgagor represents,
warrants and covenants as follows:
(a) Mortgagor does not own and will not own any asset or
property other than (i) the Mortgaged Property, and (ii) incidental personal
property necessary for the ownership or operation of the Mortgaged Property.
(b) Mortgagor will not engage in any business other than the
ownership, management and operation of the Mortgaged Property and Mortgagor will
conduct and operate its business as presently conducted and operated.
(c) Mortgagor will not enter into any contract or agreement with
any affiliate of the Mortgagor, any constituent party of Mortgagor, any
guarantor (a "GUARANTOR") of the Debt or any part thereof or any affiliate of
any constituent party or Guarantor, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arms-length basis with third parties other than any such party.
(d) Mortgagor has not incurred and will not incur any
indebtedness, secured or unsecured, direct or indirect, absolute or contingent
(including guaranteeing any obligation), other than (i) the Debt, (ii) trade and
operational debt incurred in the ordinary course of business with trade
creditors and in amounts as are normal and reasonable under the circumstances,
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and (iii) debt incurred in the financing of equipment and other personal
property used on the Premises. No indebtedness other than the Debt may be
secured (subordinate or pari passu) by the Mortgaged Property.
---- -----
(e) Mortgagor has not made and will not make any loans or
advances to any third party (including any affiliate or constituent party, any
Guarantor or any affiliate of any constituent party or Guarantor), and shall not
acquire obligations or securities of its affiliates.
(f) Mortgagor is and will remain solvent and Mortgagor will pay
its debts and liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same shall beome due.
(g) Mortgagor has done or caused to be done and will do all
things necessary to observe organizational formalities and preserve its
existence, and Mortgagor will not, nor will Mortgagor permit any constituent
party or Guarantor to amend, modify or otherwise change the partnership
certificate, partnership agreement, articles of incorporation and bylaws, trust
or other organizational documents of Mortgagor or such constituent party or
Guarantor without the prior written consent of Mortgagee.
(h) Mortgagor will maintain all of its books, records, financial
statements and bank accounts separate from those of its affiliates and any
constituent party and Mortgagor will file its own tax returns unless required
otherwise by applicable law. Mortgagor shall maintain its books, records,
resolutions and agreements as official records.
(i) Mortgagor will be, and at all times will hold itself out to
the public as, a legal entity separate and distinct from any other entity
(including any affiliate of Mortgagor, any constituent party of Mortgagor, any
Guarantor or any affiliate of any constituent party or Guarantor), shall
correct any known misunderstanding regarding its status as a separate entity,
shall conduct business in its own name, shall not identify itself or any of its
affiliates as a division or part of the other and shall maintain and utilize a
separate telephone number and separate stationery, invoices and checks.
(j) Mortgagor is adequately capitalized and will maintain
adequate capital for the normal obligations reasonably foreseeable in a business
of its size and character and in light of its contemplated business operations.
(k) Neither Mortgagor nor any constituent party will seek the
dissolution, winding up, liquidation, consolidation or merger in whole or in
part, of the Mortgagor.
(l) Mortgagor will not commingle the funds and other assets of
Mortgagor with those of any affiliate or constituent party, any Guarantor, or
any affiliate of any constituent party of Guarantor, or any other person.
(m) Mortgagor has and will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of
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any affiliate or constituent party, any Guarantor, or any affiliate of any
constituent party or Guarantor, or any other person.
(n) Mortgagor does not and will not guarantee, become obligated
for, or hold itself out to be responsible for the debts or obligations of any
person or entity or the decisions or actions respecting the daily business or
affairs of any other person or entity.
(o) If Mortgagor is a limited partnership or a limited liability
company, the general partner or managing member shall be a corporation whose
sole asset is its interest in Mortgagor and the general partner or managing
member will at all times comply, and will cause Mortgagor to comply, with each
of the representations, warranties, and covenants contained in this Paragraph 12
------------
as if such representation, warranty or covenant was made directly by such
general partner or managing member.
13. ESTOPPEL CERTIFICATES AND NO DEFAULT AFFIDAVITS.
(a) After request by Mortgagee, Mortgagor shall within ten (10)
days furnish Mortgagee with a statement, duly acknowledged and certified,
setting forth (i) the amount of the original principal amount of the Note, (ii)
the unpaid principal amount of the Note, (iii) the rate of interest of the Note,
(iv) the date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any, (vi) that the Note, this
Mortgage and the other Loan Documents are valid, legal and binding obligations
and have not been modified or if modified, giving particulars of such
modification; and (vii) reaffirming all representations and warranties of
Mortgagor set forth herein and in the other Loan Documents as of the date
requested by Mortgagee or, to the extent of any changes to any such
representations and warranties, so stating such changes.
(b) Mortgagor shall deliver to Mortgagee upon request, tenant
estoppel certificates from each commercial tenant at the Mortgaged Property in
form and substance reasonably satisfactory to Mortgagee provided that Mortgagor
shall not be required to deliver such certificates more frequently than two (2)
times in any calendar year.
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14. CONTROLLING AGREEMENT. It is expressly stipulated and agreed to
be the intent of Mortgagor, and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it
permits Mortgagee to contract for, charge, take, reserve, or receive a greater
amount of interest than under state law) and that this Paragraph 14 (and the
------------
similar paragraph contained in the Note) shall control every other covenant and
agreement in this Mortgage and the other Loan Documents. If the applicable law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under the Note or under any of the other Loan Documents, or
contracted for, charged, taken, reserved, or received with respect to the Debt,
or if Mortgagee's exercise of the option to accelerate the maturity of the Note,
or if any prepayment by Mortgagor results in Mortgagor having paid any interest
in excess of that permitted by applicable law, then it is Mortgagor's and
Mortgagee's express intent that all excess amounts theretofore collected by
Mortgagee shall be credited on the principal balance of the Note and all other
Debt (or, if the Note and all other Debt have been or would thereby be paid in
full, refunded to Mortgagor), and the provisions of the Note and the other Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or agreed to be paid to Mortgagee for the use, forbearance, or
detention of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on account
of the Debt does not exceed the maximum lawful rate from time to time in effect
and applicable to the Debt for so long as the Debt is outstanding.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, it is not the intention of Mortgagee to accelerate the maturity
of any interest that has not accrued at the time of such acceleration or to
collect unearned interest at the time of such acceleration.
15. CHANGES IN LAWS REGARDING TAXATION. If any law is enacted or
adopted or amended after the date of this Mortgage which deducts the Debt from
the value of the Mortgaged Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the
Mortgaged Property, Mortgagor will pay such tax, with interest and penalties
thereon, if any. In the event Mortgagee is advised by counsel chosen by it that
the payment of such tax or interest and penalties by Mortgagor would be unlawful
or taxable to Mortgagee or unenforceable or provide the basis for a defense of
usury, then in any such event, Mortgagee shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.
16. NO CREDITS ON ACCOUNT OF THE DEBT. Mortgagor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes or Other Charges assessed against the Mortgaged Property, or
any part thereof, and no deduction shall otherwise be made or claimed from the
assessed value of the Mortgaged Property, or any part thereof, for real, estate
tax purposes by reason of this Mortgage or the Debt. In the event such claim,
credit or deduction shall be required by law, Mortgagee shall have the option,
by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
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17. DOCUMENTARY STAMPS. If at any time the United States of America,
any State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
18. BOOKS AND RECORDS.
(a) The financial statements heretofore furnished to Mortgagee
are, as of the dates specified therein, complete and correct and fairly present
the financial condition of the Mortgagor and any other persons or entities that
are the subject of such financial statements, and are prepared in accordance
with generally accepted accounting principles. Mortgagor does not have any
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments
that are known to Mortgagor and reasonably likely to have a materially adverse
effect on the Mortgaged Property or the operation thereof as a multifamily
apartment complex, except as referred to or reflected in said financial
statements. Since the date of such financial statements, there has been no
materially adverse change in the financial condition, operation or business of
Mortgagor from that set forth in said financial statements.
(b) Mortgagor will maintain full and accurate books of accounts
and other records reflecting the results of the operations of the Mortgaged
Property and will furnish to Mortgagee on or before forty-five (45) days after
the end of each calendar quarter the following items, each certified by
Mortgagor as being true and correct: (i) a written statement (rent roll) dated
as of the last day of each such calendar quarter identifying each of the Leases
by the term, space occupied, rental required to be paid, security deposit paid,
any rental concessions, and identifying any defaults or payment delinquencies
thereunder; (ii) monthly and year to date operating statements prepared for each
calendar month during each such calendar quarter, noting Net Operating Income
(as hereinafter defined), Gross Income from Operations (as hereinafter defined),
and Operating Expenses (as hereinafter defined) and including an itemization of
actual (not pro forma) capital and other information necessary and sufficient
under generally accepted accounting practices to fairly represent the financial
position and results of operation of the Mortgaged Property during such calendar
month, all in form satisfactory to Mortgagee; (iii) a property balance sheet for
each such calendar quarter; (iv) a comparison of the budgeted income and
expenses and the actual income and expenses for each calender quarter and year
to date together with a detailed explanation of any variances of five percent
(5%) or more between budgeted and actual amounts for such quarterly period and
year to date; and (v) a calculation reflecting the Debt Service Coverage Ratio
(as hereinafter defined) as of the last day of each such calendar quarter. Until
a Secondary Market Transaction has occurred, the Mortgagor shall furnish monthly
each of the items listed in the immediately preceding sentence within twenty
(20) days after the end of such month. With 120 days following the end of each
calendar year, Mortgagor shall furnish statements of its financial affairs and
condition including a balance sheet and a statement of profit and loss for the
Mortgagor in such detail as Mortgage may reasonably request, and setting forth
the financial condition and the income and expenses for the Mortgaged Property
for the immediately preceding calendar year, which statements shall be prepared
by Mortgagor. Mortgagor's annual financial statements shall include (i) a list
of the tenants, if any, occupying more than twenty (20%) percent
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of the total floor area of the Improvements, and (ii) a breakdown showing the
year in which each Lease then in effect expires and the percentage of total
floor area of the Improvements and the percentage of base rent with respect to
which Leases shall expire in each such year, each such percentage to be
expressed on both a per year and a cumulative basis. Mortgagor's annual
financial statements shall be accompanied by a certificate executed by the
chief financial officer of Mortgagor, stating that each such annual financial
statement presents fairly the financial condition of the Mortgaged Property
being reported upon. Each such annual financial statement shall be prepared in
accordance with generally accepted accounting principles consistently applied.
At any time and from time to time Mortgagor shall deliver to Mortgagee or its
agents such other financial data as Mortgagee or its agents shall reasonably
request with respect to the ownership, maintenance, use and operation of the
Mortgaged Property.
(c) For the purposes of this Mortgage, the following terms shall have
the following meanings:
(i) The term "NET OPERATING INCOME" shall mean the amount
obtained by subtracting Operating Expenses from Gross Income from Operations.
(ii) The term "OPERATING EXPENSES" shall mean the total of all
expenditures, computed in accordance with generally accepted accounting
principles, of whatever kind relating to the operation, maintenance and
management of the Mortgaged Property that are incurred on a regular monthly or
other periodic basis, including without limitation, utilities, ordinary repairs
and maintenance, insurance, license fees, property taxes and assessments,
advertising expenses, management fees, payroll and related taxes, computer
processing charges, operational equipment or other lease payments as approved by
Mortgagee, and other similar costs, but excluding depreciation, debt service,
capital expenditures, and contributions to the Replacement Escrow Fund, the Tax
and Insurance Impound Fund, and any other reserves required under the Loan
Documents.
(iii) The term "GROSS INCOME FROM OPERATIONS" shall mean all
income, computed in accordance with generally accepted accounting principles,
derived from the ownership and operation of the Mortgaged Property from whatever
source, including, but not limited to, Rents, utility charges, escalations,
forfeited security deposits, interest on credit accounts, service fees or
charges, license fees, parking fees, rent concessions or credits, and other
passthrough or reimbursements paid by tenants under the Leases of any nature but
excluding sales, use and occupancy or other taxes on receipts required to be
accounted for by Mortgagor to any government or governmental agency, refunds and
uncollectible accounts, sales of furniture, fixtures and equipment, proceeds of
casualty insurance and condemnation awards (other than business interruption or
other loss of income insurance), and any disbursements to the Mortgagor from the
Tax and Insurance Impound Fund, the Replacement Escrow Fund, the Rollover Escrow
Fund, or any other escrow fund established by the Loan Documents.
(iv) The term "DEBT SERVICE COVERAGE RATIO" shall mean a ratio
for the applicable period in which: (A) the numerator is the Net Operating
Income (excluding
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interest on credit accounts) for such period as set forth in the statements
required hereunder; and (B) the denominator is the aggregate amount of principal
and interest due and payable on the Note.
19. PERFORMANCE OF OTHER AGREEMENTS. Mortgagor shall observe and
perform each and every term to be observed or performed by Mortgagor pursuant to
the terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
20. FURTHER ACTS, ETC.
(a) Mortgagor will, at the cost of Mortgagor, and without
expense to Mortgage, do, execute, acknowledge and deliver all and every such
further acts, deeds, conveyances, mortgages, assignments, notices of assignment,
Uniform Commercial Code financing statements or continuation statements,
transfers and assurances as Mortgagee shall, from time to time, reasonably
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Mortgagee the property and rights hereby deeded, mortgaged,
given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed,
pledged, assigned and hypothecated or intended now or hereafter so to be, or
which Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance of
the terms of this Mortgage or for filing, registering or recording this Mortgage
or for facilitating the sale of the Loan and the Loan Documents as described in
Paragraph 20(b) below. Mortgagor, on demand, will execute and deliver and hereby
- ---------------
authorizes Mortgagee to execute in the name of Mortgagor or without the
signature of Mortgagor to the extent Mortgagee may lawfully do so, one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Mortgagee in the Mortgaged Property. Upon
foreclosure, the appointment of a receiver or any other relevant action,
Mortgagor will, at the cost of Mortgagor and without expense to Mortgagee,
cooperate fully and completely to effect the assignment or transfer of any
license, permit, agreement or any other right necessary or useful to the
operation of or the Mortgaged Property. Mortgagor grants to Mortgagee an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to
Mortgagee at law and in equity, including without limitation, such rights and
remedies available to Mortgagee pursuant to this paragraph.
21. RECORDING OF MORTGAGE, ETC. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time, will
cause this Mortgage, and any security instrument creating a lien or security
interest or evidencing the lien hereof upon the Mortgaged Property and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the lien or security interest
hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor
will pay all filing, registration or recording fees, and all expenses incident
to the preparation, execution and acknowledgement of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property or any instrument of further assurance, except where prohibited by law
so to
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do. Mortgagor shall hold harmless and indemnify Mortgagee, its successors and
assigns, against any liability incurred by reason of the imposition of any tax
on the making and recording of this Mortgage.
22. REPORTING REQUIREMENTS. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor or the death,
insolvency or bankruptcy filing of any Guarantor.
23. EVENTS OF DEFAULT. The Debt shall become immediately due and
payable at the option of Mortgagee upon the happening of any one or more of the
following events of default (each an "EVENT OF DEFAULT"):
(a) if any portion of the Debt is not paid on or before the date
on which such payment is due;
(b) subject to Mortgagor's right to contest as provided herein,
if any of the Taxes or Other Charges are not paid when the same are due and
payable (unless sums equaling the amount of Taxes and Other Charges then due and
payable have been delivered to Mortgagee in accordance with Paragraph 6 hereof);
(c) if the Policies are not kept in full force and effect, or if
the Policies are not delivered to Mortgagee upon request;
(d) if Mortgagor transfers or encumbers any portion of the
Mortgaged Property without Mortgagee's prior written consent;
(e) if any representation or warranty of Mortgagor, or of any
Guarantor, made herein or in any other Loan Document or in any certificate,
report, financial statement or other instrument or document furnished to
Mortgagee shall have been false or misleading in any material respect when made;
(f) if Mortgagor or any Guarantor shall make an assignment for
the benefit of creditors or if Mortgagor shall generally not be paying its debts
as they become due;
(g) if a receiver, liquidator or trustee of Mortgagor or of any
Guarantor shall be appointed or if Mortgagor or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by, Mortgagor or any Guarantor of if any proceeding for the dissolution or
liquidation of Mortgagor or of any Guarantor shall be instituted; however, if
such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Mortgagor or such Guarantor, upon the same not being discharged,
stayed or dismissed within sixty (60) days;
(h) if Mortgagor shall be in default under any other mortgage or
security agreement covering any part of the Mortgaged Property whether it be
superior or junior in lien to this Mortgage;
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(i) subject to Mortgagor's right to contest as provided herein,
if the Mortgaged Property becomes subject to any mechanic's, materialman's or
other lien and such lien is not removed or recorded within thirty (30) days of
the filing or recording of such lien (except a lien for local real estate taxes
and assessments not then due and payable);
(j) if Mortgagor fails to cure properly any violations of laws
or ordinances affecting or which may be interpreted to affect the Mortgaged
Property within thirty (30) days after Mortgagor first receives notice of any
such violations;
(k) except as permitted in this Mortgage, the alteration,
improvement, demolition or removal of any of the Improvements without the prior
consent of Mortgagee;
(l) if Mortgagor shall continue to be in default under any term,
covenant, or provision of the Note or any of the other Loan Documents, beyond
applicable cure periods contained in those documents;
(m) if Mortgagor fails to cure a default under any other term,
covenant or provision of this Mortgage within thirty (30) days after Mortgagor
first receives notice of any such default; provided, however, if such default is
reasonably susceptible of cure, but not within such thirty (30) day period, then
Mortgagor may be permitted up to an additional sixty (60) days to cure such
default provided that Mortgagor diligently and continuously pursues such cure;
(n) if without Mortgagee's prior written consent, (i) the
Management Agreement is terminated, (ii) the ownership, management or control of
Manager is transferred, (iii) there is a material change in the Management
Agreement, or (iv) if there shall be a material default by Mortgagor under the
Management Agreement; or
(o) if Mortgagor ceases to continuously operate the Mortgaged
Property or any material portion thereof as a multifamily apartment complex for
any reason whatsoever (other than temporary cessation in connection with any
repair or renovation thereof undertaken with the consent of Mortgagee).
24. LATE PAYMENT CHARGE. If any portion of the Debt is not paid on
or before the date on which such payment is due, Mortgagor shall pay to
Mortgagee upon demand an amount equal to the lesser of five percent (5.00%) of
such unpaid portion of the Debt or the maximum amount permitted by applicable
law in order to defray a portion of the expenses incurred by Mortgagee in
handling and processing such delinquent payment and to compensate Mortgagee for
the loss of the use of such delinquent payment, and such amount shall be secured
by this Mortgage.
25. RIGHT TO CURE DEFAULTS. Upon the occurrence of any Event of
Default or if Mortgagor fails to make any payment or to do any act as herein
provided, Mortgagee may, but without any obligation to do so and without notice
to or demand on Mortgagor and without releasing Mortgagor from any obligation
hereunder, make or do the same in such manner and to such extent as Mortgagee
may deem necessary to protect the security hereof. Mortgagee is authorized to
enter upon the Mortgaged Property for such purposes or appear in, defend, or
bring any action or proceeding to protect its interest in the Mortgaged Property
or to foreclose this
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Mortgage or collect the Debt, and the cost and expense thereof (including
reasonable attorneys' fees and disbursements to the extent permitted by law),
with interest at the Default Rate (as defined in the Note) for the period after
notice from Mortgagee that such cost or expense was incurred to the date of
payment to Mortgagee, shall constitute a portion of the Debt, shall be secured
by this Mortgage and the other Loan Documents and shall be due and payable to
Mortgagee upon demand.
26. ADDITIONAL REMEDIES.
(a) Upon the occurrence of any Event of Default, Mortgagee may
take such action, without notice or demand, as it deems advisable to protect and
enforce its rights against Mortgagor and in and to the Mortgaged Property by
Mortgagee itself or otherwise, including, without limitation, 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 the other rights and remedies of Mortgagee:
(i) declare the entire Debt to be immediately due and
payable;
(ii) institute a proceeding or proceedings, judicial or
nonjudicial, by advertisement or otherwise, for the complete foreclosure of this
Mortgage in which case the Mortgaged Property or any interest therein may be
sold for cash or upon credit in one or more parcels or in several interests or
portions and in any order or manner;
(iii) with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute proceedings for
the partial foreclosure of this Mortgage for the portion of the Debt then due
and payable, subject to the continuing lien of this Mortgage for the balance of
the Debt not then due;
(iv) sell for cash or upon credit the Mortgaged Property or
any part thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to the power of
sale contained herein or otherwise, at one or more sales, as an entirety or in
parcels, at such time and place, upon such terms and after such notice thereof
as may be required or permitted by law;
(v) institute an action, suit or proceeding in equity for
the specific performance of any covenant, condition or agreement contained
herein, or in any of the other Loan Documents;
(vi) recover judgment on the Note either before, during or
after any proceedings for the enforcement of this Mortgage;
(vii) apply for the appointment of a trustee, receiver,
liquidator or conservator of the Mortgaged Property, without notice and without
regard for the adequacy of the security for the Debt and without regard for the
solvency of the Mortgagor, any Guarantor or of any person, firm or other entity
liable for the payment of the Debt;
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(viii) enforce Mortgagee's interest in the Leases and
Rents and enter into or upon the Mortgaged Property, either personally or by
its agents, nominees or attorneys and dispossess Mortgagor and its agents and
servants therefrom, and thereupon Mortgagee may (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all and every
part of the Mortgaged Property and conduct the business thereat; (B) complete
any construction on the Mortgaged Property in such manner and form as Mortgagee
deems advisable; (C) make alterations, additions, renewals, replacements and
improvements to or on the Mortgaged Property; (D) exercise all rights and powers
of Mortgagor with respect to the Mortgaged Property, whether in the name of
Mortgagor or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all Rents; and (E) apply the receipts from the Mortgaged
Property to the payment of Debt, after deducting therefrom all expenses
(including reasonable attorney's fees and disbursements) incurred in connection
with the aforesaid operations and all amounts necessary to pay the taxes,
assessments insurance and other charges in connection with the Mortgaged
Property, as well as just and reasonable compensation for the services of
Mortgagee, its counsel, agents and employees;
(ix) require Mortgagor to pay monthly in advance to
Mortgagee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion of the
Mortgaged Property occupied by Mortgagor and require Mortgagor to vacate and
surrender possession to Mortgagee of the Mortgaged Property or to such receiver
and, in default thereof, evict Mortgagor by summary proceedings or otherwise; or
(x) pursue such other rights and remedies as may be
available at law or in equity or under the Uniform Commercial Code including
without limitation the right to receive and/or establish a lock box for all
Rents proceeds from the Intangibles and any other receivables or rights to
payments of Mortgagor relating to the Mortgaged Property; or
(xi) foreclose this Mortgage in accordance with the
provisions of Wis. Stats. (S) 846.101 or (S) 846.103, or any successor statutes
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thereto.
In the event of a sale, by foreclosure or otherwise, of less than all
of the Mortgaged Property, this Mortgage shall continue as a lien on the
remaining portion of the Mortgaged Property.
(b) The proceeds of any sale made under or by virtue of this
paragraph, together with any other sums which then may be held by Mortgagee,
under this Mortgage, whether under the provisions of this paragraph or
otherwise, shall be applied by Mortgagee to the payment of the Debt in such
priority and proportion as Mortgagee in its sole discretion shall deem proper.
(c) Mortgagee may adjourn from time to time any sale by it to be
made under or by virtue of this Mortgage by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Mortgagee, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
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(d) Upon the completion of any sale or sales pursuant hereto,
Mortgagee, or an officer of any court empowered to do so, shall execute and
deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, conveying, assigning and
transferring all estate, right, title and interest in and to the property and
rights sold. Mortgagee is hereby irrevocably appointed the true and lawful
attorney of Mortgagor, in its name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the Mortgaged Property and rights so
sold and for that purpose Mortgagee may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more persons with
like power, Mortgagor hereby ratifying and confirming all that its said attorney
or such substitute or substitutes shall lawfully do by virtue hereof. Any sale
or sales made under or by virtue of this paragraph, whether made under the power
of sale herein granted or under or by virtue of judicial proceedings or of a
judgement or decree of foreclosure and sale, shall operate to divest all 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 against any
and all persons claiming or who may claim the same, or any part thereof from,
through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgement or decree of foreclosure and sale,
Mortgagee may bid for and acquire the Mortgaged Property or any part thereof and
in lien of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and costs of the action and any other sums which Mortgagee
is authorized to deduct under this Mortgage.
(f) No recovery of any judgement by Mortgagee and no levy of an
execution under any judgement upon the Mortgaged Property or upon any other
property of Mortgagor shall affect in any manner or to any extent the lien of
this Mortgage upon the Mortgaged Property or any part thereof, or any liens,
rights, powers or remedies of Mortgagee hereunder, but such liens, rights,
powers and remedies of Mortgagee shall continue unimpaired as before.
(g) Mortgagee may terminate or rescind any proceeding or other
action brought in connection with its exercise of the remedies provided in this
paragraph at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
(h) Mortgagee may resort to any remedies and the security given
by the Note, this Mortgage or the Loan Documents in whole or in part, and in
such portions and in such order as determined by Mortgagee's sole discretion. No
such action shall in any way be considered a waiver of any rights, benefits or
remedies evidenced or provided by the Note, this Mortgage or any of the other
Loan Documents. The failure of Mortgagee to exercise any right, remedy or option
provided in the Note, this Mortgage or any of the other Loan Documents shall not
be deemed a waiver of such right, remedy or option or of any covenant or
obligation secured by the Note, this Mortgage or the other Loan Documents. No
acceptance by Mortgagee of any payment after the occurrence of any Event of
Default and no payment by Mortgagee of any obligation for which
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Mortgagor is liable hereunder shall be deemed to waive or cure any Event of
Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Mortgaged Property, no
forbearance on the part of Mortgagee, and no extension of time for the payment
of the whole or any portion of the Debt or any other indulgence given by
Mortgagee to Mortgagor, shall operate to release or in any manner affect the
interest of Mortgagee in the remaining Mortgaged Property or the liability of
Mortgagor to pay the Debt. No waiver by Mortgagee shall be effective unless it
is in writing and then only to the extent specifically stated. All costs and
expenses of Mortgagee in exercising the rights and remedies under this Paragraph
---------
26 (including reasonable attorneys' fees and disbursements to the extent
- --
permitted by law), shall be paid by Mortgagor immediately upon notice from
Mortgagee, with interest at the Default Rate for the period after notice from
Mortgagee and such costs and expenses shall constitute a portion of the Debt and
shall be secured by this Mortgage.
(i) The interests and rights of Mortgagee under the Note,
this Mortgage or in any of the other Loan Documents shall not be impaired by
any indulgence, including (i) any renewal, extension or modification which
Mortgagee may grant with respect to any of the Debt, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which
Mortgagee may grant with respect to the Mortgaged Property or any portion
thereof; or (iii) any release or indulgence granted to any maker, endorser,
Guarantor or surety of any of the Debt.
27. RIGHT OF ENTRY. In addition to any other rights or remedies
granted under this Mortgage, Mortgagee, and its agents, during the Term, shall
have the right to enter and inspect the Mortgaged Property during normal
business hours. The cost of such inspections or audits shall be borne by
Mortgagor should Mortgagee determine that an Event of Default exists, including
the cost of all follow up or additional investigations or inquiries deemed
reasonably necessary by Mortgagee. The cost of such inspections, if not paid for
by Mortgagor following demand, may be added to the principal balance of the sums
due under the Note and this Mortgage and shall bear interest thereafter until
paid at the Default Rate.
28. SECURITY AGREEMENT.
(a) This Mortgage is both a real property mortgage and a
"security agreement" within the meaning of the Uniform Commercial Code. The
Mortgaged Property includes both real and personal property and all other rights
and interests, whether tangible or intangible in nature, of Mortgagor in the
Mortgaged Property. Mortgagor by executing and delivering this Mortgage has
granted and hereby grants to Mortgagee, as security for the Debt, a security
interest in the Mortgaged Property to the full extent that the Mortgaged
Property may be subject to the Uniform Commercial Code (said portion of the
Mortgaged Property so subject to the Uniform Commercial Code being called in
this paragraph the "COLLATERAL"). Mortgagor hereby agrees with Mortgagee to
execute and deliver to Mortgagee, in form and substance satisfactory to
Mortgagee, such financing statements and such further assurances as Mortgagee
may from time to time, reasonably consider necessary to create, perfect, and
preserve Mortgagee's security interest herein granted. This Mortgage shall also
constitute a "fixture filing" for the purposes of the Uniform Commercial Code.
As such, this Mortgage covers all items of the Collateral that are or
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are to become fixtures. Information concerning the security interest herein
granted may be obtained from the parties at the addresses of the parties set
forth in the first paragraph of this Mortgage.
(b) If an Event of Default shall occur, Mortgagee, in addition
to any other rights and remedies which it may have, shall have and may exercise
immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code, including, without
limiting the generality of the foregoing, the right to take possession of the
Collateral or any part thereof, and to take such other measures as Mortgagee may
deem necessary for the care, protection and preservation of the Collateral. Upon
request or demand of Mortgagee, Mortgagor shall at its expense assemble the
Collateral and make it available to Mortgagee at a convenient place acceptable
to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all expenses,
including attorneys' fees and disbursements, incurred or paid by Mortgagee in
protecting the interest in the Collateral and in enforcing the rights hereunder
with respect to the Collateral. Any notice of sale, disposition or other
intended action by Mortgagee with respect to the Collateral sent to Mortgagor in
accordance with the provisions hereof at least five (5) days prior to such
action, shall constitute commercially reasonable notice to Mortgagor. The
proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Mortgagee to the payment of the Debt in such priority and proportions
as Mortgagee in its sole discretion shall deem proper. In the event of any
change in name, identity or structure of any Mortgagor, such Mortgagor shall
notify Mortgagee thereof and promptly after request shall execute, file and
record such Uniform Commercial Code forms as are necessary to maintain the
priority of Mortgagee's lien upon and security interest in the Collateral, and
shall pay all expenses and fees in connection with the filing and recording
thereof. If Mortgagee shall require the filing or recording of additional
Uniform Commercial Code forms or continuation statements, Mortgagor shall,
promptly after request, execute, file and record such Uniform Commercial Code
forms or continuation statements as Mortgagee shall deem necessary, and shall
pay all expenses and fees in connection with the filing and recording thereof,
it being understood and agreed, however, that no such additional documents
shall increase Mortgagor's obligations under the Note, this Mortgage and any of
the other Loan Documents. Mortgagor hereby irrevocably appoints Mortgagee as its
attorney-in-fact, coupled with an interest, to file with the appropriate public
office on its behalf any financing or other statements signed only by Mortgagee,
as secured party, in connection with the Collateral covered by this Mortgage.
29. ACTIONS AND PROCEEDINGS. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its sole discretion, decides should be brought to
protect their interest in the Mortgaged Property. Mortgagee shall, at its
option, be subrogated to the lien of any mortgage or other security instrument
discharged in whole or in part by the Debt, and any such subrogation rights
shall constitute additional security for the payment of the Debt.
30. WAIVER OF SETOFF AND COUNTERCLAIM. All amounts due under this
Mortgage, the Note and the other Loan Documents shall be payable without setoff,
counterclaim or any deduction whatsoever. Mortgagor hereby waives the right to
assert a setoff, counterclaim (other than a mandatory or compulsory
counterclaim) or deduction in any action or proceeding in
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which Mortgagee is a participant, or arising out of or in any way connected with
this Mortgage, the Note, any of the other Loan Documents, or the Debt.
31. CONTEST OF CERTAIN CLAIMS. Notwithstanding the provisions of
Paragraphs 5 and 23 hereof, Mortgagor shall not be in default for failure to pay
- ------------ --
or discharge Taxes, Other Charges or mechanic's or materialman's lien asserted
against the Mortgaged Property if, and so long as, (a) Mortgagor shall have
notified Mortgagee of same within five (5) days of obtaining knowledge thereof;
(b) Mortgagor shall diligently and in good faith contest the same by appropriate
legal proceedings which shall operate to prevent the enforcement or collection
of the same and the sale of the Mortgaged Property, or any part thereof, to
satisfy the same; (c) Mortgagor shall have furnished to Mortgagee a cash
deposit, or an indemnity bond satisfactory to Mortgagee with a surety reasonably
satisfactory to Mortgagee, in the amount of the Taxes, Other Charges or
mechanic's or materialman's lien claim, plus a reasonable additional sum to pay
all costs, interest and penalties that may be imposed or incurred in connection
therewith, to assure payment of the matters under contest and to prevent any
sale or forfeiture of the Mortgaged Property or any part thereof; (d) Mortgagor
shall promptly upon final determination thereof pay the amount of any such
Taxes, Other Charges or claim so determined, together with all costs, interest
and penalties which may be payable in connection therewith; (e) the failure to
pay the Taxes, Other Charges or mechanic's or materialman's lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Mortgaged Property; and (f)
notwithstanding the foregoing, Mortgagor shall immediately upon request of
Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Taxes, Other Charges or claim notwithstanding such contest, if in the opinion
of Mortgagee, the Mortgaged Property or any part thereof of interest therein may
be in danger of being sold, forfeited, foreclosed, terminated, canceled or lost.
Mortgagee may pay over any such cash deposit or part thereof to the claimant
entitled thereto at any time when, in the judgment of Mortgagee, the entitlement
of such claimant is established.
32. RECOVERY OF SUMS REQUIRED TO BE PAID. Mortgagee shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Mortgagor existing at the time such earlier action was
commenced.
33. MARSHALLING AND OTHER MATTERS. Mortgagor hereby waives, to the extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Mortgaged Property or any
part thereof or any interest therein. Further, Mortgagor hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of each and
every person acquiring any interest in or title to the Mortgaged Property
subsequent to the date of this Mortgage and on behalf of all persons to the
extent permitted by applicable law.
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34. HAZARDOUS SUBSTANCES. Mortgagor hereby represents and warrants to
Mortgagee that, to the best of Mortgagor's knowledge, after due inquiry and
investigation except as disclosed in the report dated November 25, 1997,
prepared by Certified Environmental Inc. (the "PHASE I REPORT") and delivered to
Mortgagee in connection with the Loan: (a) the Mortgaged Property is not in
direct or indirect violation of any local, state, federal or other governmental
authority, statute, ordinance, code, order, decree, law, rule or regulation
pertaining to or imposing liability or standards of conduct concerning
environmental regulation, contamination or clean-up including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended ("CERCLA"), the Resource Conservation and Recovery Act, as
amended ("RCRA"), the Emergency Planning and Community Right-to-Know Act of
1986, as amended, the Hazardous Substances Transportation Act, as amended, the
Solid Waste Disposal Act, as amended, the Clean Water Act, as amended, the Clean
Air Act, as amended, the Toxic Substance Control Act, as amended, the Safe
Drinking Water Act, as amended, the Occupational Safety and Health Act, as
amended, any state super-lien and environmental clean-up statutes and all rules
and regulations adopted in respect to the foregoing laws whether presently in
force or coming into being and/or effectiveness hereafter (collectively,
"ENVIRONMENTAL LAWS"); (b) the Mortgaged Property is not subject to any private
or governmental lien or judicial or administrative notice or action or inquiry,
investigation or claim relating to hazardous and/or toxic, dangerous and/or
regulated, substances, wastes, materials, raw materials which include hazardous
constituents, pollutants or contaminants including without limitation,
petroleum, tremolite, anthlophylie, actinolite or polychlorinated biphenyls and
any other substances or materials which are included under or regulated by
Environmental Laws or which are considered by scientific opinion to be otherwise
dangerous in terms of the health, safety and welfare of humans (collectively,
"HAZARDOUS SUBSTANCES"); (c) no Hazardous Substances are or have been
discharged, generated, treated, disposed of or stored on, incorporated in, or
removed or transported from the Mortgaged Property other than in compliance with
all Environmental Laws; and (d) no underground storage tanks exist on any of the
Mortgaged Property. So long as Mortgagor owns or is in possession of the
Mortgaged Property, Mortgagor (i) shall keep or cause the Mortgaged Property to
be kept free from Hazardous Substances and in compliance with all Environmental
Laws, (ii) shall promptly notify Mortgagee if Mortgagor shall become aware of
any Hazardous Substances on or near the Mortgaged Property and/or if Mortgagor
shall become aware that the Mortgaged Property is in direct or indirect
violation of any Environmental Laws and/or if Mortgagor shall become aware of
any condition on or near the Mortgaged Property which shall pose a threat to the
health, safety or welfare of humans, and (iii) Mortgagor shall remove such
Hazardous Substances and/or cure such violations and/or remove such threats, as
applicable, as required by law (or as shall be required by Mortgagee in the case
of removal which is not required by law, but in response to the opinion of a
licensed hydrogeologist, licensed environmental engineer or other qualified
consultant engaged by Mortgagee ("MORTGAGEE'S CONSULTANT")), promptly after
Mortgagor becomes aware of same, at Mortgagor's sole expense. Notwithstanding
anything to the contrary in this paragraph, the Mortgagor may use and store
immaterial amounts of Hazardous Substances at the Mortgaged Property if such use
or storage is in connection with the ordinary cleaning and maintenance of the
Mortgaged Property so long as such use and storage (A) does not violate any
applicable Environmental Laws and (B) is not the subject of any specific
recommendations in the Phase I Report. Nothing herein shall prevent Mortgagor
from recovering such expenses from any other party that may be liable for such
removal or cure. The obligations and liabilities of Mortgagor
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under this Paragraph 34 shall survive any termination, satisfaction, or
------------
assignment of this Mortgage and the exercise by Mortgagee of any of its rights
or remedies hereunder, including, without limitation, the acquisition of the
Mortgaged Property by foreclosure or a conveyance in lieu of foreclosure.
35. ASBESTOS. Mortgagor represents and warrants that, to the best of
Mortgagor's knowledge, based upon the Phase I Report, no asbestos or any
substance or material containing asbestos ("ASBESTOS") is located on the
Mortgaged Property except as may have been disclosed in the Phase I Report
delivered to Mortgagee in connection with the Loan. Mortgagor shall not install
in the Mortgaged Property, nor permit to be installed in the Mortgaged Property,
Asbestos and shall remove any Asbestos promptly upon discovery to the
satisfaction of Mortgagee, at Mortgagor's sole expense. Mortgagor shall in all
instances comply with, and ensure compliance by all occupants of the Mortgaged
Property with, all applicable federal, state and local laws, ordinances, rules
and regulations with respect to Asbestos, and shall keep the Mortgaged Property
free and clear of any liens imposed pursuant to such laws, ordinances, rules or
regulations. In the event that Mortgagor receives any notice or advice from any
governmental agency or any source whatsoever with respect to Asbestos on,
affecting or installed on the Mortgaged Property, Mortgagor shall immediately
notify Mortgagee. The obligations and liabilities of Mortgagor under this
Paragraph 35 shall survive any termination, satisfaction, or assignment of this
- ------------
Mortgage and the exercise by Mortgagee of any of its rights or remedies
hereunder, including but not limited to, the acquisition of the Mortgaged
Property by foreclosure or a conveyance in lieu of foreclosure.
36. ENVIRONMENTAL MONITORING. Mortgagor shall give prompt written
notices to Mortgagee of: (a) any proceeding or inquiry by any party with respect
to the presence of any Hazardous Substance or Asbestos on, under, from or about
the Mortgaged Property, (b) all claims made or threatened by any third party
against Mortgagor or the Mortgaged Property relating to any loss or injury
resulting from any Hazardous Substance or Asbestos, and (c) Mortgagor's
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of the Mortgaged Property that could cause the Mortgaged Property
to be subject to any investigation or cleanup pursuant to any Environmental Law.
Mortgagor shall permit Mortgagee to join and participate in, as a party if it so
elects, any legal proceedings or actions initiated with respect to the Mortgaged
Property in connection with any Environmental Law or Hazardous Substance, and
Mortgagor shall pay all attorneys' fees and disbursements incurred by Mortgagee
in connection therewith. Upon Mortgagee's request, at any time and from time to
time while this Mortgage is in effect but not more frequently than once per
calendar year, unless Mortgagee has determined (in the exercise of its good
faith judgment) that reasonable cause exists for the performance of an
environmental inspection or audit of the Mortgaged Property, Mortgagor shall
provide at Mortgagor's sole expense, (i) an inspection or audit of the Mortgaged
Property prepared by a licensed hydrogeologist or licensed environmental
engineer approved by Mortgagee indicating the presence or absence of Hazardous
Substances on, in or near the Mortgaged Property, and (ii) an inspection or
audit of the Mortgaged Property prepared by a duly qualified engineering or
consulting firm approved by Mortgagee, indicating the presence or absence of
Asbestos on the Mortgaged Property; provided, however, any such inspection or
audit requested by Mortgagee, during the Term, in excess of one (1) inspection
during each five (5) year period commencing upon the date hereof, shall be
performed at Mortgagee's expense unless an Event of Default exists or Mortgagee
has determined
40
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(in the exercise of its good faith and judgment) that reasonable cause exists
for the performance of an environmental inspection or audit. If Mortgagor fails
to provide such inspection or audit within thirty (30) days after such request
Mortgagee may order same, and Mortgagor hereby grants to Mortgagee and its
employees and agents access to the Mortgaged Property and a license to undertake
such inspection or audit. The cost of such inspection or audit may be added to
the Debt and shall bear interest thereafter until paid at the Default Rate. In
the event that any environmental site assessment report prepared in connection
with such inspection or audit recommends that an operations and maintenance plan
be implemented for Asbestos or any Hazardous Substance, Mortgagor shall cause
such operations and maintenance plan to be prepared and implemented at
Mortgagor's expense upon request of Mortgagee. In the event that any
investigation, site monitoring, containment cleanup, removal restoration, or
other work of any kind is reasonably necessary or desirable under an applicable
Environmental Law (the "REMEDIAL WORK"), Mortgagor shall commence and thereafter
diligently prosecute to completion all such Remedial Work within thirty (30)
days after written demand by Mortgagee for performance thereof (or any such
shorter period of time as may be required under applicable law.) All Remedial
Work shall be performed by contractors approved in advance by Mortgagee, and
under the supervision of a consulting engineer approved by Mortgagee. All costs
and expenses of such Remedial Work shall be paid be Mortgagor including, without
limitation, Mortgagee's reasonable attorneys' fees and disbursements incurred in
connection with monitoring or review of such Remedial Work. In the event
Mortgagor shall fail to timely commence, or cause to be commenced, or fail to
diligently prosecute to completion, such Remedial Work, Mortgagee may, but shall
not be required to, cause such Remedial Work to be performed, and all costs and
expenses thereof, or incurred in connection therewith, may be added to the Debt
and shall bear interest hereafter until paid at the Default Rate.
37. HANDICAPPED ACCESS.
(a) Mortgagor agrees that the Mortgaged Property shall
at all times strictly comply to the extent applicable with the requirements of
the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of
1988 (if applicable), all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively "ACCESS
LAWS").
(b) Notwithstanding any provisions set forth herein or
in any other document regarding Mortgagee's approval of alterations of the
Mortgaged Property, Mortgagor shall not alter the Mortgaged Property in any
manner which would increase Mortgagor's responsibilities for compliance with the
applicable Access Laws without the prior written approval of Mortgagee. The
foregoing shall apply to tenant improvements constructed by Mortgagor or by any
of its tenants. Mortgagee may condition any such approval upon receipt of a
certificate of Access Law compliance from an architect, engineer, or other
person acceptable to Mortgagee.
(c) Mortgagor agrees to give prompt notice to
Mortgagee of the receipt by Mortgagor of any complaints related to violation of
any Access Laws and of the commencement of any proceedings or investigations
which relate to compliance with applicable Access Laws.
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38. INDEMNIFICATION. In addition to any other indemnifications
provided herein or in the other Loan Documents, Mortgagor shall protect, defend,
indemnify and save harmless Mortgagee from and against all liabilities,
obligations, claims, demands, damages, penalties, causes of action, losses,
fines, costs and expenses (including, without limitation, reasonable attorney's
fees and disbursements), imposed upon or incurred by or asserted against
Mortgagee by reason of (a) ownership of this Mortgage, the Mortgaged Property or
any interest therein or receipt of any Rents; (b) any accident, injury to or
death or persons or loss of or damage to property occurring in, on or about the
Mortgaged Property or any part thereof or on the adjoining sidewalk, curbs,
adjacent property or adjacent parking areas, streets or ways; (c) any use,
nonuse or condition in, on or about the Mortgaged Property or any part thereof
or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (d) any failure on the part of Mortgagor to perform or comply
with any of the terms of this Mortgage; (e) performance of any labor or services
or the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; (f) the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release, or threatened release of any
Hazardous Substance or Asbestos on, from, or affecting the Mortgaged Property;
(g) any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Substance or Asbestos; (h)
any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Substance or Asbestos; (i) any violation of the
Environmental Laws, which are based upon or in any way related to such Hazardous
Substance or Asbestos including, without limitation, the costs and expenses of
any Remedial Work, attorney and consultant fees and disbursements, investigation
and laboratory fees, court costs, and litigation expenses; (j) and failure of
the Mortgaged Property to comply with any Access Laws; (k) any representation or
warranty made in the Note, this Mortgage or any of the other Loan Documents
being false or misleading in any material respect as of the date such
representation or warranty was made; (l) any claim by brokers, finders or
similar persons claiming to be entitled to a commission in connection with the
Loan, any Lease or other transaction involving the Mortgaged Property or any
part thereof under any legal requirement or any liability asserted against
Mortgagee with respect thereto; and (m) the claims of any lessee of any or any
portion of the Mortgaged Property or any person acting through or under any
lessee or otherwise arising under or as a consequence of any Lease. Any amounts
payable to Mortgagee by reason of the application of this paragraph shall be
secured by this Mortgage and shall become immediately due and payable and shall
bear interest at the Default Rate from the date loss or damage is sustained by
Mortgagee until paid. The obligations and liabilities of Mortgagor under this
Paragraph 38 shall survive any termination, satisfaction, or assignment of this
- ------------
Mortgage and the exercise by Mortgagee of any of its rights or remedies
hereunder, including, but not limited to, the acquisition of the Mortgaged
Property by foreclosure or a conveyance in lieu of foreclosure.
39. NOTICES. Any notice, report, demand or other instrument
authorized or required or be given or furnished ("Notices") shall be in writing
-------
and shall be given as follows: (a) by hand delivery; (b) by deposit in the
United States mail as first class certified mail, return receipt requested,
postage paid; (c) by overnight nationwide commercial courier service; or (d) by
telecopy transmission (other than for notices of default) with a confirmation
copy to be delivered by duplicate notice in accordance with any of clauses (a)-
------------
(c) above, in each case, to the party intended to receive the same at the
- ---
following address(es):
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Mortgagee: Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Attention: Edmund Taylor
Re: Wellington/Lake Pointe/Stephen Jones
Telecopier: (212) 325-8162
with copies to: Credit Suisse First Boston Mortgage Capital LLC
Legal & Compliance Department
11 Madison Avenue
New York, New York 10010
Attention: Colleen Graham, Esq.
Re: Wellington/Lake Pointe/Stephen Jones
Telecopier: (212) 325-8220
and: Banc One Mortgage Capital Market, LLC
1717 Main Street, 12th Floor
Dallas, Texas 75201
Attn: John Lloyd, Account Representative
Telecopier: (214) 290-2484
or any successor servicer of the Loan.
Mortgagor: Lake Pointe Apartment Homes, Inc.
18650 West Corporate Drive
Suite 300
Brookfield, Wisconsin 53045
Attn: Arnold K. Leas
Telecopier: (414) 792-8930
with a copy to: Lake Pointe Apartment Homes, Inc.
18650 West Corporate Drive
Suite 300
Brookfield, Wisconsin 53045
Attn: Robert F. Rice
Telecopier: (414) 792-8930
Any party may change the address to which any such Notice is to be
delivered, by furnishing ten (10) days written notice of such change to the
other parties in accordance with the provisions of this Paragraph 39. Notices
------------
shall be deemed to have been given on the date they are actually received;
provided, that the inability to deliver Notices because of a changed address of
- --------
which no Notice was given, or rejection or refusal to accept any Notice offered
for delivery shall be deemed to be receipt of the Notice as of the date of such
inability to deliver or rejection or
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refusal to accept delivery. Notice for either party may be given by its
respective counsel. Additionally, notice from Mortgagee may also be given by the
Servicer.
40. AUTHORITY.
(a) Mortgagor (and the undersigned representative of Mortgagor,
if any) represent and warrant that it (or they, as the case may be) has full
power, authority and right to execute, deliver and perform its obligations
pursuant to this Mortgage, and to deed, mortgage, give, grant, bargain, sell,
alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and assign the
Mortgaged Property pursuant to the terms hereof and to keep and observe all of
the terms of this Mortgage on Mortgagor's part to be performed.
(b) Mortgagor represents and warrants that Mortgagor is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended and the related Treasury Department
regulations, including temporary regulations.
41. WAIVER OF NOTICE. Mortgagor shall not be entitled to any notices
of any nature whatsoever from Mortgagee except with respect to matters for which
this Mortgage specifically and expressly provides for the giving of notice by
Mortgagee to Mortgagor and except with respect to matters for which Mortgagee is
required by applicable law to give notice, and Mortgagor hereby expressly waives
the right to receive any notice from Mortgagee with respect to any matter for
which this Mortgage does not specifically and expressly provide for the giving
of notice by Mortgagee to Mortgagor.
42. REMEDIES OF MORTGAGOR. In the event that a claim or adjudication
is made that Mortgagee has acted unreasonably or unreasonably delayed acting in
any case where by law or under the Note, this Mortgage or any of the other Loan
Documents, it has an obligation to act reasonably or promptly, Mortgagee shall
not be liable for any monetary damages, and Mortgagor's remedies shall be
limited to injunctive relief or declaratory judgment.
43. SOLE DISCRETION OF MORTGAGEE. Wherever pursuant to this
Mortgage, Mortgagee exercises any right given to it to consent or not consent or
approve or disapprove, or any arrangement or term is to be satisfactory to
Mortgagee, the decision of Mortgagee to consent or not consent, to approve or
disapprove or to decide that arrangements or terms are satisfactory or not
satisfactory shall be in the sole discretion of Mortgagee and shall be final and
conclusive, except as may be otherwise expressly and specifically provided
herein.
44. NON-WAIVER. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor or Guarantor to take any action to foreclose this Mortgage or
otherwise enforce any of the provisions hereof or of the Note, or the other Loan
Documents, (b) the release, regardless of consideration, of the whole or any
part of the Mortgaged Property, or of any person liable for the Debt or any
portion thereof, or (c) any agreement or stipulation by Mortgagee extending the
time of payment or otherwise modifying or supplementing the terms of the Note,
this Mortgage or any of the other Loan Documents. Mortgagee may resort for the
payment of the Debt
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to any other security held by Mortgagee in such order and manner as Mortgagee,
in its sole discretion, may elect. Mortgagee may take action to recover the
Debt, or any portion thereof, or to enforce any covenant hereof without
prejudice to the right of Mortgagee thereafter to foreclosure this Mortgage. The
rights and remedies of Mortgagee under this Mortgage shall be separate, distinct
and cumulative and none shall be given effect to the exclusion of the others.
No act of Mortgagee shall be construed as an election to proceed under any one
provision herein to the exclusion of any other provision. Mortgagee shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled to every right and remedy now or hereafter afforded at law or in
equity.
45. NO ORAL CHANGE. This Mortgage, and any provisions hereof, may not
be modified, amended, waived, extended, changed, discharged or terminated orally
or by any act or failure to act on the part of Mortgagor or Mortgagee, but only
by an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
46. LIABILITY. If Mortgagor consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. Subject to the provisions hereof requiring Mortgagee's consent to any
transfer of the Mortgaged Property, this Mortgage shall be binding upon and
inure to the benefit of Mortgagor and Mortgagee and their respective successors
and assigns forever.
47. INAPPLICABLE PROVISIONS. If any term, covenant or condition of
the Note or this Mortgage is held to be invalid, illegal or unenforceable in any
respect, the Note and this Mortgage shall be construed without such provision.
48. HEADINGS, ETC. The headings and captions of various paragraphs of
this Mortgage are for convenience or reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
49. DUPLICATE ORIGINALS. This Mortgage may be executed in any number
of duplicate originals and each such duplicate original shall be deemed to be an
original.
50. DEFINITIONS. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"MORTGAGOR" shall mean "each Mortgagor and any subsequent owner or owners of the
Mortgaged Property or any part thereof or any interest therein," the word
"MORTGAGEE" shall mean "Mortgagee and any subsequent holder of the Note," the
word "NOTE" shall mean "the Note and any other evidence of indebtedness secured
by this Mortgage," the word "PERSON" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, an any other entity, the words "MORTGAGED PROPERTY" shall include any
portion of the Mortgaged Property and any interest therein and the words
"ATTORNEYS' FEES" shall include any and all attorneys' fees, paralegal and law
clerk fees, including, without limitation, fees at the pre-trial, trial and
appellate levels incurred or paid by Mortgagee in protecting its interest in the
Mortgaged Property and Collateral and enforcing its rights hereunder. Whenever
the context may require, any pronouns used herein shall include the
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corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
51. HOMESTEAD. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the Constitution and the laws of the United
States and of any state, in and to the Mortgaged Property as against the
collection of the Debt, or any part hereof.
52. ASSIGNMENTS. Mortgagee shall have the right to assign or
transfer its rights under this Mortgage without limitation. Any assignee or
transferee shall be entitled to all the benefits afforded Mortgagee under this
Mortgage.
53. WAIVER OF JURY TRIAL. MORTGAGOR HEREBY AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE NOTE, THIS MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR
ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY
MORTGAGOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. MORTGAGEE
IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY MORTGAGOR.
54. INTENTIONALLY OMITTED.
55. DEFEASANCE.
(a) Provided no Event of Default has occurred and is continuing,
at any time after the earlier to occur of (i) two years after the "startup day,"
within the meaning of Section 860G(a)(9) of the Internal Revenue Code of 1986,
as amended from time to time or any successor statute (the "CODE"), of a "real
estate mortgage investment conduit," within the meaning of Section 860D of the
Code, that holds the Note or (ii) four (4) years after the date hereof and
before the Anticipated Repayment Date, Mortgagor may cause the release of the
Mortgaged Property from the lien of this Mortgage and the other Loan Documents
upon the satisfaction of the following conditions:
(i) not less than thirty (30) days prior written notice
shall be given to Mortgagee specifying a date (the "RELEASE
DATE") on which the Defeasance Collateral (as hereinafter
defined) is to be delivered, such Release Date only to occur on a
Payment Date (as defined in the Note);
(ii) all accrued and unpaid interest and all other sums due
under the Note and under the other Loan Documents up to the
Release Date, including, without limitation, all costs and
expenses incurred by Mortgagee or its agents in connection with
such release (including, without limitation,
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the review of the proposed Defeasance Collateral and the preparation of the
Defeasance Security Agreement (as hereinafter defined) and related
documentation), shall be paid in full on or prior to the Release Date; and
(iii) Mortgagor shall deliver to Mortgagee on or prior to the
Release Date:
(A) an amount equal to the remaining principal amount of the Note and the Yield
Maintenance Premium (hereinafter defined), if any, sufficient to purchase
direct, non-callable obligations of the United States of America that
provide for payments prior, but as close as possible, to all successive
monthly Payment Dates occurring after the Release Date and assuming the
Loan is paid in full on the Anticipated Repayment Date (as defined in the
Note), with each such payment being equal to or greater than the amount of
the corresponding installment of principal and interest required to be paid
under the Note (the "DEFEASANCE COLLATERAL"), each of which shall be duly
endorsed by the holder thereof as directed by Mortgagee or accompanied by a
written instrument of transfer in form and substance wholly satisfactory to
Mortgagee (including, without limitation, such instruments as may be
required by the depository institution holding such securities to
effectuate book-entry transfers and pledges through the book-entry
facilities of such institution) in order to create a first priority
security interest therein in favor of the Mortgagee in conformity with all
applicable state and federal laws governing granting of such security
interests;
(B) a pledge and security agreement, in form and substance satisfactory to
Mortgagee in its sole discretion, creating a first priority security
interest in favor of Mortgagee in the Defeasance Collateral (the
"DEFEASANCE SECURITY AGREEMENT"), which shall provide, among other things,
that any excess received by Mortgagee from the Defeasance Collateral over
the amounts payable by Mortgagor hereunder shall be refunded to Mortgagor
promptly after each Payment Date;
(C) a certificate of Mortgagor certifying that all of the requirements set
forth in this Paragraph 55 have been satisfied;
(D) an opinion of counsel for Mortgagor in form and substance and delivered by
counsel satisfactory to Mortgagee in its sole discretion stating, among
other things, that (1) Mortgagee has a perfected first priority security
interest in the Defeasance Collateral and that the Defeasance Security
Agreement is enforceable against Mortgagor in accordance with its terms;
and (2) that any REMIC Trust formed pursuant to a securitization will not
fail to maintain its status as a "real estate mortgage investment conduit"
within the meaning of Section 860D of the Code as a result of such
defeasance;
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(E) Mortgagor shall deliver evidence in writing from the applicable
Rating Agencies to the effect that the collateral substitution
will not result in a downgrading, withdrawal or qualification of
the respective ratings in effect immediately prior to such
defeasance event for any securities issued in connection with the
securitization which are then outstanding; and
(F) such other certificates, documents or instruments as Mortgagee
may reasonably require.
(b) Upon compliance with the requirements of this paragraph, the
Mortgaged Property shall be released from the lien of the this Mortgage and the
other Loan Documents, and the Defeasance Collateral shall constitute the only
collateral which shall secure the Note and all other obligations under the Loan
Documents. Mortgagee will, at Mortgagor's expense, execute and deliver any
agreements reasonably requested by Mortgagor to release the lien of the Mortgage
from the Mortgaged Property. Mortgagor, pursuant to the Defeasance Security
Agreement, shall authorize and direct that the payments received from Defeasance
Collateral be made directly to Mortgagee and applied to satisfy the obligations
of the Mortgagor under the Note.
(c) Upon the release of the Mortgaged Property in accordance
with this paragraph, Mortgagor may, or at option of Mortgagee shall, assign all
its obligations under the Note, together with the pledged Defeasance Collateral,
to a successor entity designated by Mortgagor and approved by Mortgagee in its
sole discretion. Such successor entity shall execute an assumption agreement in
form and substance satisfactory to Mortgagee in its sole discretion pursuant to
which it shall assume Mortgagor's obligations under the Note and the Defeasance
Security Agreement. As conditions to such assignment and assumption, Mortgagor
shall (i) deliver to Mortgagee an opinion of counsel in form and substance and
delivered by counsel satisfactory to Mortgagee in its sole discretion stating,
among other things, that such assumption agreement is enforceable against
Mortgagor and such successor entity in accordance with its terms and that the
Note, the Defeasance Security Agreement and the other Loan Documents, as so
assumed, are enforceable against such successor entity in accordance with their
respective terms, and (ii) pay all costs and expenses incurred by Mortgagee or
its agents in connection with such assignment and assumption (including, without
limitation, the review of the proposed transferee and the preparation of the
assumption agreement and related documentation). Upon such assumption, Mortgagor
shall be relieved of its obligations hereunder, under the other Loan Documents
and under the Defeasance Security Agreement other than those obligations which
are specifically intended to survive the termination, satisfaction or assignment
of this Mortgage or the exercise of Mortgagee's rights and remedies hereunder.
(d) Upon the release of the Mortgaged Property in accordance
with this paragraph, Mortgagor shall have no further right to prepay the Note
pursuant to the other provisions of this paragraph or otherwise. In connection
with the conditions set forth in subparagraph (a)(iii)(A) above, Mortgagor
hereby appoints Mortgagee as its agent and attorney-in-fact for the purpose of
purchasing the Defeasance Collateral with funds provided by the Mortgagor.
Mortgagor shall pay any and all expenses incurred in the purchase of the
Defeasance Collateral and any
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revenue, documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note or otherwise required to accomplish the
agreements of this paragraph.
(e) For purposes of this Mortgage the Note and the other Loan
Documents, the term "YIELD MAINTENANCE PREMIUM" shall mean the amount, if any,
which, when added to the remaining principal amount of the Note, will be
sufficient to purchase the Defeasance Collateral.
56. LOCK-BOX AGREEMENT. On or before the date hereof Mortgagor
covenants and agrees to enter into one or more servicing account agreements and
lockbox servicing agreements acceptable to Mortgagee between Mortgagor,
Mortgagee and one or more certain financial institutions (together with any
modification, amendment, substitution or replacement thereof, hereinafter
collectively referred to as the "CASH MANAGEMENT AGREEMENT") which shall
provide, among other things, that all Rents and other sums collected from, or
arising with respect to, the Mortgaged Property be deposited in the accounts
established in connection with such Cash Management Agreement and that such
amounts shall be disbursed in accordance with paragraphs 8 and 9 of the Note.
The Mortgagor shall pay all costs and expenses required under the Cash
Management Agreement. Upon the occurrence of an Event of Default, Mortgagee may
apply any sums then held pursuant to the Cash Management Agreement to the
payment of the Debt in any order in its sole discretion. Until expended or
applied, amounts held pursuant to the Cash Management Agreement shall constitute
additional security for the Debt.
57. MISCELLANEOUS.
(a) Any consent or approval by Mortgagee in any single instance
shall not be deemed or construed to be Mortgagee's consent or approval in any
like matter arising at a subsequent date, and the failure of Mortgagee to
promptly exercise any right, power, remedy, consent or approval provided herein
or at law or in equity shall not constitute or be construed as a waiver of the
same nor shall Mortgagee be estopped from exercising such right, power, remedy,
consent or approval at a later date. Any consent or approval requested of and
granted by Mortgagee pursuant hereto shall be narrowly construed to be
applicable only to Mortgagor and the matter identified in such consent or
approval and no third party shall claim any benefit by reason thereof, and any
such consent or approval shall not be deemed to constitute Mortgagee a venturer
or partner with Mortgagor nor shall privity of contract be presumed to have been
established with any such third party. If Mortgagee deems it to be in its best
interest to retain assistance of persons, firms or corporations (including,
without limitation, attorneys, title insurance companies, appraisers, engineers
and surveyors) with respect to a request for consent or approval, Mortgagor
shall reimburse Mortgagee for all costs reasonably incurred in connection with
the employment of such persons, firms or corporations.
(b) Mortgagor covenants and agrees that during the Term, unless
Mortgagee shall previously consented in writing, (a) Mortgagor will take no
action that would cause it to become an "EMPLOYEE BENEFIT PLAN" as defined in 29
C.F.R. Section 2510.3-101, or "ASSETS OF A GOVERNMENTAL PLAN" subject to
regulation under the state statutes, and (b) Mortgagor will not sell, assign or
transfer the Mortgaged Property, or any portion thereof or interest therein, to
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any transferee that does not execute and deliver to Mortgagee its written
assumption of the obligations of this covenant. Mortgagor further covenants and
agrees to protect, defend, indemnify and hold Mortgagee harmless from and
against all loss, cost, damage and expense (including without limitation, all
attorneys' fees and excise taxes, costs of correcting any prohibited transaction
or obtaining an appropriate exemption) that Mortgage may incur as a result of
Mortgagor's breach of this covenant. This covenant and indemnity shall survive
the extinguishment of the lien of this Mortgage by foreclosure or action in lieu
thereof; furthermore, the foregoing indemnity shall supersede any limitations on
Mortgagor's liability under any of the Loan Documents.
(c) If there is more than one party comprising Mortgagor, then
the obligations and liabilities of each party under this Mortgage shall be joint
and several.
(d) The Loan Documents contain the entire agreement between
Mortgagor and Mortgagee relating to or connected with the Loan. Any other
agreements relating to or connected with the Loan not expressly set forth in the
Loan Documents are null and void and superseded in their entirety by the
provisions of the Loan Documents.
(e) Mortgagor hereby covenants and agrees not to commit, permit
or suffer to exist any act, omission or circumstance affording such right of
forfeiture. In furtherance thereof, Mortgagor hereby indemnifies Mortgagee and
agrees to defend and hold Mortgagee harmless from and against any loss, damage
or injury by reason of the breach of the covenants and agreements or the
representations and warranties set forth in this paragraph. Without limiting the
generality of the foregoing, the filing of formal charges or the commencement of
proceedings against Mortgagor or all or any part of the Mortgaged Property under
any federal or state law for which forfeiture of the Mortgaged Property or any
part thereof or of any monies paid in performance of Mortgagor's obligations
under the Loan Documents is a potential result, shall, at the election of
Mortgagee, constitute an Event of Default hereunder without notice or
opportunity to cure.
(f) Mortgagor acknowledges that, with respect to the Loan,
Mortgagor is relying solely on its own judgment and advisors in entering into
the Loan without relying in any manner on any statements, representations or
recommendations of Mortgagee or any parent, subsidiary or affiliate of
Mortgagee. Mortgagor acknowledges that Mortgagee engages in the business of
real estate financings and other real estate transactions and investments which
may be viewed as adverse to or competitive with the business of the Mortgagor or
its affiliates. Mortgagor acknowledges that it is represented by competent
counsel and has consulted counsel before executing the Loan Documents.
(g) Mortgagor covenants and agrees to pay Mortgagee upon receipt
of written notice from Mortgagee, all reasonable costs and expenses (including
reasonably attorneys' fees and disbursements) incurred by Mortgagee in
connection with (i) the preparation, negotiation, execution and delivery of this
Mortgage and the other Loan Documents; (ii) Mortgagor's performance of and
compliance with Mortgagor's respective agreements and covenants contained in
this Mortgage and the other Loan Documents on its part to be performed or
complied with after the date hereof; (iii) Mortgagee's performance and
compliance with all agreements and conditions
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contained in this Mortgage and the other Loan Documents on its part to be
performed or complied with after the date hereof; (iv) the negotiation,
preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications to this Mortgage and the other Loan
Documents; and (v) the filing and recording fees and expenses, title insurance
fees and expenses, and other similar expenses incurred in creating and
perfecting the lien in favor of Mortgagee pursuant to this Mortgage and the
other Loan Documents.
(h) This Mortgage shall be governed by and construed in
accordance with the laws of the State in which the Premises are located and the
applicable laws of the United States of America.
58. MANAGEMENT OF THE MORTGAGED PROPERTY.
-------------------------------------
Mortgagor shall maintain the Management Agreement for the operation of
the Mortgaged Property in full force and effect and timely perform all of
Martgagor's obligations thereunder and enforce performance of all obligations of
the Manager thereunder, and not permit the termination or amendment of such
Management Agreement unless the prior written consent of Mortgagee is first
obtained. Mortgagor will enter into and cause the Manager to enter into an
assignment and subordination of such Management Agreement in form satisfactory
to Mortgagee, assigning and subordinating the Manager's interest in the
Mortgaged Property and all fees and other rights of the manager pursuant to such
Management Agreement to the rights of Mortgagee. Upon an Event of Default,
Mortgagor at Mortgagee's request made at any time while such Event of Default
continues, shall terminate the Management Agreement and replace the Manager with
a Manager approved by Mortgagee. In addition, if at the end of each calendar
quarter the Mortgagor does not provide evidence of the achievement of a Debt
Service Coverage Ratio of not less than 1.10:1.0 for the preceeding twelve (12)
month period (the "REQUIRED DSCR") Mortgagor, at Mortgagee's request made at any
time such Required DSCR is not maintained, shall terminate the Management
Agreement and replace the Manager with Manager approved by Mortgagee.
59. SALE OF NOTES AND SECURITIZATION.
--------------------------------
Mortgagor acknowledges that Mortgagee and its successors and assigns
may (i) sell this Mortgage, the Note and other Loan Documents to one or more
investors as a whole loan, (ii) participate the Loan secured by this Mortgage to
one or more investors, (iii) deposit this Mortgage, the Note and other Loan
Documents with a trust, which trust may sell certificates to investors
evidencing an ownership interest in the trust assets, or (iv) otherwise sell the
Loan or interest therein to investors (the transactions referred to in clauses
(i) through (iv) are hereinafter each referred to as "SECONDARY MARKET
TRANSACTION"). Mortgagor shall cooperate with Mortgage in effecting any such
Secondary Market Transaction and shall cooperate to implement all requirements
imposed by any Rating Agency involved in any Secondary Market Transaction.
Mortgagor, however, shall not be required to modify any documents evidencing or
securing the Loan which would modify (A) the interest rate payable under the
Note, (B) the stated maturity of the Note, (C) the amortization of principal of
the Note, (D) the non-recourse provisions of the loan or (E) any other material
economic term of the loan. Mortgagor shall provide such
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information, legal opinions and documents relating to Mortgagor, Guarantor, if
any, the Mortgaged Property and any tenants of the Improvements as Mortgagee may
reasonably request in connection with such Secondary Market Transaction. In
addition, Mortgagor shall make available to Mortgagee all information concerning
its business and operations that Mortgagee may reasonably request. Mortgagee
shall be permitted to share all such information with the investment banking
firms, Rating Agencies, accounting firms, law firms and other third-party
advisory firms involved with the Loan and the Loan Documents or the applicable
Secondary Market Transaction. It is understood that the information provided by
Mortgagor to Mortgagee may ultimately be incorporated into the offering
documents for the Secondary Market Transaction and thus various investors may
also see some or all of the information. Mortgagee and all of the aforesaid
third-party advisors and professional firms shall be entitled to rely on the
information supplied by, or on behalf of, Mortgagor and Mortgagor indemnifies
Mortgagee as to any losses, claims, damages or liabilities that arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in such information or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated in such information or necessary in order to make the statements in such
information, or in light of the circumstances under which they were made, not
misleading. Mortgagee may publicize the existence of the Loan in connection with
its marketing for a Secondary Market Transaction or otherwise as part of its
business development.
60. SERVICER. At the option of Mortgagee, the Loan may be serviced by
--------
a servicer/trustee (the "SERVICER") selected by Mortgagee and Mortgagee may
delegate all or any portion of its responsibilities under this Mortgage and the
other Loan Documents to the Servicer pursuant to a servicing agreement (the
"SERVICING AGREEMENT") between Mortgagee and Servicer. Mortgagor shall be
responsible for any reasonable set-up fees or any other initial costs relating
to or arising under the Servicing Agreement.
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IN WITNESS WHEREOF, Mortgagor has executed this instrument the day and
year first above written.
LAKE POINTE APARTMENT HOMES, INC.,
a Wisconsin corporation
By: /s/ Arnold K. Leas
------------------------------
Arnold K. Leas
President
Attest: /s/ Robert F. Rice
------------------------------
Robert F. Rice
Secretary
STATE OF WISCONSIN )
)ss.:
COUNTY OF WAUKESHA )
Personally came before me this 5th day of March, 1998, the above named
ARNOLD K. LEAS and ROBERT F. RICE, President and Secretary, respectively, of
LAKE POINTE APARTMENT HOMES, INC., to me known to be the persons who executed
the foregoing instrument and acknowledge the same.
/s/ Lisa Wiegert
- ------------------------------------------
Notary Public Waukesha County, Wisconsin
My Commission 1-9-2000
-------------------
[Seal]
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EXHIBIT A
LEGAL DESCRIPTION
-----------------
Parcel Identification Number:
Lot one (1) of Certified Survey Map No. 5756 recorded in the office of
the Register of Deeds for Marathon County, Wisconsin, in Volume 21 of Certified
Survey Maps on page 74; being the land described in Certified Survey Map
recorded in said Register's office in Volume 3 of Certified Survey Maps on page
202; being a part of Block seven (7) of C. P. Haseltine's Addition to Schofield,
in the Southeast quarter (SE 1/4) of the Southeast quarter (SE 1/4) of Section
twelve (12); and also being a part of the South one-half (S 1/2) of the
Southwest quarter (SW 1/4) of the Southeast quarter (SE 1/4) of Section twelve
(12), and of the North one-half (N 1/2) of the Northeast quarter (NE 1/4) of
Section thirteen (13), all in Township twenty-eight (28) North, Range seven (7)
East, in the City of Schofield, Marathon County, Wisconsin; excepting land
described in instrument recorded in said Register's office in Micro-Record 781
on page 1181, used for highway purposes; subject to easements of record.
<PAGE>
EXHIBIT 10.6
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE REGISTRATION
RIGHTS AGREEMENT, DATED AS OF MARCH 5, 1998, BETWEEN WELLINGTON PROPERTIES TRUST
AND CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, A COPY OF WHICH WILL BE
MADE AVAILABLE BY WELLINGTON PROPERTIES TRUST UPON REQUEST.
WELLINGTON PROPERTIES TRUST
COMMON STOCK PURCHASE WARRANT
NO.W-1 March 5, 1998
Warrant to Purchase 30,000
Shares of Common Stock
WELLINGTON PROPERTIES TRUST, a Maryland Real Estate Investment Trust
(the "Company"), for value received, hereby certifies that CREDIT SUISSE FIRST
BOSTON MORTGAGE CAPITAL LLC, or registered assigns (the "Holder"), is entitled
to purchase from the Company 30,000 duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"), at a purchase price of $7.00 per share, at any
time or from time to time prior to 5:00 P.M., New York City time, on March 5,
2008 (or such later date as may be determined pursuant to Section 22) (the
"Expiration Date"), all subject to the terms, conditions and adjustments set
forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants
(collectively, the "Warrants", such term to include any such warrants issued in
substitution therefor) originally issued pursuant to the terms of a certain
Warrant Subscription Agreement, dated as of the date hereof, between the Company
and the Holder (the "Subscription Agreement"). The Warrants originally so issued
evidence rights to purchase an aggregate of 30,000 shares of Common Stock
subject to adjustment as provided herein. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned such terms in the
Subscription Agreement.
<PAGE>
1. DEFINITIONS. As used herein, unless the context otherwise
-----------
requires, the following terms shall have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares (including
---------------------------------
treasury shares) of Common Stock issued or sold (or, pursuant to Section 3.3 or
3.4, deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) (i) shares issued upon the exercise of the Warrants and (ii) such
number of additional shares as may become issuable upon the exercise of the
Warrants by reason of adjustments required pursuant to the anti-dilution
provisions applicable to such Warrants as in effect on the date hereof,
(b) shares, not to exceed, in the aggregate, 5% of the shares
outstanding on March 5th, 1998, issued upon the exercise of options granted
or to be granted under the Company's stock option plans as in effect on the
date hereof or under any other employee stock option or purchase plan or
plans adopted or assumed after such date by the Company's Board of
Directors; provided in each such case that the exercise or purchase price
for any such share shall not be less than 85% of the fair market value
(determined in good faith by the Company's Board of Directors) of the
Common Stock on the date of the grant,
(c) shares, warrants, options and other securities issued at any time
to the Holder.
"Acquiring Person" shall mean, with reference to the transactions
----------------
referred to in clauses (a) through (d) of Section 4.1, the continuing or
surviving corporation of a consolidation or merger with the Company (if other
than the Company), the transferee of substantially all of the properties of the
Company, the corporation consolidating with or merging into the Company in a
consolidation or merger in connection with which the Common Stock is changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or, in the case of a capital reorganization or
reclassification, the Company.
"Acquisition Price" shall mean, as applied to the Common Stock, (a)
-----------------
the Market Price on the date immediately preceding the date on which any
transaction to which Section 4 applies is consummated, or (b) if a purchase,
tender or exchange offer is made by the Acquiring Person (or by any of its
affiliates) to the holders of the Common Stock and such offer is accepted by the
holders of more than 50% of the outstanding shares of Common Stock, the greater
of (i) the price determined in accordance with the provisions of the foregoing
clause (a) of this sentence and (ii) the Market Price on the date immediately
preceding the acceptance of such offer by the holders of more than 50% of the
outstanding shares of Common Stock.
"Business Day" shall mean any day other than a Saturday or a Sunday or
------------
a day on which commercial banking institutions in the City of New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
2
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any
---------
successor agency having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning assigned to it in the
------------
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the introduction to
-------
this Warrant, such term to include any corporation or other entity which shall
succeed to or assume the obligations of the Company hereunder in compliance with
Section 4.
"Convertible Securities" shall mean any evidences of indebtedness,
----------------------
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
"Current Market Price" shall mean, on any date specified herein, the
--------------------
average of the daily Market Price during the 10 consecutive trading days
commencing 15 trading days before such date, except that, if on any such date
the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act 1934, as amended
------------
from time to time, and the rules and regulations thereunder, or any successor
statue.
"Expiration Date" shall have the meaning assigned to it in the
---------------
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in the case
-----------------
of cash, the dollar amount thereof, (ii) in the case of security, the Current
Market Price, and (iii) in all other cases, the higher of (A) the fair value
thereof determined by any firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company as of the last day of
any month ending within 60 days preceding the date as of which the determination
is to be made, and (B) the fair value thereof (as of a date which is within 20
days of the date as of which the determination is to be made) determined in good
faith by the Board of Directors of the Company.
"Holder" shall have the meaning assigned to it in the introduction to
------
this Warrant.
"Market Price" shall mean, on any date specified herein, the amount
------------
per share of the Common Stock, equal to (i) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular way
on such date, in either case as officially reported on the
3
<PAGE>
principal national securities exchange on which such Common Stock is then listed
or admitted for trading, (ii) if such Common Stock is not then listed or
admitted for trading on any national securities exchange but is designated as a
national market system security by the NASD, the last reported trading price of
the Common Stock on such date, (iii) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the closing bid
and asked prices of the Common Stock on such date as shown by the NASD automated
quotation system, or (iv) if such Common Stock is not then listed or admitted
for trading on any national exchange or quoted in the over-the-counter market,
the fair value thereof (as of a date which is within 20 days of the date as of
which the determination is to be made) determined in good faith jointly by the
Company and the Holder; provided, however, that if such parties are unable to
-------- -------
reach agreement within a reasonable period of time, the Market Price shall be
determined in good faith by an independent investment banking firm selected
jointly by the Company and the Holder or, if that selection cannot be made
within ten days, by an independent investment banking firm selected by the
American Arbitration Association in accordance with its rules, and provided
--------
further, that the Company shall pay all of the fees and expenses of any third
- -------
parties incurred in connection with determining the Market Price.
"Market Value" shall mean, with respect to a share of common stock (or
------------
equivalent equity interests) of the Acquiring Person or its Parent on any date
specified herein, (a) the average of the last sale prices, regular way, on the
20 consecutive trading days immediately preceding such date or, if there shall
have been no sale on any such day, the average of the closing bid and asked
prices on such date, in each case as officially reported on the principal
national securities exchange on which such common stock is at the time listed or
admitted to trading, or (b) if such common stock is not then listed or admitted
to trading on any national securities exchange, but is designated as a national
market system security by the NASD, the last trading price of the common stock
on such date, or if there shall have been no trading on such date or if the
common stock is not so designated, the average of the reported closing bid and
asked prices on such 20 days as shown by the NASD automated quotation system.
"NASD" shall mean the National Association of Securities Dealer, Inc.
----
"Notes" shall mean the note or notes issued by the Company in favor of
-----
the Holder.
"Options" shall mean any rights, options or warrants to subscribe for,
-------
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Other Securities" shall mean any stock (other than Common Stock) and
----------------
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
4
<PAGE>
"Parent" shall mean, as to any Acquiring Person, any corporation which
------
(a) controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to include the Acquiring Person in the
consolidated financial statements contained in such Parent's Annual Report on
Form 10-K and (c) is not itself included in the consolidated financial
statements of any other person (other than its consolidated subsidiaries).
"Person" shall mean any individual, firm, partnership, corporation,
------
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.
"Subscription Agreement" shall have the meaning assigned to it in the
----------------------
introduction to this Warrant.
"Purchase Price" shall mean initially $7.00 per share, subject to
--------------
adjustment and readjustment from time to time as provided in Section 3, and, as
so adjusted or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by Section 3.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement dated as of March 5th, 1998, between the Company and the Holder.
"Restricted Securities" shall mean (i) any Warrants bearing the
---------------------
applicable legend set forth in Section 10.1, (ii) any shares of Common Stock (or
Other Securities) issued or issuable upon the exercise of Warrants which are
(or, upon issuance, will be) evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section, and (iii) any shares of Common
Stock (or Other Securities) issued subsequent to the exercise of any of the
Warrants as a dividend or other distribution with respect to, or resulting from
a subdivision of the outstanding shares of Common Stock (or other Securities)
into a greater number of shares by reclassification, stock splits or otherwise,
or in exchange for or in replacement of the Common Stock (or Other Securities)
issued upon such exercise, which are evidenced by a certificate or certificates
bearing the applicable legend set forth in such Section.
"Rights" shall have the meaning assigned to it in Section 3.10.
------
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and the rules and regulations thereunder, or any successor
statute.
"Warrants" shall have the meaning assigned to it in the introduction
--------
to this Warrant.
5
<PAGE>
2. EXERCISE OF WARRANT.
-------------------
2.1. Manner of Exercise: Payment of the Purchase Price. (a) This
-------------------------------------------------
Warrant may be exercised by the Holder hereof, in whole or in part, at any time
or from time to time prior to the Expiration Date, by surrendering to the
Company at its principal office this Warrant, with the form of Election to
Purchase Shares attached hereto as Exhibit A (or a reasonable facsimile thereof)
duly executed by the Holder and accompanied by payment of the Purchase Price for
the number of shares of Common Stock specified in such form.
(b) Payment of the Purchase Price may be made as follows (or by any
combination of the following): (i) in United States currency by cash or delivery
of a certified check or bank draft payable to the order of the Company or by
wire transfer to the Company, (ii) by cancellation of all or any part of the
unpaid principal amount of Notes held by the Holder in an amount equal to the
Purchase Price, (iii) by cancellation of such number of the shares of Common
Stock otherwise issuable to the Holder upon such exercise as shall be specified
in such Election to Purchase Shares, such that the excess of the aggregate
Current Market Price of such specified number of shares on the date of exercise
over the portion of the Purchase Price attributable to such shares shall equal
the Purchase Price attributable to the shares of Common Stock to be issued upon
such exercise, in which case such amount shall be deemed to have been paid to
the Company and the number of shares issuable upon such exercise shall be
reduced by such specified number, or (iv) by surrender to the Company for
cancellation certificates representing shares of Common Stock of the Company
owned by the Holder (properly endorsed for transfer in blank) having a Current
Market Price on the date of Warrant exercise equal to the Purchase Price.
2.2. When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and at such time the Person or Persons in whose name or names any
certificates or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 2.3 shall be deemed
to have become the holder or holders of record thereof for all purposes.
2.3 Delivery of Stock Certificates, etc.; Charges, Taxes and
--------------------------------------------------------
Expenses. (a) As soon as practicable after each exercise of this Warrant, in
- --------
whole or in part, and in any event within five Business Days thereafter, the
Company shall cause to be issued in the name of and delivered to the Holder
hereof or subject to Section 10, as the Holder may direct,
(i) a certificate or certificates for the number of shares of Common
Stock (or Other Securities) to which the Holder shall be entitled upon such
exercise plus, in lieu of issuance of any fractional share to which the
Holder would otherwise be entitled, if any, a check for the amount of cash
equal to the same fraction multiplied by the Current Market Price per share
on the date of Warrant exercise, and
6
<PAGE>
(ii) in case such exercise is for less than all of the shares of
Common Stock purchasable under this Warrant, a new Warrant or Warrants of
like tenor, for the balance of the shares of Common Stock purchasable
hereunder.
(b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof
for any issue or transfer tax or other incidental expense, in respect of
the issuance of such certificates, all of which such taxes and expenses
shall be paid by the Company.
2.4. Company to Reaffirm Obligations. The Company shall, at the time
-------------------------------
of each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder all
rights to which such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the Holder of this
--------
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to the Holder.
3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
-------------------------------------------------
3.1. Adjustment of Number of Shares.
------------------------------
Upon each adjustment of the Purchase Price as a result of the
calculations made in this Section 3, this Warrant shall thereafter evidence the
right to receive, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth) obtained by dividing (i)
the product of the aggregate number of shares covered by this Warrant
immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Purchase Price.
----------------------------
3.2.1. Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10) without consideration or for a consideration per share less
than the greater of the Purchase Price and the Current Market Price in effect
immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Purchase Price by a fraction
(a) the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
and (ii) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at the
greater of such Purchase Price and such Current Market Price, and
7
<PAGE>
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, provided
--------
that, for the purposes of this Section 3.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant
to Section 3.3 or 3.4, such Additional Shares shall be deemed to be
outstanding, and (y) treasury shares shall not be deemed to be outstanding.
3.2.2. Extraordinary Dividends and Distributions. In case the Company
-----------------------------------------
at any time or from time to time after the date hereof shall declare, order,
pay or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a regularly scheduled cash
dividend (at a rate not in excess of 110% of the rate of the last regularly
scheduled cash dividend theretofore paid) payable out of consolidated earnings
or earned surplus, determined in accordance with generally accepted accounting
principles, or (c) a dividend payable in Common Stock, pursuant to the Company's
Dividend Reinvestment Program as in effect on the date hereof, provided that the
cash dividend equivalent of such Common Stock dividend does not exceed 110% of
the rate of the last regularly scheduled cash dividend and is payable out of
consolidated earnings or earned surplus, determined in accordance with generally
accepted accounting principles, or (d) a dividend of Rights referred to in
Section 3.10 hereof, then, in each such case, subject to Section 3.8, the
Purchase Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of any class of securities
entitled to receive such dividend or distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Purchase Price by a fraction.
(x) the numerator of which shall be the Current Market Price in
effect on such record date or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-divided trading, less
the Fair Value of such dividend or distribution applicable to one share of
Common Stock, and
(y) the denominator of which shall be such Current Market Price.
, provided that, in the event that the amount of such dividend as so determined
--------
is equal to or greater than 10% of such Current Market Price or in the event
that such fraction is less than 9/10ths, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder shall receive, upon Warrant
exercise at the time such dividend or distribution is paid to the holders of the
Common Stock, a pro rata share of such dividend based upon the maximum number of
shares of Common Stock at the time issuable to the Holder (determined without
regard to whether the Warrant is exercisable at such time.)
3.3.3 Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant, or assume, or shall fix a record date for the determination of
holders of the shares of its Common Stock generally entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
8
<PAGE>
immediately exercisable), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in
the case of Convertible Securities and Options therefor, the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue, sale, grant or assumption
or, in case such a record date shall have been fixed, as of the close of
business on such record date (or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading), provided
--------
that such Additional Shares of Common Stock shall not be deemed to have been
issued unless (i) the consideration per share (determined pursuant to Section
3.5) of such shares would be less than the greater of the Purchase Price and the
Current Market Price in effect on the date of and immediately prior to such
issue, sale, grant or assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an ex-dividend basis, on
the date prior to the commencement of ex-dividend trading), as the case may be,
and (ii) such Additional Shares of Common Stock were issued, granted or sold by
the Company to, or assumed by the Company with respect to, the holders of the
Company's shares of Common Stock generally, and (iii) such Additional Shares of
Common Stock are not purchasable pursuant to Rights referred to in Section 3.10,
and provided, further, that in any such case in which Additional Shares of
-------- -------
Common Stock are deemed to be issued
(a) whether or not the Additional Shares of Common Stock underlying
such Options or Convertible Securities are deemed to be issued, no further
adjustment of the Purchase Price shall be made upon the subsequent issue
or sale of Convertible Securities or shares of Common Stock upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, except in the case of any such Options or Convertible
Securities which contain provisions requiring an adjustment, subsequent to
the date of the issue or sale thereof, of the number of Additional Shares
of Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities by reason of (x) a
change of control or the Company, (y) the acquisition by any Person or
group of Persons of any specified number or percentage of the voting
securities of the Company or (z) any similar event or occurrence, each such
case to be deemed hereunder to involve a separate issuance of Additional
Shares of Common Stock, Options or Convertible Securities, as the case may
be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
9
<PAGE>
(c) upon the expiration (or purchase by the Company and cancellation or
retirement) of any such Options which shall not have been exercised or the
expiration of any rights of conversion or exchange under any such Convertible
Securities which (or purchase by the Company and cancellation or retirement of
any such Convertible Securities the rights of conversion or exchange under
which) shall not have been exercised, the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading, as the
case may be with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation or retirement, as the case may
be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold were
the Additional Shares of Common Stock, if any, actually issued or sold upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Company for the issue, sale, grant
or assumption of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for
the issue or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue or sale, grant or
assumption of such Options, and the consideration received by the Company
for the Additional Shares of Common Stock deemed to have then been issued
was the consideration actually received by the Company for the issue, sale,
grant or assumption of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company (pursuant to
Section 3.5) upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall have
the effect of increasing the Purchase Price by an amount in excess of the amount
of the adjustment thereof originally made in respect of the issue, sale, grant
or assumption of such Options or Convertible Securities; and
(e) in the case of any such Options which expire by their terms not more
than 30 days after the date of issue, sale, grant or assumption thereof, no
adjustment of the Purchase Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the manner
provided in subdivision (c) above.
<PAGE>
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5. Computation of Consideration. For the purposes of this Section 3,
----------------------------
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net
amount of cash received by the Company, without deducting any expenses
paid or incurred by the Company or any commissions or compensations
paid or concessions or discounts allowed to underwriters, dealers or
others performing similar services in connection with such issue or
sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the Fair Value thereof at the time of
such issue or sale, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and (ii)
above, allocable to such Additional Shares of Common Stock, such
allocation to be determined in the same manner that the Fair Value of
property not consisting of cash or securities is to be determined as
provided in the definition of 'Fair Value' herein;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share determined
by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration to protect
against dilution) payable to the Company upon the exercise in full of
such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such
11
<PAGE>
Convertible Securities, in each case computing such consideration as
provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
3.6. Adjustments for Combinations, etc. In case the outstanding
---------------------------------
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 4) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
3.8. De Minimis Adjustments. If the amount of any adjustment of the
----------------------
Purchase Price per share required pursuant to this Section 3 would be less than
one tenth (1/10) of one percent (1%) of the Purchase Price, such amount shall be
carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate a change in the
Purchase Price of at least one tenth (1/10) of one percent (1%) of such Purchase
Price. All calculations under this Warrant shall be made to the nearest .001 of
a cent or to the nearest one-hundredth of a share, as the case may be.
3.9. Abandoned Dividend or Distribution. If the Company shall take a
----------------------------------
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this
12
<PAGE>
Warrant) and shall, thereafter, and before such dividend or distribution is paid
or delivered to shareholders entitled thereto, legally abandon its plan to pay
or deliver such dividend or distribution, then any adjustment made to the
Purchase Price and number of shares of Common Stock purchasable upon Warrant
exercise by reason of the taking of such record shall be reversed, and any
subsequent adjustments, based thereon, shall be recomputed.
3.10. Shareholder Rights Plan. Notwithstanding the foregoing, in the
-----------------------
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights.
4. CONSOLIDATION, MERGER, ETC.
--------------------------
4.1. Adjustments for Consolidation, Merger, Sale of Assets,
------------------------------------------------------
Reorganization, etc. In case the Company after the date hereof (a) shall
- -------------------
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 3.2.1 or 3.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Purchase Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, either of the following, as shall be elected by the Holder (such
election to be made within one year after the date of the consummation of such
transaction by written notice to the Acquiring
13
<PAGE>
Person or its Parent, as the case may be, and, in the absence of such notice,
the provisions of clause (ii) below shall be deemed to have been elected by the
Holder):
(i) the highest amount of securities, cash and property to
which the Holder actually would have been entitled as a shareholder
upon such consummation if the Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
corporate action) as nearly equivalent as possible to the adjustments
provided for in Sections 3 through 5, or
(ii) the number of shares of common stock of the Acquiring
Person or its Parent, whichever meets the requirements set forth below
(subject to adjustments, subsequent to such corporate action, as
nearly equivalent as possible to the adjustments provided for in
Sections 3 through 5), determined by dividing (a) the amount equal to
the product obtained by multiplying (1) the number of shares of Common
Stock (or Other Securities) to which the Holder of this Warrant would
have been entitled had the Holder exercised this Warrant immediately
prior to such consummation, times (2) the greater of the Acquisition
Price and the Purchase Price in effect on the date immediately
preceding the date of such consummation, by (b) the Market Value per
share of the common stock of the Acquiring Person or its Parent, as
the case may be, on the date immediately preceding the date of such
consummation;
provided that the Company shall not enter into any of the transactions described
- --------
in clauses (a) through (d) above, unless, immediately after the date of the
consummation of such transaction, the Acquiring Person or the Parent of the
Acquiring Person is required to file, and in each of its three fiscal years
immediately preceding the date of the consummation of such transaction has
filed, reports with the Securities and Exchange Commission pursuant to section
13 or section 15(d) of the Exchange Act. In the event that the Acquiring Person
fulfills the requirements contained in the immediately preceding sentence, then,
if the Holder of this Warrant shall elect (or shall be deemed to elect) to
receive common stock pursuant to clause (ii) above, such Holder shall be
entitled to receive, upon the basis stated in such clause (ii), only the common
stock of the Acquiring Person.
4.2. Assumption of Obligations. Notwithstanding anything contained in
-------------------------
the Warrants or in the Subscription Agreement to the contrary, the Company shall
not effect any of the transactions described in clauses (a) through (d) of
Section 4.1 unless, prior to the consummation thereof, each Person (other than
the Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company under the Registration Rights Agreement and (c) the obligation to
deliver to the Holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 4, the Holder may be
entitled to receive and such Person shall have similarly delivered to the Holder
an opinion of counsel for such
14
<PAGE>
Person, which counsel shall be reasonably satisfactory to the Holder, stating
that this Warrant shall thereafter continue in full force and effect and the
terms hereof (including, without limitation, all of the provisions of this
Section 4) shall be applicable to the stock, securities, cash or property which
such Person may be required to deliver upon any exercise of this Warrant or the
exercise of any rights pursuant hereto. Nothing in this Section 4 shall be
deemed to authorize the Company to enter into any transaction not otherwise
permitted by the Subscription Agreement.
5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
---------------------
the provisions of Section 3 or Section 4 are not strictly applicable or if
strictly applicable would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles of such
Sections, then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Company), which shall give their opinion on
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Sections 3 and 4, necessary to preserve, without
dilution, the purchase rights represented by this Warrant. Upon receipt of such
opinion, the Company shall promptly mail a copy thereof to the Holder and shall
make the adjustments described therein.
6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) shall not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) shall take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all taxes,
liens, security interests, encumbrances, preemptive rights and charges on the
exercise of the Warrants from time to time outstanding, (c) shall not take any
action which results in any adjustment of the Purchase Price if the total number
of shares of Common Stock (or Other Securities) issuable after the action upon
the exercise of all of the Warrants would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company's certificate
of incorporation and available for the purpose of issue upon such exercise, and
(d) shall not issue any capital stock of any class which is preferred as to
dividends or as to the distribution of assets upon voluntary or involuntary
dissolution, liquidation or winding-up, unless the rights of the holders thereof
shall be limited to a fixed sum or percentage of par value or a sum determined
by reference to a formula based on a published index of interest rates, an
interest rate publicly announced by a financial institution or a similar
indicator of interest rates in respect of participation in dividends and to a
fixed sum or percentage of par value in any such distribution of assets.
15
<PAGE>
7. ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any
-------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and cause independent certified public accountants of recognized
national standing (which may be the regular auditors of the Company) selected by
the Company to verify such computation (other than an computation of the fair
value of property) and prepare a report setting forth such adjustment or
readjustment and showing in reasonable detail the method of calculation thereof
and the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be received by the Company for
any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Purchase Price in effect immediately prior to such
issue or sale and as adjusted and readjusted (if required by Section 3) on
account thereof. The Company shall forthwith mail a copy of each such report to
each holder of a Warrant and shall, upon the written request at any time of any
holder of a Warrant, furnish to such holder a like report. The Company shall
also keep copies of all such reports at its principal office and shall cause the
same to be available for inspection at such office during normal business hours
by any holder of a Warrant or any prospective purchaser of a Warrant designated
by the holder thereof.
8. NOTICES OF CORPORATE ACTION. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a regularly scheduled cash
dividend payable out of consolidated earnings or earned surplus, determined
in accordance with generally accepted accounting principles, in an amount
not exceeding the amount of the immediately preceding cash dividend for
such period) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any consolidation
or merger involving the Company and any other Person, any transaction or
series of transactions in which more than 50% of the voting securities of
the Company are transferred to another Person, or any transfer, sale or
other disposition of all or substantially all the assets of the Company to
any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or
16
<PAGE>
right, and the amount and character of such dividend, distribution or right, and
(ii) the date or expected date on which any such reorganization,
reclassification, recapitalization, consolidation, merger, transfer, sale,
disposition, dissolution, liquidation or winding-up is to take place and the
time, if any such time is to be fixed, as of which the holders of record of
Common Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 45 days prior to the date therein specified.
9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company shall, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be. At any time as Common Stock is listed on any national
securities exchange, the Company shall, at its expense, obtain promptly and
maintain the approval for listing on each such exchange, upon official notice of
issuance, the shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such shares after their
issuance; and the Company shall also list on such national securities exchange,
shall register under the Exchange Act and shall maintain such listing of, any
Other Securities that at any time are issuable upon exercise of the Warrants, if
and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.
10. RESTRICTIONS ON TRANSFER.
------------------------
10.1. Restrictive Legends. Except as otherwise permitted by this
-------------------
Section 10, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND
SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT
AND IN THE REGISTRATION RIGHTS AGREEMENT, DATED AS OF MARCH 5, 1998,
BETWEEN WELLINGTON PROPERTIES TRUST AND CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC."
17
<PAGE>
Except as otherwise permitted by this Section 10, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. SUCH SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE CONDITIONS SPECIFIED IN CERTAIN COMMON STOCK PURCHASE WARRANTS
ISSUED BY WELLINGTON PROPERTIES TRUST PURSUANT TO THE SUBSCRIPTION
AGREEMENT, DATED AS OF MARCH 5, 1998, BETWEEN WELLINGTON PROPERTIES TRUST
AND CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC. A COMPLETE AND CORRECT
COPY OF THE FORM OF SUCH WARRANT IS AVAILABLE FOR INSPECTION AT THE
PRINCIPAL OFFICE OF WELLINGTON PROPERTIES TRUST OR AT THE OFFICE OR AGENCY
MAINTAINED BY WELLINGTON PROPERTIES TRUST AS PROVIDED IN SUCH WARRANTS AND
WILL BE FURNISHED TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND
WITHOUT CHARGE."
10.2. Transfer to Comply With the Securities Act. Restricted
------------------------------------------
Securities may not be sold, assigned, pledged, hypothecated, encumbered or in
any manner transferred or disposed of, in whole or in part, except in compliance
with the provisions of the Securities Act and state securities or Blue Sky laws
and the terms and conditions hereof.
10.3. Termination of Restrictions. The restrictions imposed by this
---------------------------
Section 10 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the opinion of both counsel for the Holder and
counsel for the Company, such restrictions are no longer required or necessary
in order to protect the Company against a violation of the Securities Act upon
any sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the applicable legends
required by Section 10.1.
18
<PAGE>
11. [INTENTIONALLY DELETED.]
12. RESERVATION OF STOCK, ETC. The Company shall at all times reserve
-------------------------
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof, and, in the case of all
securities, shall be free from all taxes, liens, security interests,
encumbrances, preemptive rights and charges. The transfer agent for the Common
Stock, which may be the Company ("Transfer Agent"), and every subsequent
Transfer Agent for any shares of the Company's capital stock issuable upon the
exercise of any of the purchase rights represented by this Warrant, are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the
Transfer Agent for the Common Stock and with every subsequent Transfer Agent for
any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by this Warrant. The Company shall supply such
Transfer Agent with duly executed stock certificates for such purpose All
Warrant Certificates surrendered upon the exercise of the rights thereby
evidenced shall be canceled, and such canceled Warrants shall constitute
sufficient evidence of the number of shares of stock which have been issued upon
the exercise of such Warrants. Subsequent to the Expiration Date, no shares of
stock need be reserved in respect of any unexercised Warrant.
13. REGISTRATION AND TRANSFER OF WARRANTS, ETC.
------------------------------------------
13.1. Warrants Register: Ownership of Warrants. Each Warrant issued
----------------------------------------
by the Company shall be numbered and shall be registered in a warrant register
(the "Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Company's transfer agent. The
Company shall be entitled to treat the registered Holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes. Subject to Section 10, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
13.2. Transfer of Warrants. Subject to compliance with Section 10, if
--------------------
applicable, this Warrant and all rights hereunder are transferable in whole or
in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any
19
<PAGE>
partial transfer, the Company shall at its expense issue and deliver to the
Holder a new Warrant of like tenor, in the name of the Holder, which shall be
exercisable for such number of shares of Common Stock with respect to which
rights under this Warrant were not so transferred.
13.3. Replacement of Warrants. On receipt by the Company of evidence
-----------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
13.4. Adjustments To Purchase Price and Number of Shares.
--------------------------------------------------
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
13.5. Fractional Shares. Notwithstanding any adjustment pursuant to
-----------------
Section 3 in the number of shares of Common Stock covered by this Warrant or
any other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
14. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that
------------------------------
there would be no adequate remedy at law to the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant and accordingly, the Company
agrees that in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
Holder hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.
15. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in
---------------------------------------
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company or as imposing any obligation on the Holder to
purchase any
20
<PAGE>
securities or as imposing any liabilities on the Holder as a shareholder of the
Company, whether such obligation or liabilities are asserted by the Company or
by creditors of the Company.
16. NOTICES. All notices and other communications (and deliveries)
-------
provided for or permitted hereunder shall be made in writing by hand delivery,
telecopier, any courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed (a) if to the Company, to the attention of its President at its
principal office located at 18650 West Corporate Drive, Suite 300, P.O. Box
0919, Brookfield, Wisconsin 53045 or such other address as may hereafter be
designated in writing by the Company to the Holder in accordance with the
provisions of this Section, or (b) if to the Holder, at its address as it
appears in the Warrant Register.
All such notices and communications (and deliveries) shall be deemed
to have been duly given: at the time delivered by hand, if personally delivered;
when receipt is acknowledged, if telecopied; on the next Business Day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage prepaid; provided, that the exercise of any Warrant
--------
shall be effective in the manner provided in Section 2.
17. AMENDMENTS. This Warrant and any term hereof may not be amended,
----------
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.
18. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof", "herein" and "hereunder"
and words of similar import when used in this Warrant shall refer to this
Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (4) the word "including" and words of
similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
19. GOVERNING LAW. This Warrant shall be governed by, and construed
-------------
in accordance with, the laws of the State of New York without giving effect to
the conflict of laws principles thereof).
20. JUDICIAL PROCEEDINGS; JURY TRIAL. Any legal action, suit or
---------------------------------
proceeding brought against the Company with respect to this Warrant may be
brought in any federal court of the Southern District of New York or any state
court located in New York County, State of New York, and by execution and
delivery of this Warrant, the Company hereby irrevocably and unconditionally
waives any claim (by way of motion, as a defense or otherwise)
21
<PAGE>
of improper venue, that it is not subject personally to the jurisdiction of such
court, that such courts are an inconvenient forum or that this Warrant or the
subject matter may not be enforced in or by such court. The Company irrevocably
submits to the exclusive jurisdiction of the aforementioned courts in such
action, suit or proceeding. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 16, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT
OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY IT OR THE HOLDER IN
CONNECTION WITH THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY."
21. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and
-----------------------------
Other Securities) issuable upon exercise of this Warrant (or upon conversion
of any shares of common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration Rights
Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
22
<PAGE>
22. EXPIRATION. The Company shall give the Holder of this Warrant
----------
not less than six weeks nor more than nine months notice of the expiration of
the right to exercise this Warrant. The right to exercise this Warrant shall
expire at 5:00 p.m., New York City time, on the later of March 5, 2008 and the
date of the effectiveness of a registration statement covering shares of Common
Stock, unless the Company shall fail to give such notice as aforesaid, in which
event the right to exercise this Warrant shall not expire until a date six weeks
after the date on which the Company shall give the holder hereof notice of the
expiration of the right to exercise this Warrant.
WELLINGTON PROPERTIES TRUST
By: /s/ Arnold K. Leas
-----------------------------
Title: President
23
<PAGE>
EXHIBIT A to
Common Stock Purchase Warrant
-----------------------------
FORM OF
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ______ shares of Common Stock, par value $_____ per share ("Common
Stock"), of WELLINGTON PROPERTIES TRUST and hereby [makes payment of $_____
therefor] [or] [makes payment therefor by application pursuant to Section
2.1(b)(ii) of the Warrant of $_____ aggregate principal amount of Notes (as
defined in the Warrant)] [or] [makes [payment therefor by reduction pursuant to
Section 2.1(b)(iii) of the Warrant of the number of shares of Common Stock
otherwise issuable to the Holder upon Warrant exercise by ___ shares] [or]
[makes payment therefor by delivery of the following Common Stock Certificates
of the Company (properly endorsed for transfer in blank) for cancellation by
theCompany pursuant to Section 2.1(b)(iv) of the Warrant, certificates of which
are attached hereto for cancellation _____ ____________ [list certificates by
number and amount]]. The undersigned hereby requests that certificates for such
shares be issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
________________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:_____________________________________________________________________
(NAME)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased (and/or reduced)
hereby is less than the number of shares of Common Stock covered by the Warrant,
the undersigned requests that a new Warrant representing the number of shares of
Common Stock not so purchased (or reduced) be issued and delivered as follows:
ISSUE TO:_______________________________________________________________________
(NAME OF HOLDER)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:_____________________________________________________________________
(NAME OF HOLDER)
________________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Dated: ______________ [NAME OF HOLDER]
By__________________________
Name:
Title:
24
<PAGE>
EXHIBIT B to
Common Stock Purchase Warrant
-----------------------------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $_____ per share ("Common Stock") of WELLINGTON
PROPERTIES TRUST, represented by the Warrant, with respect to the number of
shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint _______ Attorney to make such
transfer on the books of WELLINGTON PROPERTIES TRUST maintained for that
purpose, with full power of substitution in the premises.
Dated: ______________ [NAME OF HOLDER]
By__________________________
Name:
Title:
25
<PAGE>
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
by and between
WELLINGTON PROPERTIES TRUST
and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
Dated as of March 5th, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. DEFINITIONS................................................................... 1
2. REGISTRATION UNDER THE SECURITIES ACT......................................... 5
2.1 Demand Registration...................................................... 5
2.2 Incidental Registration.................................................. 8
2.3 S-3 Registration; Shelf Registration..................................... 10
2.4 Expenses................................................................. 11
2.5 Underwritten Offerings................................................... 11
2.6 Conversions; Exercises................................................... 12
3. [INTENTIONALLY OMITTED]....................................................... 12
4. REGISTRATION PROCEDURES....................................................... 12
4.1 Obligations of the Company............................................... 12
4.2 Seller Information....................................................... 16
4.3 Notice to Discontinue.................................................... 17
5. INDEMNIFICATION; CONTRIBUTION................................................. 17
5.1 Indemnification by the Company........................................... 17
5.2 Indemnification by Holders............................................... 18
5.3 Conduct of Indemnification Proceedings................................... 18
5.4 Contribution............................................................. 19
5.5 Other Indemnification.................................................... 20
5.6 Indemnification Payments................................................. 20
6. GENERAL....................................................................... 20
6.1 Adjustments Affecting Registrable Securities............................. 20
6.2 Registration Rights to Others............................................ 20
6.3 Availability of Information; Rule 144; Rule 144A; Other Exemptions....... 20
6.4 Amendments and Waivers................................................... 21
6.5 Notices.................................................................. 21
6.6 Successors and Assigns................................................... 23
6.7 Counterparts............................................................. 23
6.8 Descriptive Headings, Etc................................................ 23
6.9 Severability............................................................. 24
6.10 Governing Law........................................................... 24
6.11 Remedies; Specific Performance.......................................... 24
6.12 Entire Agreement........................................................ 24
6.13 Nominees for Beneficial Owners.......................................... 24
6.14 Consent to Jurisdiction; Waiver of Jury................................. 25
6.15 Further Assurances...................................................... 25
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
6.16 No Inconsistent Agreements........................................... 25
6.17 Construction......................................................... 25
</TABLE>
3
<PAGE>
REGISTRATION RIGHTS AGREEMENTS (this or the "Agreement") dated as of
March 5th, 1998, by and between WELLINGTON PROPERTIES TRUST, a Delaware
corporation (the "Company"), and CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
(the "Initial Holder").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Initial Holder has agreed to make a loan in an aggregate
amount not to exceed $17,000,000 dollars (the "Loan") to Lake Pointe Apartment
Homes, Inc., a Wisconsin corporation ("Lake Pointe");
WHEREAS, in order to induce the Initial Holder to make the Loan to
Lake Pointe, the Company has agreed to issue warrants to the Initial Holder to
purchase up to 30,000 Common Shares (as hereinafter defined) and provide certain
registration rights on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have the
-----------
following meanings:
"Affiliate" shall mean (i) with respect to any Person, any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person, and (ii) with respect to any
individual, shall also mean the spouse, sibling, child, stepchild, grandchild,
niece, nephew or parent of such Person, or the spouse thereof.
"Common Shares" shall mean shares of common stock, par value $0.01
-------------
per share, of the Company.
"Company" shall have the meaning set forth in the preamble.
-------
"Demand Registration" shall mean a registration required to be
-------------------
effected by the Company pursuant to Section 2.1.
"Demand Registration Statement" shall mean a registration statement of
-----------------------------
the Company which covers the Registrable Securities requested to be included
therein pursuant to the provisions of Section 2.1 and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference (or deemed to be incorporated by
reference) therein.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
<PAGE>
"Holders" shall mean the Initial Holder for so long as it owns any
-------
Registrable Securities and such of its respective heirs, successors and
permitted assigns (including any permitted transferees of Registrable
Securities) who acquire or are otherwise the transferee of Registrable
Securities, directly or indirectly, from such Initial Holder (or any subsequent
Holder), for so long as such heirs, successors and permitted assigns own any
Registrable Securities. For purposes of this Agreement, a Person will be deemed
to be a Holder whenever such Person holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities,
whether or not such purchase, conversion, exercise or exchange has actually been
effected and disregarding any legal restrictions upon the exercise of such
rights. Registrable Securities issuable upon exercise of an option or upon
conversion exchange or exercise of another security shall be deemed outstanding
for the purposes of this Agreement.
"Holders' Counsel" shall mean one firm of counsel (per registration)
----------------
to the Holders of Registrable Securities participating in such registration,
which counsel shall be selected (i) in the case of Demand Registration or an S-3
Registration, by the Initiating Holders holding a majority of the Registrable
Securities for which registration was requested in the Request, and (ii) in all
other cases, by the Majority Holders of the Registration.
"Incidental Registration" shall mean a registration required to be
-----------------------
effected by the Company pursuant to Section 2.2.
"Incidental Registration Statement" shall mean a registration
---------------------------------
statement of the Company which covers the Registrable Securities requested to be
included therein pursuant to the provisions of Section 2.2 and all amendments an
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference (or deemed to be incorporated by
reference) therein.
"Initial Holder" shall mean the Person specified as such in the
--------------
Preamble.
"Initiating Holders" shall mean, with respect to a particular
------------------
registration, the Holders who initiated the Request for such registration.
"Inspectors" shall have the meaning set forth in Section 4.1(g).
----------
"Majority Holders" shall mean one or more Holders of Registrable
----------------
Securities who would hold a majority of the Registrable Securities who would
hold a majority of the Registrable Securities to be included in such
registration.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
2
<PAGE>
"Person" shall mean any individual, firm, partnership, corporation,
------
professional corporation, trust, joint venture, association, joint stock
company, limited liability company, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof, and shall include any successor (by merger or otherwise) of
such entity.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement (including, without limitation, any preliminary prospectus and any
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), and any such Prospectus as amended or
supplemented by any prospectus supplement, and all other amendments and
supplements to such Prospectus, including post-effective amendments, and in each
case including all material incorporated by reference (or deemed to be
incorporated by reference) therein.
"Registrable Securities" shall mean (i) any Warrant Shares issued or
----------------------
issuable upon exercise of the Warrants issued to the Initial Holder in
connection with the Loan, (ii) any Common Shares otherwise or hereafter
purchased or acquired by the Holders or their Affiliates and (iii) any other
securities of the Company (or any successor or assign of the Company, whether by
merger, consolidation, sale of assets or otherwise) which may be issued or
issuable with respect to, in exchange for, or in substitution of, Registrable
Securities referenced in clauses (i) and (ii) above by reason of any dividend or
stock split, combination of shares, merger, consolidation, recapitalization,
reclassification, reorganization, sale of assets or similar transaction. As to
any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (A) a registration statement with respect to the
sale of such securities shall have been declared effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (B) such securities are sold pursuant to Rule 144 (or
any similar provisions then in force) under the Securities Act, (C) such
securities have been otherwise transferred, a new certificate or other evidence
of ownership for them not bearing the legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration under the Securities Act, or (D) such securities
shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance with this Agreement by the Company and its
subsidiaries, including, without limitation (i) all SEC, stock exchange, NASD
and other registration, listing and filing fees, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue sky laws
and compliance with the rules of any stock exchange (including fees and
disbursements of counsel in connection with such compliance and the preparation
of a blue sky memorandum and legal investment survey), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing, printing,
distributing, mailing and delivering any Registration Statement, any Prospectus,
any underwriting agreements, transmittal letters, securities sales agreements,
securities certificates and other documents relating to the performance of or
compliance with this Agreement, (iv) the fees and disbursements of counsel for
the Company, (v) the fees and disbursements of Holders' Counsel, (vi) the fees
and disbursements of all independent public
3
<PAGE>
accountants (including the expenses of any audit and/or "cold comfort" letters)
and the fees and expenses of other Persons, including experts, retained by the
Company, (vii) the expenses incurred in connection with making road show
presentations and holding meetings with potential investors to facilitate the
distribution and sale of Registrable Securities which are customarily borne by
the issuer, (viii) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, and (ix) premiums and other costs of
policies of insurance against liabilities arising out of the public offering of
the Registrable Securities being registered; provided, however, Registration
-------- -------
Expenses shall not include discounts and commissions payable to underwriters,
selling brokers, dealer managers or other similar Persons engaged in the
distribution of any of the Registrable Securities; and provided further, that in
-------- -------
any case where Registration Expenses are not to be borne by the Company, such
expenses shall not include salaries of Company personnel or general overhead
expenses of the Company, auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of the Company or other expenses
for the preparation of financial statements or other data normally prepared by
the Company in the ordinary course of its business or which the Company would
have incurred in any event; and provided, further, that in the event the Company
-------- -------
shall, in accordance with Section 2.2 or Section 2.6 hereof, not register any
securities with respect to which it had given written notice of its intention to
register to Holders, notwithstanding anything to the contrary in the foregoing,
all of the costs incurred by the Holders in connection with such registration
shall be deemed to be Registration Expenses.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any Registrable Securities and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference (or deemed to be
incorporated by reference) therein.
"Request" shall have the meaning set forth in Section 2.1(a).
-------
"S-3 Registration" shall mean a registration required to be effected
----------------
by the Company pursuant to Section 2.3(a).
"SEC" shall mean the Securities and Exchange Commission, or any
---
successor agency having jurisdiction to enforce the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time, and the rules and regulations thereunder, or any successor
statute.
"Shelf Registration" shall have the meaning set forth in Section
------------------
2.1(a).
"Underwriters" shall mean the underwriters, if any, of the offering
------------
being registered under the Securities Act.
"Underwritten Offering" shall mean a sale of securities of the Company
---------------------
to an Underwriter or Underwriters for reoffering to the public.
4
<PAGE>
"Warrant Shares" shall mean the Common Shares or other equity
--------------
securities issued or issuable upon the exercise of the Warrants.
"Warrants" shall mean the warrants issued to the Initial Holder in
--------
connection with the Loan, together with any additional warrants issued in
accordance with the terms thereof.
"Withdrawn Demand Registration" shall have the meaning set forth in
-----------------------------
Section 2.1(a).
"Withdrawn Request" shall have the meaning set forth in Section
-----------------
2.1(a).
2. REGISTRATION UNDER THE SECURITIES ACT.
-------------------------------------
2.1 Demand Registration.
-------------------
(a) Right to Demand Registration. Subject to Section 2.1(c), at any
----------------------------
time or from time to time the Majority Holders shall have the right to request
in writing that the Company register all or part of such Holders' Registrable
Securities (a "Request") (which Request shall specify the amount of Registrable
Securities intended to be disposed of by such Holders and the intended method of
disposition thereof) by filing with the SEC a Demand Registration Statement. As
promptly as practicable, but no later than 10 days after receipt of a Request,
the Company shall give written notice of such requested registration to all
Holders of Registrable Securities. Subject to Section 2.1 (b), the Company shall
include in a Demand Registration (i) the Registrable Securities intended to be
disposed of by the Initiating Holders and (ii) the Registrable Securities
intended to be disposed of by any other Holder which shall have made a written
request (which request shall specify the amount of Registrable Securities to be
registered and the intended method of disposition thereof) to the Company for
inclusion thereof in such registration within 20 days after the receipt of such
written notice from the Company. The Company shall, as expeditiously as possible
following a Request, use its best efforts to cause to be filed with the SEC a
Demand Registration Statement providing for the registration under the
Securities Act of the Registrable Securities which the Company has been so
requested to register by all such Holders, to the extent necessary to permit the
disposition of such Registrable Securities so to be registered in accordance
with the intended methods of disposition thereof specified in such Request or
further requests (including, without limitation, by means of a shelf
registration pursuant to Rule 415 under the Securities Act (a "Shelf
Registration") if so requested and if the Company is then eligible to use such a
registration). The Company shall use its best efforts to have such Demand
Registration Statement declared effective by the SEC as soon as practicable
thereafter and to keep such Demand Registration Statement continuously effective
for the period specified in Section 4.1(b).
A Request may be withdrawn prior to the filing of the Demand
Registration Statement by the Majority Holders of the Registration (a "Withdrawn
Request") and a Demand Registration Statement may be withdrawn prior to the
effectiveness thereof by the Majority Holders of the Registration (a "Withdrawn
Demand Registration"), and such withdrawals shall be treated as a Demand
Registration which shall have been effected pursuant to this Section 2.1, unless
the Holders of Registrable Securities to be included in such Registration
5
<PAGE>
Statement reimburse the Company for its reasonable out-of-pocket Registration
Expenses relating to the preparation and filing of such Demand Registration
Statement (to the extent actually incurred); provided; however, that if a
-------- -------
Withdrawn Request or Withdrawn Registration Statement is made (A) because of a
material adverse change in the business, financial condition or prospects of
the Company or (B) because the sole or lead managing Underwriter advises that
the amount of Registrable Securities to be sold in such offering be reduced
pursuant to Section 2.1(b) by more than 25% of the Registrable Securities to be
included in such Registration Statement, then such withdrawal shall not be
treated as a Demand Registration effected pursuant to this Section 2.1 (and
shall not be counted toward the number of Demand Registrations), and the Company
shall pay all Registration Expenses in connection therewith. Any Holder
requesting inclusion in a Demand Registration may, at any time prior to the
effective date of the Demand Registration Statement (and for any reason) revoke
such request by delivering written notice to the Company revoking such requested
inclusion.
The registration rights granted pursuant to the provisions of
this Section 2.1 shall be in addition to the registration rights granted
pursuant to the other provisions of Section 2 hereof.
(b) Priority in Demand Registrations. If a Demand Registration
--------------------------------
involves an Underwritten Offering, and the sole or lead managing Underwriter, as
the case may be, of such Underwritten Offering shall advise the Company in
writing (with a copy to each Holder requesting registration) on or before the
date five days prior to the date then scheduled for such offering that, in its
opinion, the amount of Registrable Securities requested to be included in such
Demand Registration exceeds the number which can be sold in such offering within
a price range acceptable to the Majority Holders of the Registration (such
writing to state the basis of such opinion and the approximate number of
Registrable Securities which may be included in such offering), the Company
shall include in such Demand Registration, to the extent of the number which
the Company is so advised may be included in such offering, the Registrable
Securities requested to be included in the Demand Registration by the Holders
allocated pro rata in proportion to the number of Registrable Securities
--- ----
requested to be included in such Demand Registration by each of them. In the
event the Company shall not, by virtue of this Section 2.1(b), include in any
Demand Registration all of the Registrable Securities of any Holder requesting
to be included in such Demand Registration, such Holder may, upon written notice
to the Company given within five days of the time such Holder first is notified
of such matter, reduce the amount of Registrable Securities it desires to have
included in such Demand Registration, whereupon only the Registrable Securities,
if any, it desires to have included will be so included and the Holders not so
reducing shall be entitled to a corresponding increase in the amount of
Registrable Securities to be included in such Demand Registration.
(c) Limitations on Registrations. The rights of Holders of
----------------------------
Registrable Securities to request Demand Registrations pursuant to Section
2.1(a) are subject to the following limitations: In no event shall the Company
be required to effect more than one (1) Demand Registration; provided, however,
-------- -------
that such number shall be increased to the extent the Company does not include
in what would otherwise be the final registration the number of Registrable
Securities requested to be registered by the Holders by reason of Section
2.1(b).
6
<PAGE>
(d) Underwriting; Selection of Underwriters. Notwithstanding anything
----------------------------------------
to the contrary contained in Section 2.1(a), if the Initiating Holders holding a
majority of the Registrable Securities for which registration was requested in
the Request so elect, the offering of such Registrable Securities pursuant to
such Demand Registration shall be in the form of a firm commitment Underwritten
Offering; and such Initiating Holders may require that all Persons (including
other Holders) participating in such registration sell their Registrable
Securities to the Underwriters at the same price and on the same terms of
underwriting applicable to the Initiating Holders. If any Demand Registration
involves an Underwritten Offering, the sole or managing Underwriters and any
additional investment bankers and managers to be used in connection with such
registration shall be selected by the Initiating Holders holding a majority of
the Registrable Securities for which registration was requested in the Request,
subject to the approval of the Company (such approval not to be unreasonably
withheld).
(e) Registration of Other Securities. Whenever the Company shall
--------------------------------
effect a Demand Registration, no securities other than the Registrable
Securities shall be covered by such registration unless the Majority Holders of
the Registration shal have consented in writing to the inclusion of such other
securities.
(f) Effective Registration Statement; Suspension. A Demand
---------------------------------------------
Registration Statement shall not be deemed to have become effective (and the
related registration will not be deemed to have been effected) (i) unless it has
been declared effective by the SEC and remains effective in compliance with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such Demand Registration Statement for the
time period specified in Section 4.1(b), (ii) if the offering of any Registrable
Securities pursuant to such Demand Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, or (iii) if, in the case of an Underwritten
Offering, the conditions to closing specified in an underwriting agreement to
which the Company is a party are not satisfied other than by the sole reason of
any breach or failure by the Holders of Registrable Securities or are not
otherwise waived.
(g) Other Registrations. During the period (i) beginning on the date
-------------------
of a Request and (ii) ending on the date that is 90 days after the date that a
Demand Registration Statement filed pursuant to such Request has been declared
effective by the SEC or, if the Holders shall withdraw such Request or such
Demand Registration Statement, on the date of such Withdrawn Request or such
Withdrawn Registration Statement, the Company shall not, without the consent of
the Majority Holders of the Registration, file a registration statement
pertaining to any other securities of the Company.
(h) Registration Statement Form. Registrations under this Section 2.1
---------------------------
shall be such appropriate registration form of the SEC (i) as shall be selected
by the Initiating Holders holding a majority of the Registrable Securities for
which registration was requested in the Request and (ii) which shall be
available for the sale of Registrable Securities in accordance with the intended
method or methods of disposition specified in the requests for registration. The
Company agrees to include in any such Registration Statement all information
which any selling Holder, upon advice of counsel, shall reasonably request.
7
<PAGE>
2.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at any
---------------------------------------
time or from to time proposes to register any of its securities under the
Securities Act (other than in a registration on Form S-4 or S-8 or any successor
form to such forms and other than pursuant to Section 2.1 or 2.3) whether or
not pursuant to registration rights granted to other holders of its securities
and whether or not for sale for its own account, the Company shall deliver
prompt written notice (which notice shall be given at least 30 days prior to
such proposed registration) to all Holders of Registrable Securities of its
intention to undertake such registration, describing in reasonable detail the
proposed registration and distribution (including the anticipated range of the
proposed offering price, the class and number of securities proposed to be
registered and the distribution arrangements) and of such Holders' right to
participate in such registration under this Section 2.2 as hereinafter provided.
Subject to the other provisions of this paragraph (a) and Section 2.2(b), upon
the written request of any Holder made within 20 days after the receipt of such
written notice (which request shall specify the amount of Registrable Securities
to be registered and the intended method of disposition thereof), the Company
shall effect the registration under the Securities Act of all Registrable
Securities requested by Holder to be so registered (an "Incidental
Registration"), to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable Securities so
to be registered, by inclusion of such Registrable Securities in the
Registration Statement which covers the securities which the Company proposes to
register and shall cause such Registration Statement to become and remain
effective with respect to such Registrable Securities in accordance with the
registration procedures set forth in Section 4. If an Incidental Registration
involves an Underwritten Offering, immediately upon notification to the Company
from the Underwriter of the price at which such securities are to be sold, the
Company shall so advise each participating Holder. The Holders requesting
inclusion in an Incidental Registration may, at any time prior to the effective
date of the Incidental Registration Statement (and for any reason), revoke such
request by delivering written notice to the Company revoking such requested
inclusion.
If at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Incidental
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder of Registrable Securities and, thereupon, (A) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
incurred in connection therewith), without prejudice, however, to the rights of
Holders to cause such registration to be effected as a registration under
Section 2.1 or 2.3(a), and (B) in the case of a determination to delay such
registration, the Company shall be permitted to delay the registration of such
Registrable Securities for the same period as the delay in registering such
other securities; provided, however, that if such delay shall extend beyond 120
-------- -------
days from the date the Company received a request to include Registrable
Securities in such Incidental Registration, then the Company shall again give
all Holders the opportunity to participate therein and shall follow the
notification procedures set forth in the preceding
8
<PAGE>
paragraph. There is no limitation on the number of such Incidental Registrations
pursuant to this Section 2.2 which the Company is obligated to effect.
The registration rights granted pursuant to the provisions of this
Section 2.2 shall be in addition to the registration rights granted pursuant to
the other provisions of Section 2 hereof.
(b) Priority in Incidental Registration. If an Incidental
-----------------------------------
Registration involves an Underwritten Offering (on a firm commitment basis), and
the sole or the lead managing Underwriter, as the case may be, of such
Underwritten Offering shall advise the Company in writing (with a copy to each
Holder requesting registration) on or before the date five days prior to the
date then scheduled for such offering that, in its opinion, the amount of
securities (including Registrable Securities) requested to be included in such
registration exceeds the amount which can be sold in such offering without
materially interfering with the successful marketing of the securities being
offered (such writing to state the basis of such opinion and the approximate
number of such securities which may be included in such offering without such
effect), the Company shall include in such registration, to the extent of the
number which the Company is so advised may be included in such offering without
such effect, (i) in the case of a registration initiated by the Company, (A)
first, the securities that the Company proposes to register for its own account,
(B) second, the Registrable Securities requested to be included in such
registration by the Holders, allocated pro rata in proportion to the number of
--- ----
Registrable Securities requested to be included in such registration by each of
them, and (C) third, other securities of the Company to be registered on behalf
of any other Person, and (ii) in the case of a registration initiated by a
Person other than the Company, (A) first, the Registrable Securities requested
to be included in such registration by the Holders and by any Persons initiating
such registration, allocated pro rata in proportion to the number of securities
--- ----
requested to be included in such registration by each of them, (B) second, the
securities that the Company proposes to register for its own account, and (C)
third, other securities of the Company to be registered on behalf of any other
Person; provided, however, that in the event the Company will not, by virtue of
-------- -------
this Section 2.2(b), include in such registration all of the Registrable
Securities of any Holder requested to be included in such registration, such
Holder may, upon written notice to the Company given within three days of the
time such Holder first is notified of such matter, reduce the amount of
Registrable Securities it desires to have included in such registration,
whereupon only the Registrable Securities, if any, it desires to have included
will be so included and the Holders not so reducing shall be entitled to a
corresponding increase in the amount of Registrable Securities to be included in
such registration.
(c) Selection of Underwriters. If any Incidental Registration
-------------------------
involves an Underwritten Offering, the sole or managing Underwriter(s) and any
additional investment bankers and managers to be used in connection with such
registration shall be subject to the approval of the Majority Holders of the
Registration (such approval not to be unreasonably withheld).
9
<PAGE>
2.3 S-3 Registration; Shelf Registration.
------------------------------------
(a) S-3 Registration. If at any time (i) one or more Holders of
----------------
Registrable Securities representing 25% or more of the Registrable Securities
then outstanding request that the Company file a registration statement on Form
S-3 or any successor form thereto for a public offering of all or any portion of
the shares of Registrable Securities held by such Holder or Holders, the
reasonably anticipated aggregate price to the public of which would exceed
$1,000,000, and (ii) the Company is a registrant entitled to use Form S-3 or any
successor form thereto to register such securities, then the Company shall, as
expeditiously as possible following such Request, use its best efforts to
register under the Securities Act on Form S-3 or any successor form thereto, for
public sale in accordance with the intended methods of disposition specified in
such Request or any subsequent requests (including, without limitation, by means
of a Shelf Registration) the Registrable Securities specified in such Request
and any subsequent requests; provided, that if such registration is for an
--------
Underwritten Offering, the terms of Sections 2.1(b) and 2.1(d) shall apply (and
any reference to "Demand Registration" therein shall, for purposes of this
Section 2.3, instead be deemed a reference to "S-3 Registration").Whenever the
Company is required by this Section 2.3 to use its best efforts to effect the
registration of Registrable Securities, each of the procedures and requirements
of Section 2.1(a) and 2.1(e) (including but not limited to the requirements that
the Company (A) notify all Holders of Registrable Securities from whom such
Request for registration has not been received and provide them with the
opportunity to participate in the offering and (B) use its best efforts to have
such S-3 Registration Statement declared and remain effective for the time
period specified herein) shall apply to such registration (and any reference in
such Sections 2.1(a) and 2.1(e) to "Demand Registration" shall, for purposes of
this Section 2.3, instead be deemed a reference to "S-3 Registration").
Notwithstanding anything to the contrary contained herein, no Request may be
made under this Section 2.3 within 90 days after the effective date of a
Registration Statement filed by the Company covering a firm commitment
Underwritten Offering in which the Holders of Registrable Securities shall have
been entitled to join pursuant to this Agreement in which there shall have been
effectively registered all shares of Registrable Securities as to which
registration shall have been requested. There is no limitation on the number of
S-3 Registrations that the Company is obligated to effect.
The registration rights granted pursuant to the provisions of this
Section 2.3(a) shall be in addition to the registration rights granted pursuant
to the other provisions of this Section 2.
(b) Shelf Registration. If a request made pursuant to Section 2.1 or
------------------
2.3(a) is for a Shelf Registration, the Company shall use its best efforts to
keep the Shelf Registration continuously effective through the date on which all
of the Registrable Securities covered by such Shelf Registration may be sold
pursuant to Rule 144(k) under the Securities Act (or any successor provision
having similar effect); provided, however, that prior to the termination of such
-------- -------
Shelf Registration, the Company shall first furnish to each Holder of
Registrable Securities participating in such Shelf Registration (i) an opinion,
in form and substance satisfactory to the Majority Holders of the Registration,
of counsel for the Company satisfactory to the Majority Holders of the
Registration stating that such Registrable Securities are freely salable
pursuant to
10
<PAGE>
Rule 144(k) under the Securities Act (or any successor provision having similar
effect) or (ii) a "No-Action Letter" from the staff of the SEC stating that the
SEC would not recommend enforcement action if the Registrable Securities
included in such Shelf Registration were sold in a public sale other than
pursuant to an effective registration statement.
2.4 Expenses. The Company shall pay all Registration Expenses in
--------
connection with any Demand Registration, Incidental Registration, S-3
Registration or Shelf Registration, whether or not such registration shall
become effective and whether or not all Registrable Securities originally
requested to be included in such registration are withdrawn or otherwise
ultimately not included in such registration, except as otherwise provided with
respect to a Withdrawn Request and a Withdrawn Demand Registration in Section
2.1(a). Each Holder shall pay all discounts and commissions payable to
underwriters, selling brokers, managers or other similar Persons engaged in the
distribution of such Holder's Registrable Securities pursuant to any
registration pursuant to this Section 2.
2.5 Underwritten Offerings.
----------------------
(a) Demand Underwritten Offerings. If requested by the sole or lead
-----------------------------
managing Underwriter for any Underwritten Offering effected pursuant to a Demand
Registration or an S-3 Registration, the Company shall enter into a customary
underwriting agreement with the Underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to each Holder of
Registrable Securities participating in such offering and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnification and contribution to the effect and to the extent provided in
Section 5.
(b) Holders of Registrable Securities to be Parties to Underwriting
---------------------------------------------------------------
Agreement. The Holders of Registrable Securities to be distributed by
- ---------
Underwriters in an Underwritten Offering contemplated by Section 2 shall be
parties to the underwriting agreement between the Company and such Underwriters
and may, at such Holders' option, require that any or all of the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such Underwriters shall also be made to and for the benefit
of such Holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such Underwriters under such underwriting
agreement be conditions precedent to the oblgation of such Holders of
Registrable Securities; provided, however, that the Company shall not be
-------- -------
required to make any representations or warranties with respect to written
information specifically provided by a selling Holder for inclusion in the
Registration Statement. No Holder shall be required to make any representations
or warranties to, or agreements with, the Company or the Underwriters other than
representations, warranties or agreements regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of disposition.
(c) Participation in Underwritten Registration. Notwithstanding
------------------------------------------
anything herein to the contrary, no Person may participate in any underwritten
registration hereunder unless such Person (i) agrees to sell its securities on
the same terms and conditions provided in
11
<PAGE>
any underwritten arrangements approved by the Persons entitled hereunder to
approve such arrangement and (ii) accurately completes and executes in a timely
manner all questionnaires, powers of attorney, indemnities, custody agreements,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
2.6 Conversions; Exercises. Notwithstanding anything to the contrary
----------------------
herein, in order for any Registrable Securities that are issuable upon the
exercise of warrants to be included in any registration pursuant to Section 2
hereof, the exercise of such warrants must be effected no later than immediately
prior to the closing of any sales under the Registration Statement pursuant to
which such Registrable Securities are to be sold.
3. [INTENTIONALLY OMITTED]
-----------------------
4. REGISTRATION PROCEDURES.
-----------------------
4.1 Obligations of the Company. Whenever the Company is required to effect
--------------------------
the registration of Registrable Securities under the Securities Act pursuant to
Section 2 of this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC (promptly, and in any event within
30 days after receipt of a request to register Registrable Securities) the
requisite Registration Statement to effect such registration, which Registration
Statement shall comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required by the SEC
to be filed therewith, and the Company shall use its best efforts to cause such
Registration Statement to become effective (provided, that the Company may
--------
discontinue any registration of its securities that are not Registrable
Securities, and, under the circumstances specified in Section 2.2, its
securities that are Registrable Securities); provided, however, that before
-------- -------
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, or comparable statements under securities or blue sky laws of any
jurisdiction, the Company shall (i) provide Holders' Counsel and any other
Inspector with an adequate and appropriate opportunity to participate in the
preparation of such Registration Statement and each Prospectus included therein
(and each amendment or supplement thereto or comparable statement) to be filed
with the SEC, which documents shall be subject to the review and comment of
Holders' Counsel, and (ii) not file any such Registration Statement or
Prospectus (or amendment or supplement thereto or comparable statement) with the
SEC to which Holder's Counsel, any selling Holder or any other Inspector shall
have reasonably objected on the grounds that such filing does not comply in all
material respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
(b) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the Prospectus used in connection therewith as
may be necessary (i) to keep such Registration Statement effective, and (ii) to
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such Registration Statement, in each
case until such time as all of such Registrable Securities have been disposed of
in accordance with the intended methods of disposition by the seller(s) thereof
set forth in such Registration Statement; provided, that except with respect to
--------
any Shelf
12
<PAGE>
Registration, such period need not extend beyond nine months after the effective
date of the Registration Statement; and provided further, that with respect to
-------- -------
any Shelf Registration, such period need not extend beyond the time period
provided in Section 2.3, and which periods, in any event, shall terminate when
all Registrable Securities covered by such Registration Statement have been sold
(but not before the expiration of the 90 day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable);
(c) furnish, without charge, to each selling Holder of such Registrable
Securities and each Underwriter, if any, of the securities covered by such
Registration Statement, such number of copies of such Registration Statement,
each amendment and supplement thereto (in each case including all exhibits), and
the Prospectus included in such Registration Statement (including each
preliminary Prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such selling Holder and Underwriter may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such selling Holder (the Company hereby
consenting to the use in accordance with applicable law of each such
Registration Statement (or amendment or post-effective amendment thereto) and
each such Prospectus (or preliminary prospectus or supplement thereto) by each
such selling Holder of Registrable Securities and the Underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Registration Statement or Prospectus);
(d) prior to any offering of Registrable Securities, use its best efforts
to register or qualify all Registrable Securities and other securities covered
by such Registration Statement under such other securities of blue sky laws of
such jurisdictions as any selling Holder of Registrable Securities covered by
such Registration Statement or the sole or lead managing Underwriter, if any,
may reasonably request to enable such selling Holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
selling Holder and to continue such registration or qualification in effect in
each such jurisdiction for as long as such Registration Statement remains in
effect (including through new filings or amendments or renewals), and do any and
all other acts and things which may be necessary or advisable to enable any such
selling Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such selling Holder; provided, however, that the
-------- -------
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 4.1 (d), (ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such jurisdiction;
(e) use its best efforts to obtain all other approvals, consents,
exemptions or authorizations from such governmental agencies or authorities as
may be necessary to enable the selling Holders of such Registrable Securities to
consummate the disposition of such Registrable Securities:
(f) promptly notify Holders' Counsel, each Holder of Registrable
Securities covered by such Registration Statement and the sole or lead managing
Underwriter, if any: (i) when the Registration Statement, any pre-effective
amendment, the Prospectus or any prospectus supplement related thereto or post-
effective amendment to the Registration Statement has been filed and, with
respect to the Registration Statement or any post-effective amendment,
13
<PAGE>
when the same has become effective, (ii) of any request by the SEC or any state
securities or blue sky authority for amendments or supplements to the
Registration Statement or the Prospectus related thereto or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation or threat of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
existence of any fact of which the Company becomes aware or the happening of any
event which results in (A) the Registration Statement containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein not misleading, or
(B) the Prospectus included in such Registration Statement containing an untrue
statement of a material fact or omitting to state a material fact required to be
stated therein or necessary to make any statements therein, in the light of the
circumstances under which they were made, not misleading, (vi) if at any time
the representations and warranties contemplated by Section 2.5 (b) cease to be
true and correct in all material respects, and (vii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate or that there exists circumstances not yet disclosed to the
public which make further sales under such Registration Statement inadvisable
pending such disclosure and post-effective amendment; and, if the notification
relates to an event described in any of the clauses (ii) through (vii) of this
Section 4.1 (f), the Company shall promptly prepare a supplement or
post-effective amendment to such Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that (1) such Registration Statement shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(2) as thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder, such Prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances
under which they were made not misleading (and shall furnish to each such Holder
and each Underwriter, if any, a reasonable number of copies of such Prospectus
so supplemented or amended); and if the notification relates to an event
described in clause (iii) of this Section 4.1 (f), the Company shall take all
reasonable action required to prevent the entry of such stop order or to remove
it if entered;
(g) make available for inspection by any selling Holder of
Registrable Securities, any sole or lead managing Underwriter participating in
any disposition pursuant to such Registration Statement, Holders' Counsel and
any attorney, accountant or other agent retained by any such seller or any
Underwriter (each, an "Inspector" and, collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company and any subsidiaries thereof as may be in existence at such time
(collectively, the "Records") as shall be necessary, in the opinion of such
Holders' and such Underwriters' respective counsel, to enable them to exercise
their due diligence responsibility and to conduct a reasonable investigation
within the meaning of the Securities Act, and cause the Company's and any
subsidiaries' officers, directors and employees, and the independent public
accountants of the Company, to supply all information reasonably requested by
any such Inspectors in connection with such Registration Statement;
14
<PAGE>
(h) obtain an opinion from the Company's counsel and a "cold comfort"
letter from the Company's independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
Registration Statement, in each case dated the effective date of such
Registration Statement (and if such registration involves an Underwritten
Offering, dated the date of the closing under the underwriting agreement), in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be reasonably satisfactory to
the sold or lead managing Underwriter, if any, and to the Majority Holders of
the Registration, and furnish to each Holder participating in the offering and
to each Underwriter, if any, a copy of such opinion and letter addressed to such
Holder (in the case of the opinion) and Underwriter, (in the case of the opinion
and the "cold comfort" letter);
(i) provide a CUSIP number for all Registrable Securities and provide
and cause to be maintained a transfer agent and registrar for all such
Registrable Securities covered by such Registration Statement not later than the
effectiveness of such Registration Statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and any other governmental agency or authority
having jurisdiction over the offering, and make available to its security
holders, as soon as reasonably practicable but no later than 90 days after the
end of any 12-month period, an earnings statement (i) commencing at the end of
any month in which Registrable Securities are sold to Underwriters in an
Underwritten Offering and (ii) commencing with the first day of the Company's
calendar month next succeeding each sale of Registrable Securities after the
effective date of a Registration Statement, which statement shall cover such
12-month periods, in a manner which satisfies the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder;
(k) if so requested by the Majority Holders of the Registration, use
its best efforts to cause all such Registrable Securities to be listed (i) on
each national securities exchange on which the Company's securities are then
listed or (ii) if securities of the Company are not at the time listed on any
national securities exchange (or if the listing of Registrable Securities is not
permitted under the rules of each national securities exchange on which the
Company's securities are then listed), on a national securities exchange
designated by the Majority Holders of the Registration;
(l) keep each selling Holder of Registrable Securities advised in
writing as to the initiation and progress of any registration under Section 2
hereunder;
(m) enter into and perform customary agreements (including, if
applicable, an underwriting agreement in customary form) and provide officers'
certificates and other customary closing documents;
(n) cooperate with each selling Holder of Registrable Securities and
each Underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the NASD and make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the
15
<PAGE>
Underwriters (taking into account the needs of the Company's businesses and the
requirements of the marketing process) in the marketing of Registrable
Securities in any Underwritten Offering;
(o) furnish to each Holder participating in the offering and the sole
or lead managing Underwriter, if any, without charge, at least one manually-
signed copy of the Registration Statement and any post-effective amendments
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those deemed to be
incorporated by reference);
(p) cooperate with the selling Holders of Registrable Securities and
the sole or lead managing Underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the Underwriter or, if not an Underwritten Offering, in accordance
with the instructions of the selling Holders of Registrable Securities at least
three business days prior to any sale of Registrable Securities;
(q) if requested by the sole or lead managing Underwriter or any
selling Holder of Registrable Securities, immediately incorporate in a
prospectus supplement or post-effective amendment such information concerning
such Holder of Registrable Securities, the Underwriters or the intended method
of distribution as the sole or lead managing Underwriter or the selling Holder
of Registrable Securities reasonably requests to be included therein and as is
appropriate in the reasonable judgment of the Company, including, without
limitation, information with respect to the number of shares of the Registrable
Securities being sold to the Underwriters, the purchase price being paid
therefor by such Underwriters and with respect to any other terms of the
Underwritten Offering of the Registrable Securities to be sold in such offering;
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; and supplement or make
amendments to any Registration Statement if requested by the sole or lead
managing Underwriter of such Registrable Securities; and
(r) use its best efforts to take all other steps necessary to
expedite or facilitate the registration and disposition of the Registrable
Securities contemplated hereby.
4.2 Seller Information. The Company may require each selling Holder of
------------------
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding such Holder, such Holder's Registrable
Securities and such Holder's intended method of disposition as the Company may
from time to time reasonably request in writing; provided that such information
--------
shall be used only in connection with such registration. If any Registration
Statement or comparable statement under "blue sky" laws refers to any Holder by
name or otherwise as the Holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance satisfactory to such Holder and the Company, to the effect
that the effect that the holding by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment
16
<PAGE>
quality of the Company's securities covered thereby and that such holding does
not imply that such Holder will assist in meeting any future financial
requirements of the Company, and (ii) in the event that such reference to such
Holder by name or otherwise is not in the judgment of the Company, as advised by
counsel, required by the Securities Act or any similar federal statute or any
state "blue-sky" or securities law then in force, the deletion of the reference
to such Holder.
4.3 Notice to Discontinue. Each Holder of Registrable Securities agrees by
---------------------
acquisition of such Registrable Securities that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
4.1(f)(ii) through (vii), such Holder shall forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4.1(f) and, if so
directed by the Company, such Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in such
Holder's possession of the Prospectus covering such Registrable Securities which
is current at the time of receipt of such notice. If the Company shall give any
such notice, the Company shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Agreement (including,
without limitation, the period referred to in Section 4.1(b)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to Section 4.1(f) to and including the date when the Holder shall have
received the copies of the supplemented or amended prospectus contemplated by
and meeting the requirements of Section 4.1(f).
5. INDEMNIFICATION; CONTRIBUTION.
-----------------------------
5.1 Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the fullest extent permitted by law, each Holder of
Registrable Securities, its officers, directors, partners, members,
shareholders, employees, Affiliates and agents (collectively, "Agents") and each
Person who controls such Holder (within the meaning of the Securities Act) and
its Agents with respect to each registration which has been effected pursuant to
this Agreement, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof, and expenses (as incurred or suffered and including, but not
limited to, any and all expenses incurred in investigating, preparing or
defending any litigation or proceeding, whether commenced or threatened, and the
reasonable fees, disbursements and other charges of legal counsel) in respect
thereof (collectively, "Claims"), insofar as such Claims arise out of or are
based upon any untrue or alleged untrue statement of a material fact contained
in any Registration Statement or Prospectus (including any preliminary, final or
summary prospectus and any amendment or supplement thereto) related to any such
registration or any omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration, or
any qualification or compliance incident thereto; provided, however, that the
-------- -------
Company will not be liable in any such case to the extent that any such Claims
arise out of or are based upon untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact so made in
reliance upon and in
17
<PAGE>
conformity with written information furnished to the Company in an instrument
duly executed by such Holder specifically stating that it was expressly for use
therein. The Company shall also indemnify any Underwriters of the Registrable
Securities, their Agents and each Person who controls any such Underwriter
(within the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Holders of Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Person who may be entitled to
indemnification pursuant to this Section 5 and shall survive the transfer of
securities by such Holder or Underwriter.
5.2 Indemnification by Holders. Each Holder, if Registrable Securities
--------------------------
held by it are included in the securities as to which a registration is being
effected, agrees to, severally and not jointly, indemnify and hold harmless, to
the fullest extent permitted by law, the Company, its directors and officers,
each other Person who participates as an Underwriter in the offering or sale of
such securities and its Agents and each Person who controls the Company or any
such Underwriter (within the meaning of the Securities Act) and its Agents
against any and all Claims, insofar as such Claims arise out of or are based
upon any untrue or alleged untrue statement of a material fact contained in any
Registration Statement or Prospectus (including any preliminary, final or
summary prospectus and any amendment or supplement thereto) related to such
registration, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, to the extent, but only to the extent, that such untrue
statement or alleged untrue or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company in an
instrument duly executed by such Holder specifically stating that it was
expressly for use therein; provided, however, that the aggregate amount which
-------- -------
any such Holder shall be required to pay pursuant to this Section 5.2 shall in
no event be greater than the amount of the net proceeds received by such Holder
upon the sale of the Registrable Securities pursuant to the Registration
Statement giving rise to such Claims less all amounts previously paid by such
Holder with respect to any such Claims. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
indemnified party and shall survive the transfer of such securities by such
Holder or Underwriter.
5.3 Conduct of Indemnification Proceedings. Promptly after receipt by an
--------------------------------------
indemnified party of notice of any Claim or the commencement of any action or
proceeding involving a Claim under this Section 5, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party
pursuant to Section 5, (i) notify the indemnifying party in writing of the Claim
or the commencement of such proceeding; provided, that the failure of any
--------
indemnified party to provide such notice shall not relieve the indemnifying
party of its obligations under this Section 5, except to the extent the
indemnifying party is materially and actually prejudiced thereby and shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 5, and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided; however, that any indemnified
-------- -------
party shall have the right to employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (A) the indemnifying party has agreed
in writing to pay such fees and expenses, (B) the indemnifying
18
<PAGE>
party shall have failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such indemnified party within 10 days after receiving
notice form such indemnified party that the indemnified party believes it has
failed to do so, (C) in the reasonable judgment of any such indemnified party,
based upon advice of counsel, a conflict of interest may exist between such
indemnified party and the indemnifying party with respect to such claims (in
which case, if the indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such indemnifying party) or (D) such indemnified party
is a defendant in an action or proceeding which is also brought against the
indemnifying party and reasonably shall have concluded that there may be one or
more legal defenses available to such indemnified party which are not available
to the indemnifying party. No indemnifying party shall be liable for any
settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. In addition, without the
consent of the indemnified party (which consent shall not be unreasonably
withheld), no indemnifying party shall be permitted to consent to entry of any
judgment with respect to, or to effect the settlement or compromise of any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim), unless such settlement,
compromise or judgment (1) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim, (2) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party, and (3) does not provide for any
action on the part of any party other than the payment of money damages which is
to be paid in full by the indemnifying party.
5.4 Contribution. If the indemnification provided for in Section 5.1 or
------------
5.2 from the indemnifying party for any reason is unavailable to (other than by
reason of exceptions provided therein), or is insufficient to hold harmless, an
indemnified party hereunder in respect of any Claim, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such Claim in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, in connection with the actions which resulted in such Claim, as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. If, however, the foregoing allocation is not permitted by applicable
law, then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative faults but also the relative benefits of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.4 were determined by pro rata allocation
--- ----
or by any other method of
19
<PAGE>
allocation which does not take into account the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by a party as a result of any Claim referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth in
Section 5.3, any legal or other fees, costs or expenses reasonably incurred by
such party in connection with any investigation or proceeding. Notwithstanding
anything in this Section 5.4 to the contrary, no indemnifying party (other than
the Company) shall be required pursuant to this Section 5.4 to contribute any
amount in excess of the net proceeds received by such indemnifying party from
the sale of the Registrable Securities pursuant to the Registration Statement
giving rise to such Claims, less all amounts previously paid by such
indemnifying party with respect to such Claims. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
5.5 Other Indemnification. Indemnification similar to that specified in
---------------------
the preceding Sections 5.1 and 5.2 (with appropriate modifications) shall be
given by the Company and each selling Holder of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority, other than
the Securities Act. The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract.
5.6 Indemnification Payments. The indemnification and contribution
------------------------
required by this Section 5 shall be made by periodic payments of the amount
thereof during the course of any investigation or defense, as and when bills are
received or any expense, loss, damage or liability is incurred.
6. GENERAL.
-------
6.1 Adjustments Affecting Registrable Securities. The Company agrees that
--------------------------------------------
it shall not effect or permit to occur any combination or subdivision of shares
which would adversely affect the ability of the Holder of any Registrable
Securities to include such Registrable Securities in any registration
contemplated by this Agreement or the marketability of such Registrable
Securities in any such registration.
6.2 Registration Rights to Others. The Company has not previously entered
-----------------------------
into an agreement with respect to its securities granting any registration
rights to any Person. If the Company shall at any time hereafter provide to any
holder of any securities of the Company rights with respect to the registration
of such securities under the Securities Act, (i) such rights shall not be in
conflict with or adversely affect any of the rights provided in this Agreement
to the Holders and (ii) if such rights are provided on terms or conditions more
favorable to such holder than the terms and conditions provided in this
Agreement, the Company shall provide (by way of amendment to this Agreement or
otherwise) such more favorable terms or conditions to the Holders.
6.3 Availability of Information; Rule 144; Rule 144A; Other Exemptions. So
------------------------------------------------------------------
long as the Company shall not have filed a registration statement pursuant to
Section 12 of the Exchange
20
<PAGE>
Act or a registration statement pursuant to the requirements of the Securities
Act, the Company shall, at any time and from time to time, upon the request of
any Holder of Registrable Securities and upon the request of any Person
designated by such Holder as a prospective purchaser of any Registrable
Securities, furnish in writing to such Holder or such prospective purchaser, as
the case may be, a statement as of a date not earlier than 12 months prior to
the date of such request of the nature of the business of the Company and the
products and services it offers and copies of the Company's most recent balance
sheet and profit and loss and retained earnings statements, together with
similar financial statements for such part of the two preceding fiscal years as
the Company shall have been in operation, all such financial statements to be
audited to the extent audited statements are reasonable available, provided
--------
that, in any event the most recent financial statements so furnished shall
include a balance sheet as of a date less than 16 months prior to the date of
such request, statements of profit and loss and retained earnings for the 12
months preceding the date of such balance sheet, and, if such balance sheet is
not as of a date less than 6 months prior to the date of such request,
additional statements of profit and loss and retained earnings for the period
from the date of such balance sheet to a date less than 6 months prior to the
date of such request. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company
covenants that it shall timely file any reports required to be filed by it under
the Securities Act or the Exchange Act (including, but not limited to, the
reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 under the Securities Act), and that it shall take
such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (i) Rule 144 and Rule 144A under
the Securities Act, as such rules may be amended from time to time, or (ii) any
other rule or regulation now existing or hereafter adopted by the SEC. Upon the
request of any Holder of Registrable Securities, the Company shall deliver to
such Holder a written statement as to whether it has complied with such
requirements.
6.4 Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified, supplemented or terminated, and waivers or consents to
departures from the provisions hereof may not be given, without the written
consent of the Company and the Holders holding more than 50% of the Registrable
Securities then outstanding; provided, however, that no such amendment,
-------- -------
modification, supplement, waiver or consent to departure shall reduce the
aforesaid percentage of Registrable Securities without the written consent of
all of the Holders of Registrable Securities; and provide further, that nothing
------- -------
herein shall prohibit any amendment, modification, supplement, termination,
waiver or consent to departure the effect of which is limited only to those
Holders who have agreed to such amendment, modification, supplement,
termination, waiver or consent to departure.
6.5 Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, telecopier, and
courier guaranteeing overnight delivery or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to the applicable
party at the address set forth below or such other address as
21
<PAGE>
may hereafter be designated in writing by such party to the other parties in
accordance with the provisions of this Section:
(i) If to the Company, to:
Wellington Properties Trust
18650 West Corporate Drive
Suite 300
P.O. Box 0919
Brookfield, Wisconsin 53045
Attn: Arnold K. Leas
Telecopier: (414) 792-8930
With a copy to:
Wellington Properties Trust
18650 West Corporate Drive
Suite 300
P.O. Box 0919
Brookfield, Wisconsin 53045
Attn: Robert F. Rice
Telecopier: (414) 792-8930
(ii) If to the Initial Holder, to:
Credit Suisse First Boston Mortgage Capital LLC
Principal Transactions Group
11 Madison Avenue
New York, New York 10010
Attention: Edmund Taylor
Re: Wellington/Lake Pointe/Stephen Jones
Telecopier: (212) 325-8162
With a copy to:
Credit Suisse First Boston Mortgage Capital LLC
Legal & Compliance Department
11 Madison Avenue
New York, New York 10010
Attention: Colleen Graham, Esq.
Re: Wellington/Lake Pointe/Stephen Jones
Telecopier: (212) 325-8220
22
<PAGE>
With a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attn: Bruce Cybul, Esq.
Telecopy: (212) 593-5955
Telephone: (212)756-2000
(iii) If to any subsequent Holder, to the address
of such Person set forth in the records of
the Company.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when receipt is
acknowledged, if telecopied; on the next business day, if timely delivered to a
courier guaranteeing overnight delivery; and five days after being deposited in
the mail, if sent first class or certified mail, return receipt requested,
postage prepaid.
6.6 Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the parties hereto and their respective heirs, successors
and permitted assigns (including any permitted transferee of Registrable
Securities. Any Holder may assign to any permitted transferee of its Registrable
Securities (other than a transferee that acquires such Registrable Securities in
a registered public offering or pursuant to a sale under Rule 144 of the
Securities Act (or any successor rule)), its rights and obligations under this
Agreement; provided, however, if any permitted transferee shall take and hold
-------- -------
Registrable Securities, such transferee shall promptly notify the Company and by
taking and holding such Registrable Securities such permitted transferee shall
automatically be entitled to receive the benefits of and be conclusively deemed
to have agreed to be bound by and to perform all of the terms and provisions of
this Agreement as if it were a party hereto (and shall, for all purposes, be
deemed a Holder under this Agreement). If the Company shall so request, any
heir, successor or permitted assign (including any permitted transferee) shall
agree in writing to acquire and hold the Registrable Securities subject to all
of the terms hereof. For purposes of this Agreement, "successor" for any entity
other than a natural person shall mean a successor to such entity as a result of
such entity's merger, consolidation, sale of substantially all of its assets, or
similar transaction. Except as provided above or otherwise permitted by this
Agreement, neither this Agreement nor any right, remedy, obligation or liability
arising hereunder or by reason hereof shall be assignable by any Holder or by
the Company without the consent of the other parties hereto.
6.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original, but all of which counterparts, taken together, shall constitute
one and the same instrument.
6.8 Descriptive Headings, Etc. The headings in this Agreement are for
-------------------------
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires: (1) words of any gender shall be
23
<PAGE>
deemed to include each other gender; (2) words using the singular or plural
number shall also include the plural or singular number, respectively; (3) the
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section and paragraph references are
to be Sections and paragraphs of this Agreement unless otherwise specified; (4)
the word "including" and words of similar import when used in this Agreement
shall mean "including, without limitation," unless otherwise specified; (5) "or"
is not exclusive; and (6) provisions apply to successive events and
transactions.
6.9 Severability. In the event that any one or more of the provisions,
------------
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
6.10 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of New York (without giving effect to the
conflict of laws principles thereof).
6.11 Remedies; Specific Performance. The parties hereto acknowledge that
------------------------------
money damages would not be an adequate remedy at law if any party fails to
perform in any material respect any of its obligations hereunder, and
accordingly agree that each party, in addition to any other remedy to which it
may be entitled at law or in equity, shall be entitled to seek to compel
specific performance of the obligations of any other party under this Agreement,
without the posting of any bond, in accordance with the terms and conditions of
this Agreement in any court of the United States or any State thereof having
jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Agreement, none of the parties hereto shall raise the
defense that there is an adequate remedy at law. Except as otherwise provided by
law, a delay or omission by a party hereto in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or constitute
a waiver of or acquiescence in any such breach. No remedy shall be exclusive of
any other remedy. All available remedies shall be cumulative.
6.12 Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or understandings relating to such
subject matter, other than those set forth or referred to herein. This Agreement
supersedes all prior agreements and understandings between the Company and the
other parties to this Agreement with respect to such subject matter.
6.13 Nominees for Beneficial Owners. In the event that any Registrable
------------------------------
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its
24
<PAGE>
election in writing delivered to the Company, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
6.14 Consent to Jurisdiction; Waiver of Jury. Each party to this Agreement
---------------------------------------
hereby irrevocably and unconditionally agrees that any legal action, suit or
proceeding arising out of or relating to this Agreement or any agreements or
transactions contemplated hereby may be brought in any federal court of the
Southern District of New York or any state court located in New York County,
State of New York, and hereby irrevocably and unconditionally expressly submits
to the personal jurisdiction and venue of such courts for the purposes thereof
and hereby irrevocably and unconditionally waives any claim (by way of motion,
as a defense or otherwise) of improper venue, that it is not subject personally
to the jurisdiction of such court, that such courts are an inconvenient forum or
that this Agreement or the subject matter may not be enforced in or by such
court. The Company irrevocably submits to the exclusive jurisdiction of the
aforementioned courts in such action, suit or proceeding. The Company hereby
irrevocably and unconditionally consents to the service of process of any of the
aforementioned courts in any such action, suit or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the address
set forth or provided for in Section 6.5 of this Agreement, such service to
become effective 10 days after such mailing. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any manner permitted
by law or commence legal proceedings or otherwise proceed against any other
party in any other jurisdiction to enforce judgments obtained in any action,
suit or proceeding brought pursuant to this Section. THE COMPANY HEREBY
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING, WHETHER AT
LAW OR EQUITY, BROUGHT IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
6.15 Further Assurances. Each party hereto shall do and perform or cause
------------------
to be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated herein.
6.16 No Inconsistent Agreements. The Company will not hereafter enter into
--------------------------
any agreement which is inconsistent with the rights granted to the Holders in
this Agreement.
6.17 Construction. The Company and the Initial Holder acknowledge that
------------
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the Company and the
Holders.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
COMPANY: INITIAL HOLDER:
WELLINGTON PROPERTIES TRUST CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
By: /s/ Arnold K. Leas By: /s/ [SIGNATURE ILLEGIBLE]^^
----------------------------- -----------------------------
Title: President Title: Authorized Signature
<PAGE>
EXHIBIT 10.8
MULTIFAMILY NOTE
US $12,900,700.00 Brookfield, Wisconsin
City
As of May 6, 1997
FOR VALUE RECEIVED, the undersigned promise to pay AMERICAN PROPERTY
FINANCING, INC., a Delaware corporation, or order, the principal sum of Twelve
Million Nine Hundred Thousand Seven Hundred and 00/100 ($12,900,700.00)
Dollars, with interest on the unpaid principal balance from the date of this
Note, until paid, at the rate of 8.095% percent per annum. The principal and
interest shall be payable at 6 East 43rd Street, New York, New York 10017, or
such other place as the holder hereof may designate in writing, in consecutive
monthly installments of Ninety-Five Thousand Five Hundred Sixteen and 52/100
Dollars (US $95,516.52) on the first day of each month beginning July 1, 1997,
(herein "amortization commencement date"), until the entire indebtedness
evidenced hereby is fully paid, except that any remaining indebtedness, if not
sooner paid, shall be due and payable on June 1, 2004.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
If any installment under this Note is not received by the holder hereof
within ten (10) calendar days after the installment is due, the undersigned
shall pay to the holder hereof a late charge of five (5%) percent of such
installment, such late charge to be immediately due and payable without demand
by the holder hereof. If any installment under this Note remains past due for
thirty (30) calendar days or more, the outstanding principal balance of this
Note shall bear interest during the period in which the undersigned is in
default at a rate of 12.095% percent per annum, or, if such increased rate of
interest may not be collected from the undersigned under applicable law, then at
the maximum increased rate of interest, if any, which may be collected from the
undersigned under applicable law.
See Addendum to Multifamily Note annexed hereto.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
____________
*Strike through bracketed clause (3) if not completed.
WISCONSIN--Multifamily--1/77--FNMA/FHLMC Uniform Instrument Form 4150
<PAGE>
The attached Addendum to Multifamily Note dated the date of this Note is
incorporated into and is deemed to amend and supplement this Multifamily Note.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of May 6, 1997, and reference is made thereto for rights as to
acceleration of the indebtedness evidenced by this Note. This Note shall be
governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.
______________
** STRIKE THROUGH THIS PARAGRAPH IF NOT APPLICABLE.
______________________ MAPLE GROVE APARTMENT HOMES, INC., a
Wisconsin corporation
By: /s/ Arnold K. Leas
---------------------------------
Name: Arnold K. Leas
Title: President
PAY TO THE ORDER OF ______________________________________
WITHOUT RECOURSE.
AMERICAN PROPERTY FINANCING, INC., a
Delaware corporation
By: /s/ Arthur A. Habighorst
---------------------------------
Name: Arthur A. Habighorst
Title: President
WISCONSIN -- Multifamily -- 1/77 -- FNMA/FHLMC Uniform Instrument
<PAGE>
ADDENDUM TO MULTIFAMILY NOTE
THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made as of the 6th
day of May, 1997, and is incorporated into and shall be deemed to amend and
supplement the Multifamily Note (the "Multifamily Note") made by the undersigned
(the "Borrower") to AMERICAN PROPERTY FINANCING, INC. and its successors,
assigns and transferees (the "Lender"), dated the same date as this Addendum
(the Multifamily Note as amended and supplemented by this Addendum, any other
addendum to the Multifamily Note, and any future amendments to the Multifamily
Note is referred to as the "Note"). The debt evidenced by the Note is secured by
a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of the same date
(the "Multifamily Instrument"), covering the property described in the
Multifamily Instrument and defined therein as the "Property," located at:
Maple Grove Apartments, 3013-3143 Maple Valley Drive, Madison, Wisconsin
- --------------------------------------------------------------------------------
[Property Address]
This Property is located entirely within the State of Wisconsin [Insert name of
state in which the property is located] (the "Property Jurisdiction"). The
Multifamily Instrument is amended and supplemented by the Rider to Multifamily
Instrument (the "Rider") and any other rider to Multifamily Instrument given by
Borrower to Lender and dated the same date as the Multifamily Instrument. (The
Multifamily Instrument as amended and supplemented by the Rider and any other
rider to the Multifamily Instrument and any future amendments to the Instrument
is referred to as the "Instrument".)
The term "Loan Documents" when used in this Addendum shall mean, collectively,
the following documents: (i) the Instrument, (ii) the Note, and (iii) all other
documents or agreements, including any Collateral Agreements (as defined in the
Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or
made in connection with, the loan evidenced by the Note, as such Loan Documents
may be amended.
The covenants and agreements of this Addendum, and the covenants and agreements
of any other addendum to the Multifamily Note, shall be incorporated into and
shall amend and supplement the covenants and agreements of the Multifamily Note
as if this Addendum and the other addenda were a part of the Multifamily Note,
and all references to the Note in the Loan Documents shall mean the Note as so
amended and supplemented. Any conflict between the provisions of the Multifamily
Note and this Addendum shall be resolved in favor of this Addendum.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made in
the Multifamily Note Borrower and Lender further covenant and agree as follows:
A. PREPAYMENTS
1. YIELD MAINTENANCE PERIOD
During the first 6.5 [insert applicable number of years] years of the Note
term beginning with the date of the Note (the "Yield Maintenance Period") and
upon giving Lender 60 days prior written notice, Borrower may prepay the entire
unpaid principal balance of the Note on the last Business Day before a scheduled
monthly payment date by paying, in addition to the entire unpaid principal
balance, accrued interest and any other sums due Lender at the time of
prepayment, a prepayment premium equal to the greater of;
(a) 1% of the entire unpaid principal balance of the Note, or
(b) The product obtained by multiplying (1) the entire unpaid principal
balance of the Note at the time of prepayment, times (2) the difference
obtained by subtracting from the interest rate on the Note the yield
rate (the "Yield Rate") on the 7.25% U.S. Treasury Security due May,
2002 (the "Specified U.S. Treasury Security"), as the Yield Rate is
reported in the Wall Street Journal on the fifth Business Day preceding
(x) the date notice of prepayment is given to Lender where prepayment
is voluntary, or (y) the date Lender accelerated the loan, times (3)
the present value factor calculated using the following formula:
1 - (1 + r)/-n/
-----------
r
[r = Yield Rate
n = the number of years, and any fraction thereof, remaining
between the prepayment date and the expiration of the Yield
Maintenance Period]
In the event that no Yield Rate is published for the Specified U.S.
Treasury Security, then the nearest equivalent U.S. Treasury Security shall be
selected at Lender's sole discretion. If the publication of such Yield Rates in
the Wall Street Journal is discontinued, Lender shall determine such Yield Rates
from another source selected by Lender.
Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.
2. AFTER YIELD MAINTENANCE PERIOD
After the expiration of the Yield Maintenance Period and upon giving Lender
60 days prior written notice, Borrower may prepay the entire unpaid principal
balance of the Note on the last Business Day before a scheduled monthly payment
date by paying, in addition to the entire unpaid principal balance, accrued
interest and any other sums due Lender at the time of prepayment, a prepayment
premium equal to 1% of the entire unpaid principal balance of the Note. No
prepayment premium shall be due for any full prepayment made by Borrower in
accordance with the provisions of the preceding sentence within 90 days of the
maturity date of the Note.
Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.
3. PARTIAL PREPAYMENTS
Borrower shall have no right to make a partial prepayment of the
outstanding indebtedness during the Note term. However, in the event that Lender
shall require a partial prepayment of the outstanding indebtedness after a
default under the Note, the Instrument or any of the other Loan Documents, by
applying funds held by Lender pursuant to any Collateral Agreement (as defined
in Uniform Covenant 2B of the Instrument) against the indebtedness secured by
the Instrument, or, if Lender shall for any other reason accept a partial
prepayment by Borrower of the outstanding indebtedness, except as otherwise
provided in paragraph A.4 of this Addendum, a prepayment premium shall be due
and payable to Lender as follows:
ADDENDUM TO MULTIFAMILY NOTE--FANNIE MAE UNIFORM INSTRUMENT Form 4157 5/93
Page 1 of 4
<PAGE>
(a) After Yield Maintenance Period. If Lender shall require or accept a
partial prepayment after the expiration of the Yield Maintenance
Period, the partial prepayment shall be made on the last Business Day
before a scheduled monthly payment date and a prepayment premium equal
to 1% of the partial principal prepayment amount shall be due and
payable to Lender. No prepayment premium shall be due for any partial
prepayment made by Borrower in accordance with the provisions of the
preceding sentence within 90 days of the maturity date of the Note.
(b) During Yield Maintenance Period. If Lender shall require or accept a
partial prepayment during the Yield Maintenance Period, the partial
prepayment shall be made on the last Business Day before a scheduled
monthly payment date and a prepayment premium shall be due and payable
to Lender equal to the greater of:
(i) 1% of the amount of principal being prepaid, or
(ii) the product obtained by multiplying (A) the amount of the
principal which is being prepaid, times (B) the difference
obtained by subtracting from the interest rate on the Note the
yield rate (the "Partial Prepayment Yield Rate") on the
Specified U.S. Treasury Security, as the Partial Prepayment
Yield Rate is reported in the Wall Street Journal on the fifth
Business Day preceding (1) the day Lender accelerates the loan
(in connection with any partial prepayment made in connection
with an acceleration of the loan), or (2) the day Lender applies
funds held under any Collateral Agreement (other than in
connection with an acceleration of the loan), times (C) the
present value factor calculated using the following formula:
1-(1+y)-n
----------
y
[y = Partial Prepayment Yield Rate
n = the number of years, and any fraction thereof, remaining
between the prepayment date and the expiration of the Yield
Maintenance Period]
When the total amount to be applied toward the unpaid principal balance of
the loan and the prepayment premium is known, but the amounts to be allocated
toward the unpaid principal balance of the loan and the prepayment premium,
respectively, are unknown, the Lender shall determine the allocation between the
prepaid principal amount and the prepayment premium as follows:
Given: a = total amount to be applied
b = prepaid principal amount
c = prepayment premium
N = note rate
F = present value factor = 1-(1+y)-n
---------
y
["y" and "n" have the same meanings as set forth in
subparagraph (ii) above]
Then: a = b + c
b = a
--------
F(N-y)+1
c = a-b
Except as provided in the next sentence, any partial prepayment of the
outstanding indebtedness shall not extend the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender shall
otherwise agree in writing. Upon any partial prepayment, Lender shall have the
option, in its sole and absolute discretion, to recast the monthly installments
due under the Note so that the maturity date of the Note shall remain the same.
4. PREMIUM DUE WHETHER VOLUNTARY OR INVOLUNTARY PREPAYMENT; INSURANCE AND
CONDEMNATION PROCEEDS
Borrower shall pay the prepayment premium due under this paragraph A
whether the prepayment is voluntary or involuntary (in connection with
Lender's acceleration of the unpaid principal balance of the Note) or the
Instrument is satisfied or released by foreclosure (whether by power of sale or
judicial proceeding), deed in lieu of foreclosure or by any other means.
Notwithstanding any other provision herein to the contrary, Borrower shall not
be required to pay any prepayment premium in connection with any prepayment
occurring as a result of the application of insurance proceeds or condemnation
awards under the Instrument.
5. NOTICE; BUSINESS DAY
Any notice to Lender provided for in this Addendum shall be given in the
manner provided in the Instrument. The term "Business Day" means any day other
than a Saturday, a Sunday, or any other day on which Lender is not open for
business.
B. BORROWER'S EXCULPATION
Subject to the provisions of paragraph C and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if the Borrower is a partnership), and any "Key
Principal" (collectively, the individual(s) whose name(s) is (are) set forth at
the foot of this Addendum) to pay the principal of and interest on the debt
evidenced by the Note and any other agreement evidencing Borrower's obligations
under the Note and the Instrument shall be limited to (1) the real and personal
property described as the "Property" in the Instrument, (2) the personal
property described in or pledged under any Collateral Agreement (as defined in
Uniform Covenant 2B of the Instrument) executed in connection with the loan
evidenced by the Note, (3) the rents, profits, issues, products and income of
the Property received or collected by or on behalf of Borrower (the "Rents and
Profits") to the extent such receipts are necessary first, to pay the reasonable
expenses of operating, managing, maintaining and repairing the Property,
including but not limited to real estate taxes, utilities, assessments,
insurance premiums, repairs, replacements and ground rents, if any (the "
Operating Expenses") then due and payable as of the time of receipt of such
Rents and Profits, and then, to pay the principal and interest due under the
Note and any other sums due under the Instrument or any other Loan Document
(including but not limited to deposits or reserves due under any Collateral
Agreement), except to the extent that Borrower did not have the legal right,
because of a bankruptcy, receivership or similar judicial proceeding to direct
the disbursement of such sums.
Form 4157 5/93 Page 2 of 4
<PAGE>
Except as provided in paragraph C, Lender shall not seek (a) any judgment
for a deficiency against Borrower, any general partner of Borrower (if Borrower
is a partnership) or any Key Principal, or Borrower's or any general partner's
or Key Principal's heirs, legal representatives, successors or assigns, in any
action to enforce any right or remedy under the Instrument, or (b) any judgment
on the Note except as may be necessary in any action brought under the
Instrument to enforce the lien against the Property or to exercise any remedies
under any Collateral Agreement.
C. EXCEPTIONS TO NON-RECOURSE LIABILITY
If, without obtaining the Lender's prior written consent, (i) a Transfer
shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives
Lender the right, at its option, to declare all sums secured by the Instrument
immediately due and payable, (ii) Borrower shall encumber the Property with the
lien of any subordinate instrument in connection with any financing by Borrower,
or, (iii) Borrower shall violate the single asset covenant of paragraph J of the
Rider, any of such events shall constitute a default by Borrower under the Note,
the Instrument and the other Loan Documents, and if such event shall continue
for 30 days, paragraph B shall not apply from and after the date which is 30
days after such event and the Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint or
several basis if more than one) shall be personally liable on a joint and
several basis for full recourse liability under the Note and the other Loan
Documents.
Notwithstanding paragraph B, Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint and
several basis if more than one) shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including but not
limited to attorneys fees) resulting from (A) fraud or intentional
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants or other sums or payments received by or on behalf of the
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceeding, to direct disbursement of such sums or payments, (C) all
Rents and Profits, (except to the extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and any other sums due under the Instrument and all other Loan
Document (including but not limited to deposits or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due Lender under paragraph 19(c) of the Instrument, or (E) Borrower's failure
following a default under any of the Loan Documents to deliver to Lender on
demand all Rents and Profits, security deposits (except to the extent that
Borrower did not have the legal right because of a bankruptcy, receivership or
similar judicial proceeding to direct the disbursement of such sums), books and
records relating to the Property.
No provision of paragraphs B or C shall (i) affect any guaranty or similar
agreement executed in connection with the debt evidenced by the Note, (ii)
release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument, or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
D. BUSINESS, COMMERCIAL OR INVESTMENT PURPOSE
Borrower represents that the Loan evidenced by the Note is being made
solely for business, commercial or investment purposes.
E. GOVERNING LAW
1. CHOICE OF LAW
The validity of the Note, and the other Loan Documents, each of their terms
and provisions, and the rights and obligations of Borrower under the Note, and
the other Loan Documents shall be governed by, interpreted, construed, and
enforced pursuant to and in accordance with the laws of the Property
Jurisdiction.
2. CONSENT TO JURISDICTION
Borrower irrevocably consents to the exclusive jurisdiction of any and all
state federal courts with jurisdiction in the Property Jurisdiction over
Borrower and Borrower's assets. Borrower agrees that such assets shall be used
to first satisfy all claims of creditors organized or domiciled in the United
States of America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to the
Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which may arise under or in relation to the
Note, including without limitation those controversies relating to the
execution, interpretation, breach, enforcement, or compliance with the Note, the
Instrument, or any other issue arising under, related to, or in connection with
any of the Loan Documents. Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for any litigation arising from the Note,
the Instrument or any of the other Loan Documents, and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence, or
otherwise.
F. SUCCESSORS AND ASSIGNS
The provisions of the Note, the Instrument, and all other Loan Documents
shall be binding on the successors and assigns, including, but not limited to,
any receiver, trustee, representative or other person appointed under foreign or
domestic bankruptcy, receivership, or similar proceedings of Borrower and any
person having an interest in Borrower.
G. NO THIRD PARTY BENEFICIARY
Borrower acknowledges and agrees that (i) any loss sharing arrangement or
arrangement for interim advancement of funds that originally is made by the
Lender named in the Note to Federal National Mortgage Association is made
pursuant to a contractual obligation of such Lender to Federal National Mortgage
Association that is independent of, and separate and distinct from, the
obligation of Borrower for the full and prompt payment of the indebtedness
evidenced by the Note, (ii)
Form 4157 5/93 Page 3 of 4
<PAGE>
Borrower shall not be deemed to be a third party beneficiary of such loss
sharing arrangement or arrangement for interim advancement of funds, and (iii)
no such loss sharing interim advancement arrangement shall constitute any person
or entity making such payment as a guarantor or surety of the Borrower's
obligations, notwithstanding the fact that the obligations under any such loss
sharing or interim advancement arrangement may be calculated with reference to
amounts payable under the Note or other Loan Documents.
BY SIGNING BELOW, Borrower accepts and agrees to the covenants and
agreements contained in this Addendum.
MAPLE GROVE APARTMENT HOMES, INC.,
------------------------------------------
a Wisconsin corporation
------------------------------------------
By: /s/ Arnold K. Leas
---------------------------------(Seal)
Name: Arnold K. Leas
----------------------------------
Title: President
---------------------------------
ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO PERSONAL LIABILITY FOR
THE EXCEPTIONS TO NON-RECOURSE
Key Principal (each for himself if more than one) hereby represents to
Lender that he has a direct or indirect ownership interest in the Borrower and
that he participates in the management of Borrower.
BY SIGNING BELOW, the undersigned Key Principal (each for himself if more
that one) understands, accepts and agrees to the provisions of paragraph C
above. No transfer of Key Principal's ownership interest in Borrower or in any
other entity which directly or indirectly has an ownership interest in Borrower
shall release Key Principal from liability hereunder, unless the Borrower and
Key Principal shall have complied with the provisions of Uniform Covenant 19 of
the Instrument and Lender shall have approved the transfer and the substituted
Key Principal. Key Principal shall have no right of subrogation against the
Borrower or any general partner of Borrower by reason of any payment by Key
Principal pursuant to paragraph C.
Key Principal:
By: /s/ Arnold K. Leas
--------------------------------------(Seal)
Name: Arnold K. Leas
-----------------------------------------
Address: 18650 West Corporate Drive, Ste. 300
---------------------------------------
Brookfield, Wisconsin 53045
----------------------------------------------
----------------------------------------(Seal)
Name: ----------------------------------------
Address: -------------------------------------
----------------------------------------------
----------------------------------------(Seal)
Name: ----------------------------------------
Address: -------------------------------------
----------------------------------------------
<PAGE>
EXHIBIT 10.9
WHEN RECORDED MAIL TO:
Cassin Cassin & Joseph LLP
300 East 42nd Street
New York, New York 10017
Attn: Carol M. Joseph, Esq.
County: Dane
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
MULTIFAMILY MORTGAGE,
ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
THIS MORTGAGE (herein "Instrument") is made as of the 6th day of May 1997,
between the Mortgagor/Grantor, MAPLE GROVE APARTMENT HOMES, INC., a Wisconsin
corporation whose address is c/o The Wellington Companies, 18650 West Corporate
Drive, Ste. 300, Brookfield, Wisconsin 53045 (herein "Borrower"), and the
Mortgagee, AMERICAN PROPERTY FINANCING, INC., a corporation organized and
existing under the laws of Delaware, whose address is 6 East 43rd Street, New
York, New York 10017 (herein "Lender").
Whereas, Borrower is indebted to Lender in the principal sum of Twelve
Million Nine Hundred Thousand Seven Hundred and 00/100 ($12,900,700.00) Dollars,
which indebtedness is evidenced by Borrower's note dated as of May 6, 1997
(herein "Note"), providing for monthly installments of principal and interest,
with the balance of the indebtedness, if not sooner paid, due and payable on
June 1, 2004;
To Secure to Lender (a) the repayment of the indebtedness evidenced by the
Note, with interest thereon, and all renewals, extensions and modifications
thereof; (b) the repayment of any future advances, with interest thereon, made
by Lender to Borrower pursuant to paragraph 30 hereof (herein "Future
Advances"); (d) the payment of all other sums, with interest thereon, advanced
in accordance herewith to protect the security of this Instrument; and (e) the
performance of the covenants and agreements of Borrower herein contained,
Borrower does hereby mortgage, grant, convey and assign to Lender, with power of
sale, [*] the following described property located in Dane County, City of
Wisconsin and State of Wisconsin:
* DELETE BRACKETED MATERIAL IF NOT COMPLETED.
See Schedule "A" attached hereto and made a part hereof.
See Rider to Multifamily Instrument attached hereto and made a part hereof.
See Second Rider to Multifamily Instrument attached hereto and made a part
hereof.
Premises known as: Maple Grove Apartments, 3013-3143 Maple Valley Drive,
Madison, Wisconsin
WISCONSIN--Multifamily--7/78--FNMA/FHLMC Uniform Instrument FORM 4050
(PAGE 1 OF 8 PAGES)
<PAGE>
Together with all buildings, improvements, and tenements now or hereafter
erected on the property and all heretofore or hereafter vacated alleys and
streets abutting the property, and all easements, rights, appurtenances rents,
royalties, mineral, oil and gas rights and profits, water, water rights, and
water stock appurtenant to the property, and all fixtures, machinery, equipment,
engines, boilers, incinerators, building materials, appliances and goods of
every nature whatsoever now or hereafter located in, or on, or used, or intended
to be used in connection with the property, including, but not limited to, those
for the purposes of supplying or distributing heating, cooling, electricity,
gas, water, air and light; and all elevators, and related machinery and
equipment, fire prevention and extinguishing apparatus, security and access
control apparatus, plumbing, bath tubs, water heaters, water closets, sinks,
ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings,
storm windows, storm doors, screens, blinds, shades, curtains and curtain rods,
mirrors, cabinets, panelling, rugs, attached floor coverings, furniture,
pictures, antennas, trees and plants and *any and all other personal property on
the Property site, and together with the following items: utility deposits,
unearned premiums, accrued, accruing or to accrue under insurance policies now
or hereinafter obtained by the Borrower and all proceeds of any conversion of
the "Property" (as hereinafter defined), or any part thereof including, without
limitation, proceeds of hazard and title insurance and all awards and
compensation for the taking of eminent domain, condemnation or otherwise, of all
or in part of the Property and any easements therein, contract rights and
general intangibles, and all leases affecting the use of the Property, now or
hereinafter entered into and all right, title and interest in all monies
deposited with the Lender or its assignees. all of which, including replacements
and additions thereto, shall be deemed to be and remain a part of the real
property covered by this Instrument; and all of the foregoing, together with
said property (or the leasehold estate in the event this Instrument is on a
leasehold) are herein referred to as the "Property".
Borrower covenants that Borrower is lawfully seized of the estate hereby
conveyed and has the right to mortgage, grant, convey and assign the Property
(and, if this Instrument is on a leasehold, that the ground lease is in full
force and effect without modification except as noted above and without default
on the part of either lessor or lessee thereunder), that the Property is
unencumbered, and that Borrower will warrant and defend generally the title to
the Property against all claims and demands, subject to any easements and
restrictions listed in a schedule of exceptions to coverage in any title
insurance policy insuring Lender's interest in the Property.
FORM 4050 (PAGE 2 OF 8 PAGES)
<PAGE>
SCHEDULE "A"
LEGAL DESCRIPTION:
Units One (1), Two (2), Three (3), Four (4), Five (5), Six (6), Seven (7),
Eight (8), Nine (9), Ten (10), Eleven (11), Twelve (12), Thirteen (13), and
Fourteen (14). Maple Grove Apartment Homes, A Condominium, in the City of
Madison, Dane County, Wisconsin.
LEGAL DESCRIPTION OF CONDOMINIUM PLAT:
Lot 140, Maple Grove First Addition, recorded in Volume 56-68B of Plats on
--------------------------
Pages 201-202, Dane County Registry, and Lot 154, Maple Grove Second Addition,
---------------------------
recorded in Volume 56-100A of Plats on Page 291, Dane County Registry, located
in the SE 1/4 of the SW 1/4 of Section 1, T6N, R8E, City of Madison, Dane
County, Wisconsin, To-wit: Commencing at the South 1/4 corner of said Section 1;
thence N00 degrees 30'36"E, 60.01 feet to the point of beginning; thence S89
degrees 27'19"W, 469.82 feet: thence N00 degrees 32'41"W, 188.66 feet; thence
N89 degrees 26'47"W, 230.22 feet to the start of a curve; thence northwesterly
on a curve to the left which has a radius of 183.00 feet and a chord which bears
N30 degrees 23'03"W, 182.11 feet; thence N60 degrees 13'25"W, 100.00 feet to a
point of curve; thence northwesterly on a curve to the right which has a radius
of 117.00 feet and a chord which bears N29 degrees 50'06"W, 118.37 feet; thence
N00 degrees 33'13"E, 245.86 feet; thence S89 degrees 26'47"E, 186.93 feet;
thence N80 degrees 26'25"E, 110.04 feet; thence N67 degrees 18'45"E, 102.57
feet; thence N54 degrees 38'53"E, 102.57 feet; thence N43 degrees 53'58"E. 71.62
feet; thence N39 degrees 28'58"E, 139.54 feet; thence N44 degrees 52'12"W, 17.15
feet; thence N46 degrees 29'30"W, 108.20 feet; thence N39 degrees 28'58"E, 30.07
feet; thence S46 degrees 29'30"E, 110.31 feet to a point of curve; thence
southeasterly on a curve to the right which has a radius of 333.00 feet and a
chord which bears S22 degrees 59'27"E, 265.58 feet; thence S00 degrees 30'36"W,
358,90 feet; thence S89 degrees 29'24"E, 220.00 feet; thence S00 degrees
30'36"W, 444.99 feet to the point of beginning. Contains 576,082 square feet
(13.23 acres).
<PAGE>
UNIFORM COVENANTS BORROWER AND LENDER COVENANT AND AGREE AS FOLLOWS:
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay when due the
principal of and interest on the indebtedness evidenced by the Note, any
prepayment and late charges provided in the Note and all other sums secured by
this Instrument.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Subject to applicable law or to
a written waiver by Lender, Borrower shall pay to Lender on the day monthly
installments of principal or interest are payable under the Note (or on another
day designated in writing by Lender), until the Note is paid in full, a sum
(herein "Funds") equal to one-twelfth of (a) the yearly water and sewer rates
and taxes and assessments which may be levied on the Property, (b) the yearly
ground rents, if any, (c) the yearly premium installments for fire and other
hazard insurance, rent loss insurance and such other insurance covering the
Property as Lender may require pursuant to paragraph 5 hereof, (d) the yearly
premium installments for mortgage insurance, if any, and (e) if this Instrument
is on a leasehold, the yearly fixed rents, if any, under the ground lease, all
as reasonably estimated initially and from time to time by Lender on the basis
of assessments and bills and reasonable estimates thereof. Any waiver by Lender
of a requirement that Borrower pay such Funds may be revoked by Lender, in
Lender's sole discretion, at any time upon notice in writing to Borrower. Lender
may require Borrower to pay to Lender, in advance, such other Funds for other
taxes, charges, premiums, assessments and impositions in connection with
Borrower or the Property which Lender shall reasonably deem necessary to protect
Lender's interests (herein "Other Impositions"). Unless otherwise provided by
applicable law, Lender may require Funds for Other Impositions to be paid by
Borrower in a lump sum or in periodic installments, at Lender's option.
The Funds shall be held in an institution(s) the deposits or accounts of
which are insured or guaranteed by a Federal or state agency (including Lender
if Lender is such an institution). Lender shall apply the Funds to pay said
rates, rents, taxes, assessments, insurance premiums and Other Impositions so
long as Borrower is not in breach of any covenant or agreement of Borrower in
this Instrument. Lender shall make no charge for so holding and applying the
Funds, analyzing said account or for verifying and compiling said assessments
and bills, unless Lender pays Borrower interest, earnings or profits on the
Funds and applicable law permits Lender to make such a charge. Borrower and
Lender may agree in writing at the time of execution of this Instrument that
interest on the Funds shall be paid to Borrower, and unless such agreement is
made or applicable law requires interest, earnings or profits to be paid, Lender
shall not be required to pay Borrower any interest, earnings or profits on the
Funds. Lender shall give to Borrower, without charge, an annual accounting of
the Funds in Lender's normal format showing credits and debits to the Funds and
the purpose for which each debit to the Funds was made. The Funds are pledged as
additional security for the sums secured by this Instrument.
If the amount of the Funds held by Lender at the time of the annual
accounting thereof shall exceed the amount deemed necessary by Lender to provide
for the payment of water and sewer rates, taxes, assessments, insurance
premiums, rents and Other Impositions, as they fall due, such excess shall be
credited to Borrower on the next monthly installment or installments of Funds
due. If at any time the amount of the Funds held by Lender shall be less than
the amount deemed necessary by Lender to pay water and sewer rates, taxes,
assessments, insurance premiums, rents and Other Impositions, as they fall due,
Borrower shall pay to Lender any amount necessary to make up the deficiency
within thirty days after notice from Lender to Borrower requesting payment
thereof.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Instrument, Lender may apply, in any amount and in any order as Lender shall
determine in Lender's sole discretion, any Funds held by Lender at the time of
application (i) to pay rates, rents, taxes, assessments, insurance premiums and
Other Impositions which are now or will hereafter become due, or (ii) as a
credit against sums secured by this Instrument. Upon payment in full of all sums
secured by this Instrument, Lender shall promptly refund to Borrower any Funds
held by Lender.
3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, all
payments received by Lender from Borrower under the Note or this Instrument
shall be applied by Lender in the following order of priority: (i) amounts
payable to Lender by Borrower under paragraph 2 hereof; (ii) interest payable on
the Note; (iii) principal of the Note; (iv) interest payable on advances made
pursuant to paragraph 8 hereof; (v) principal of advances made pursuant to
paragraph 8 hereof; (vi) interest payable on any Future Advance, provided that
if more than one Future Advance is outstanding, Lender may apply payments
received among the amounts of interest payable on the Future Advances in such
order as Lender, in Lender's sole discretion, may determine; (vii) principal of
any Future Advance, provided that if more than one Future Advance is
outstanding, Lender may apply payments received among the principal balances of
the Future Advances in such order as Lender, in Lender's sole discretion, may
determine; and (viii) any other sums secured by this Instrument in such order as
Lender, at Lender's option, may determine; provided, however, that Lender may,
at Lender's option, apply any sums payable pursuant to paragraph 8 hereof prior
to interest on and principal of the Note, but such application shall not
otherwise affect the order of priority of application specified in this
paragraph 3.
4. CHARGES; LIENS. Borrower shall pay all water and sewer rates, rents, taxes,
assessments, premiums, and Other Impositions attributable to the Property at
Lender's option in the manner provided under paragraph 2 hereof or, if not paid
in such manner, by Borrower making payment, when due, directly to the payee
thereof, or in such other manner as Lender may designate in writing. Borrower
shall promptly furnish to Lender all notices of amounts due under this paragraph
4, and in the event Borrower shall make payment directly, Borrower shall
promptly furnish to Lender receipts evidencing such payments. Borrower shall
promptly discharge any lien which has, or may have, priority over or equality
with, the lien of this Instrument, and Borrower shall pay, when due, the claims
of all persons supplying labor or materials to or in connection with the
Property. Without Lender's prior written permission. Borrower shall not allow
any lien inferior to this Instrument to be perfected against the Property.
5. HAZARD INSURANCE. Borrower shall keep the improvements now existing or
hereafter erected on the Property insured by carriers at all times satisfactory
to Lender against loss by fire, hazards included within the term "extended
coverage", rent loss and such other hazards, casualties, liabilities and
contingencies as Lender (and, if this Instrument is on a leasehold, the ground
lease) shall require and in such amounts and for such periods as Lender shall
require. All premiums on insurance policies shall be paid, at Lender's option,
in the manner provided under paragraph 2 hereof, or by Borrower making payment,
when due, directly to the carrier, or in such other manner as Lender may
designate in writing.
All insurance policies and renewals thereof shall be in a form acceptable
to Lender and shall include a standard mortgage clause in favor of and in form
acceptable to Lender. Lender shall have the right to hold the policies, and
Borrower shall promptly furnish to Lender all renewal notices and all receipts
of paid premiums. At least thirty days prior to the expiration date of a policy.
Borrower shall deliver to Lender a renewal policy in form satisfactory to
Lender. If this Instrument is on a leasehold, Borrower shall furnish Lender a
duplicate of all policies, renewal notices, renewal policies and receipts of
paid premiums if, by virtue of the ground lease, the originals thereof may not
be supplied by Borrower to Lender.
In the event of loss, Borrower shall give immediate written notice to the
insurance carrier and to Lender. Borrower hereby authorizes and empowers Lender
as attorney-in-fact for Borrower to make proof of loss, to adjust and compromise
any claim under insurance policies, to appear in and prosecute any action
arising from such insurance policies, to collect and receive insurance proceeds,
and to deduct therefrom Lender's expenses incurred in the collection of such
proceeds; provided however, that nothing contained in this paragraph 5 shall
require Lender to incur any expense or take any action hereunder. Borrower
further authorizes Lender, at Lender's option, (a) to hold the balance of such
proceeds to be used to reimburse Borrower for the cost of reconstruction or
repair of the Property or (b) to apply the balance of such proceeds to the
payment of the sums secured by this Instrument, whether or not then due, in
the order of application set forth in paragraph 3 hereof (subject, however, to
the rights of the lessor under the ground lease if this Instrument is on a
leasehold).
If the insurance proceeds are held by Lender to reimburse Borrower for the
cost of restoration and repair of the Property, the Property shall be restored
to the equivalent of its original condition or such other condition as Lender
may approve in writing. Lender may, at Lender's option, condition disbursement
of said proceeds on Lender's approval of such plans and specifications of an
architect satisfactory to Lender, contractor's cost estimates, architect's
certificates, waivers of liens, sworn statements of mechanics and materialmen
and such other evidence of costs, percentage completion of construction,
application of payments, and satisfaction of liens as Lender may reasonably
require. If the insurance proceeds are applied to the payment of the sums
secured by this Instrument, any such application of proceeds to principal shall
not extend or postpone the due dates of the monthly installments referred to in
paragraphs 1 and 2 hereof or change the amounts of such installments. If the
Property is sold pursuant to paragraph 27 hereof or if Lender acquires title to
the Property. Lender shall have all of the right, title and interest of Borrower
in and to any insurance policies and unearned premiums thereon and in and to the
proceeds resulting from any damage to the Property prior to such sale or
acquisition.
6. PRESERVATION AND MAINTENANCE OR PROPERTY; LEASEHOLDS. Borrower (a) shall not
commit waste or permit impairment or deterioration of the Property, (b) shall
not abandon the Property, (c) shall restore or repair promptly and in a good and
workmanlike manner all
Uniform Covenents - Multifamily - 1/77 - FNMA/FHLMC Uniform Instrument
Form 4050 (page 3 of 8 pages)
<PAGE>
or any part of the Property to the equivalent of its original condition, or such
other condition as lender may approve in writing, in the event of any damage,
injury or loss thereto, whether or not insurance proceeds are available to cover
in whole or in part the costs of such restoration or repair, (d) shall keep the
Property, including improvements, fixtures, equipment, machinery and appliances
thereon in good repair and shall replace fixtures, equipment, machinery and
appliances on the Property when necessary to keep such items in good repair, (e)
shall comply with all laws, ordinances, regulations and requirements of any
governmental body applicable to the Property, (f) shall provide for professional
management of the Property by a residential rental property manager satisfactory
to Lender pursuant to a contract approved by Lender in writing, unless such
requirement shall be waived by Lender in writing, (g) shall generally operate
and maintain the Property in a manner to ensure maximum rentals, and (h) shall
give notice in writing to Lender of and, unless otherwise directed in writing by
Lender, appear in and defend any action or proceeding purporting to affect the
Property, the security of this Instrument or the rights or powers of Lender.
Neither Borrower nor any tenant or other person shall remove, demolish or alter
any improvements now existing or hereafter erected on the Property or any
fixture, equipment, machinery or appliance in or on the Property except when
incident to the replacement of fixtures, equipment, machinery and appliances
with items of like kind.
If this Instrument is on a leasehold, Borrower (i) shall comply with the
provisions of the ground lease, (ii) shall give immediate written notice to
Lender of any default by lessor under the ground lease or of any notice received
by Borrower from such lessor of any default under the ground lease by Borrower,
(iii) shall exercise any option to renew or extend the ground lease and give
written confirmation thereof to Lender within thirty days after such option
becomes exercisable, (iv) shall give immediate written notice to Lender of the
commencement of any remedial proceedings under the ground lease by any party
thereto and, if required by Lender, shall permit Lender as Borrower's
attorney-in-fact to control and act for Borrower in any such remedial
proceedings and (v) shall within thirty days after request by Lender obtain from
the lessor under the ground lease and deliver to Lender the lessor's estoppel
certificate required thereunder, if any. Borrower hereby expressly transfers and
assigns to Lender the benefit of all covenants contained in the ground lease,
whether or not such covenants run with the land, but Lender shall have no
liability with respect to such covenants nor any other covenants contained in
the ground lease.
Borrower shall not surrender the leasehold estate and interests herein
conveyed nor terminate or cancel the ground lease creating said estate and
interests, and Borrower shall not, without the express written consent of
Lender, alter or amend said ground lease. Borrower covenants and agrees that
there shall not be a merger of the ground lease, or of the leasehold estate
created thereby, with the fee estate covered by the ground lease by reason of
said leasehold estate or said fee estate, or any part of either, coming into
common ownership, unless Lender shall consent in writing to such merger; if
Borrower shall acquire such fee estate, then this Instrument shall
simultaneously and without further action be spread so as to become a lien on
such fee estate.
7. USE OF PROPERTY. Unless required by applicable law or unless Lender has
otherwise agreed in writing, Borrower shall not allow changes in the use for
which all or any part of the Property was intended at the time this Instrument
was executed. Borrower shall not initiate or acquiesce in a change in the zoning
classification of the Property without Lender's prior written consent.
8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform the covenants
and agreements contained in this Instrument, or if any action or proceeding is
commenced which affects the Property or title thereto or the interest of Lender
therein, including, but not limited to, eminent domain, insolvency, code
enforcement, or arrangements or proceedings involving a bankrupt or decedent,
then Lender at Lender's option may make such appearances, disburse such sums and
take such action as Lender deems necessary, in its sole discretion, to protect
Lender's interest, including, but not limited to, (i) disbursement of attorney's
fees, (ii) entry upon the Property to make repairs, (iii) procurement of
satisfactory insurance as provided in paragraph 5 hereof, and (iv) if this
Instrument is on a leasehold, exercise of any option to renew or extend the
ground lease on behalf of Borrower and the curing of any default of Borrower in
the terms and conditions of the ground lease.
Any amounts disbursed by Lender pursuant to this paragraph 8, with interest
thereon, shall become additional indebtedness of Borrower secured by this
Instrument. Unless Borrower and Lender agree to other terms of payment, such
amounts shall be immediately due and payable and shall bear interest from the
date of disbursement at the rate stated in the Note unless collection from
Borrower of interest at such rate would be contrary to applicable law, in which
event such amounts shall bear interest at the highest rate which may be
collected from Borrower under applicable law. Borrower hereby covenants and
agrees that Lender shall be subrogated to the lien of any mortgage or other lien
discharged, in whole or in part, by the indebtedness secured hereby. Nothing
contained in this paragraph 8 shall require Lender to incur any expense or take
any action hereunder.
9. INSPECTION. Lender may make or cause to be made reasonable entries upon and
inspections of the Property.
10. See Rider to Multifamily Instrument annexed hereto and made a part hereof.
11. CONDEMNATION. Borrower shall promptly notify Lender of any action or
proceeding relating to any condemnation or other taking, whether direct or
indirect, of the Property, or part thereof, and Borrower shall appear in and
prosecute any such action or proceeding unless otherwise directed by Lender in
writing. Borrower authorizes Lender, at Lender's option, as attorney-in-fact for
Borrower, to commence, appear in and prosecute, in Lender's or Borrower's name,
any action or proceeding relating to any condemnation or other taking of the
Property, whether direct or indirect, and to settle or compromise any claim in
connection with such condemnation or other taking. The proceeds of any award,
payment or claim for damages, direct or consequential, in connection with such
condemnation or other taking, whether direct or indirect, of the Property, or
part thereof, or for the conveyances in lieu of condemnation, are hereby
assigned to and shall be paid to Lender subject, if this Instrument is on a
leasehold, to the rights of lessor under the ground lease.
Borrower authorizes Lender to apply such awards, payments, proceeds or
damages, after the deduction of Lender's expenses incurred in the collection of
such amounts, at Lender's option, to restoration or repair of the Property or to
payment of the sums secured by this Instrument, whether or not then due, in
order of application set forth in paragraph 3 hereof, with the balance, if any,
to Borrower. Unless Borrower and Lender otherwise agree in writing any
application of proceeds to principal shall not extend or postpone the due date
of the monthly installments referred to in paragraphs 1 and 2 hereof or change
the amount of such installments. Borrower agrees to execute such further
evidence of assignment of any awards, proceeds, damages or claims arising in
connection with such condemnation or taking as Lender may require.
12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender may, at Lender's
option, without giving notice to or obtaining the consent of Borrower,
Borrower's successors or assigns or of any junior lienholder or guarantors,
without liability on Lender's part and notwithstanding Borrower's breach of any
covenant or agreement of Borrower in this Instrument, extend the time for
payment of said indebtedness or any part thereof, reduce the payments thereon,
release anyone liable on any of said indebtedness, accept a renewal note or
notes therefor, modify the terms and time of payment of said indebtedness,
release from the lien of this Instrument any part of the Property, take or
release other or additional security, reconvey any part of the Property, consent
to any map or plan of the Property, consent to the granting of any easement,
join in any extension or subordination agreement, and agree in writing with
Borrower to modify the rate of interest or period of amortization of the Note or
change the amount of the monthly installments payable thereunder. Any actions
taken by Lender pursuant to the terms of this paragraph 12 shall not affect the
obligation of Borrower or Borrower's successors or assigns to pay the sums
secured by this Instrument and to observe the covenants of Borrower contained
herein, shall not affect the guaranty of any person, corporation, partnership or
other entity for payment of the indebtedness secured hereby, and shall not
affect the lien or priority of lien hereof on the Property. Borrower shall pay
Lender a reasonable service charge, together with such title insurance premiums
and attorney's fees as may be incurred at Lender's option, for any such action
if taken at Borrower's request.
13. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance by Lender in exercising
any right or remedy hereunder, or otherwise afforded by applicable law, shall
not be a waiver of or preclude the exercise of any right or remedy. The
acceptance by Lender of payment of any sum secured by this Instrument after the
due date of such payment shall not be a waiver of Lender's right to either
require prompt payment when due of all other sums so secured or to declare a
default for failure to make prompt payment. The procurement of insurance or the
payment of taxes or other liens or charges by Lender shall not be a waiver of
Lender's right to accelerate the maturity of the indebtedness secured by this
Instrument, nor shall Lender's receipt of any awards, proceeds or damages under
paragraphs 5 and 11 hereof operate to cure or waive Borrower's default in
payment of sums secured by this Instrument.
Form 4050 (page 4 of 8 pages)
<PAGE>
14. ESTOPPEL CERTIFICATE. Borrower shall within ten days of a written request
from Lender furnish Lender with a written statement, duly acknowledged, setting
forth the sums secured by this Instrument and any right of set-off, counter
claim or other defense which exists against such sums and the obligations of
this Instrument.
15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is intended to
be a security agreement pursuant to the Uniform Commercial Code for any of the
items specified above as part of the Property which, under applicable law may be
subject to a security interest pursuant to the Uniform Commercial Code, and
Borrower hereby grants Lender a security interest in said items. Borrower agrees
that Lender may file this Instrument, or a reproduction thereof, in the real
estate records or other appropriate index, as a financing statement for any of
the items specified above as part of the Property. Any reproduction of this
Instrument or of any other security agreement or financing statement shall be
sufficient as a financing statement. In addition, Borrower agrees to execute and
deliver to Lender, upon Lender's request, any financing statements, as well as
extensions, renewals and amendments thereof, and reproductions of this
Instrument in such form as Lender may require to perfect a security interest
with respect to said items. Borrower shall pay all costs of filing such
financing statements and any extensions, renewals, amendments and releases
thereof, and shall pay all reasonable costs and expenses of any record searches
for financing statements Lender may reasonably require. Without the prior
written consent of Lender, Borrower shall not create or suffer to be created
pursuant to the Uniform Commercial Code any other security interest in said
items, including replacements and additions thereto. Upon Borrower's breach of
any covenant or agreement of Borrower contained in this Instrument, including
the covenants to pay when due all sums secured by this Instrument, Lender shall
have remedies of a secured party under the Uniform Commercial Code and, at
Lender's option, may also invoke the remedies provided in paragraph 27 of this
Instrument as to such items. In exercising any of said remedies, Lender may
proceed against the items of real property and any items of personal property
specified above as part of the Property separately or together and in any order
whatsoever, without in any way affecting the availability of Lender's remedies
under the Uniform Commercial Code or of the remedies provided in paragraph 27 of
this Instrument.
16. LEASES OF THE PROPERTY. As used in this paragraph 16, the word "lease" shall
mean "sublease" if this Instrument is on a leasehold. Borrower shall comply with
and observe Borrower's obligations as landlord under all leases of the Property
or any part thereof. Borrower will not lease any portion of the Property for
non-residential use except with the prior written approval of Lender. Borrower,
at Lender's request, shall furnish Lender with executed copies of all leases now
existing or hereafter made of all or any part of the Property, and all leases
now or hereafter entered into will be in form and substance subject to the
approval of Lender. All leases of the Property shall specifically provided that
such leases are subordinate to this Instrument; that the tenant attorns to
Lender, such attornment to be effective upon Lender's acquisition of title to
the Property; that the tenant agrees to execute such further evidences of
attornment as Lender may from time to time request; that the attornment of the
tenant shall not be terminated by foreclosure; and that Lender may, at Lender's
option, accept or reject such attornments. Borrower shall not, without Lender's
written consent, execute, modify, surrender or terminate, either orally or in
writing, any lease now existing or hereafter made of all or any part of the
Property providing for a term of three years or more, permit an assignment of
sublease of such a lease without Lender's written consent, or request or consent
to the subordination of any lease of all or any part of the Property to any lien
subordinate to this Instrument. If Borrower becomes aware that any tenant
proposes to do, or is doing, any act or thing which may give rise to any right
of set-off against rent, Borrower shall (i) take such steps as shall be
reasonably calculated to prevent the accrual of any right to a set-off against
rent, (ii) notify Lender thereof and of the amount of said set-offs, and (iii)
within ten days after such accrual, reimburse the tenant who shall have acquired
such right to set-off or take such other steps as shall effectively discharge
such set-off and as shall assure that rents thereafter due shall continue to be
payable without set-off or deduction.
Upon Lender's request, Borrower shall assign to Lender, by written
instrument satisfactory to Lender, all leases now existing or hereafter made of
all or any part of the Property and all security deposits made by tenants in
connection with such leases of the Property. Upon assignment by Borrower to
Lender of any leases of the Property, Lender shall have all of the rights and
powers possessed by Borrower prior to such assignment and Lender shall have the
right to modify, extend or terminate such existing leases and to execute new
leases, in Lender's sole discretion.
17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and
cumulative to all other rights or remedies under this Instrument or afforded by
law or equity, and may be exercised concurrently, independently or successively,
in any order whatsoever.
18. ACCELERATION IN CASE OF BORROWER'S INSOLVENCY. If Borrower shall voluntarily
file a petition under the Federal Bankruptcy Act, as such Act may from time to
time be amended, or under any similar or successor Federal statute relating to
bankruptcy, insolvency, arrangements or reorganizations, or under any state
bankruptcy or insolvency act, or file an answer in an involuntary proceeding
admitting insolvency or inability to pay debts, or if Borrower shall fail to
obtain a vacation or stay of involuntary proceedings brought for the
reorganization, dissolution or liquidation of Borrower, or if Borrower shall be
adjudged a bankrupt, or if a trustee or receiver shall be appointed for Borrower
or Borrower's property, or if the Property shall become subject to the
jurisdiction of a Federal bankruptcy court or similar state court, or if
Borrower shall make an assignment for the benefit of Borrower's creditors, or if
there is an attachment, execution or other judicial seizure of any portion of
Borrower's assets and such seizure is not discharged within ten days, then
Lender may, at Lender's option, declare all of the sums secured by this
Instrument to be immediately due and payable without prior notice to Borrower,
and Lender may invoke any remedies permitted by paragraph 27 of this Instrument.
Any attorney's fees and other expenses incurred by Lender in connection with
Borrower's bankruptcy or any of the other aforesaid events shall be additional
indebtedness of Borrower secured by this Instrument pursuant to paragraph 8
hereof.
See Rider to Multifamily Instrument annexed hereto and made a part hereof.
21. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS.
The covenants and agreements herein contained shall bind, and the rights
hereunder shall inure to, the respective successors and assigns of Lender and
Borrower, subject to the provisions of paragraph 19 hereof. All covenants and
agreements of Borrower shall be joint and several. In exercising any rights
hereunder or taking any actions provided for herein, Lender may act through its
employees, agents or independent contractors as authorized by Lender. The
captions and headings of the paragraphs of this Instrument are for convenience
only and are not to be used to interpret or define the provisions hereof.
22. UNIFORM MULTIFAMILY INSTRUMENT; GOVERNING LAW; SEVERABILITY. This form of
multifamily instrument combines uniform covenants for national use and
non-uniform covenants with limited variations by jurisdiction to constitute a
uniform security instrument covering real property and related fixtures and
personal property. This Instrument shall be governed by the law of the
jurisdiction in which the Property is located. In the event that any provision
of this Instrument or the Note conflicts with applicable law, such conflict
shall not affect other provisions of this Instrument or the Note which can be
given effect without the conflicting provisions, and to this end the provisions
of this
Form 4050 (page 5 of 8 pages)
<PAGE>
Instruments and the note are declared to be severable. In the event that any
acceptable law limiting the amount of interest or other charges permitted to be
collected from Borrower is interpreted so that any charge provided for in this
Instrument or in the Note, whether considered separately or together with other
charges levied in connection with this Instrument and the Note, violates such
law, and Borrower is entitled to the benefit of such law, such charge is hereby
reduced to the extent necessary to eliminate such violation. The amounts, if
any, previously paid to Lender in excess of the amounts payable to Lender
pursuant to such charges as reduced shall be applied by Lender to reduce the
principal of the indebtedness evidenced by the Note. For the purpose of
determining whether any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower has been violated, all
indebtedness which is secured by this Instrument or evidenced by the Note and
which constitutes interest, as well as all other charges levied in connection
with such indebtedness which constitute interest, shall be deemed to be
allocated and spread over the stated term of the Note. Unless otherwise required
by applicable law, such allocation and spreading shall be effected in such a
manner that the rate of interest computed thereby is uniform throughout the
stated term of the Note.
23. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the right to
assert any statute of limitations as a bar to the enforcement of the lien of
this Instrument or to any action brought to enforce the Note or any other
obligation secured by this Instrument.
24. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security
interests in the Property held by Lender or by any other party. Lender shall
have the right to determine the order in which any or all of the Property shall
be subjected to the remedies provided herein. Lender shall have the right to
determine the order in which any or all portions of the indebtedness secured
hereby are satisfied from the proceeds realized upon the exercise of the
remedies provided herein. Borrower, any party who consents to this Instrument
and any party who now or hereafter acquires a security interest in the Property
and who has actual or constructive notice hereof hereby waives any and all right
to require the marshalling of assets in connection with the exercise of any of
the remedies permitted by applicable law or provided herein.
26. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION. As part
of the consideration for the indebtedness evidenced by the Note, Borrower hereby
absolutely and unconditionally assigns and transfers to Lender all the rents and
revenues of the Property, including those now due, past due, or to become due by
virtue of any lease or other agreement for the occupancy or use of all or any
part of the Property, regardless of to whom the rents and revenues of the
Property are payable. Borrower hereby authorizes Lender or Lender's agents to
collect the aforesaid rents and revenues and hereby directs each tenant of the
Property to pay such rents to Lender or Lender's agents; provided, however, that
prior to written notice given by Lender to Borrower of the breach by Borrower of
any covenant or agreement of Borrower in this Instrument, Borrower shall collect
and receive all rents and revenues of the Property as trustee for the benefit of
Lender and Borrower, to apply the rents and revenues so collected to the sums
secured by this Instrument in the order provided in paragraph 3 hereof with the
balance, so long as no such breach has occurred, to the account of Borrower, it
being intended by Borrower and Lender that this assignment of rents constitutes
an absolute assignment and not an assignment for additional security only. Upon
delivery of written notice by Lender to Borrower of the breach by Borrower of
any covenant or agreement of Borrower in this Instrument, and without the
necessity of Lender entering upon and taking and maintaining full control of the
Property in person, by agent or by a court-appointed receiver, Lender shall
immediately be entitled to possession of all rents and revenues of the Property
as specified in this paragraph 26 as the same become due and payable, including
but not limited to rents then due and unpaid, and all such rents shall
immediately upon delivery of such notice be held by Borrower as trustee for the
benefit of Lender only; provided, however, that the written notice by Lender to
Borrower of the breach by Borrower shall contain a statement that Lender
exercises its rights to such rents. Borrower agrees that commencing upon
delivery of such written notice of BOrrower's breach by Lender to Borrower, each
tenant of the Property shall make such rents payable to and pay such rents to
Lender or Lender's agents on Lender's written demand to each tenant therefor,
delivered to each tenant personally, by mail or by delivering such demand to
each Rental unit, without any liability on the part of said tenant to inquire
further as to the existence of a default by Borrower.
Borrower hereby covenants that Borrower has not executed any prior
assignment of said rents, that Borrower has not performed, and will not perform,
any acts or has not executed, and will not execute, any instrument which would
prevent Lender from exercising its rights under this paragraph 26, and that at
the time of execution of this Instrument there has been no anticipation or
prepayment of any of the rents of the Property for more than two months prior to
the due dates of such rents. Borrower covenants that Borrower will not hereafter
collect or accept payment of any rents of the Property more than two months
prior to the due dates of such rents. Borrower further covenants that Borrower
will execute and deliver to Lender such further assignments of rents and
revenues of the Property as Lender may from time to time request.
Upon Borrower's breach of any covenant or agreement of Borrower in this
Instrument, Lender may in person, by agent or by a court-appointed receiver,
regardless of the adequacy of Lender's security, enter upon and take and
maintain full control of the Property in order to perform all acts necessary and
appropriate for the operation and maintenance thereof including, but not limited
to, the execution, cancellation or modification of leases, the collection of all
rents and revenues of the Property, the making of repairs to the Property and
the execution or termination of contracts providing for the management or
maintenance of the Property, all on such terms as are deemed best to protect the
security of this Instrument. In the event Lender elects to seek the appointment
of a receiver for the Property upon Borrower's breach of any covenant or
agreement of Borrower in this Instrument, Borrower hereby expressly consents to
the appointment of such receiver. Lender or the receiver shall be entitled to
receive a reasonable fee for so managing the Property.
All rents and revenues collected subsequent to delivery of written notice
by Lender to Borrower of the breach by Borrower of any covenant or agreement of
Borrower in this Instrument shall be applied first to the costs, if any, of
taking control of and managing the Property and collecting the rents, including,
but not limited to, attorney's fees, receiver's fees, premiums on receiver's
bonds, costs of repairs to the Property, premiums on insurance policies, taxes,
assessments and other charges on the Property, and the costs of discharging any
obligation or liability of Borrower as lessor or landlord of the Property and
then to the sums secured by this Instrument. Lender or the receiver shall have
access of the books and records used in the operation and maintenance of the
Property and shall be liable to account only for those rents actually received.
Lender shall not be liable to Borrower, anyone claiming under or through
Borrower or anyone having an interest in the Property by reason of anything done
or left undone by Lender under this paragraph 26.
If the rents of the Property are not sufficient to meet the costs, if any,
of taking control of and managing the Property and collecting the rents, any
funds expended by Lender for such purposes shall become indebtedness of Borrower
to Lender secured by this Instrument pursuant to paragraph 8 hereof. Unless
Lender and Borrower agree in writing to other terms of payment, such amounts
shall be payable upon notice from Lender to Borrower requesting payment thereof
and shall bear interest from the date of disbursement at the rate stated in the
Note unless payment of interest at such rate would be contrary to applicable
law, in which event such amounts shall bear interest at the highest rate which
may be collected from Borrower under applicable law.
Any entering upon and taking and maintaining of control of the Property by
Lender or the receiver and any application of rents as provided herein shall not
cure or waive any default hereunder or invalidate any other right or remedy of
Lender under applicable law or provided herein. This assignment of rents of the
Property shall terminate at such time as this Instrument ceases to secure
indebtedness held by Lender.
UNIFORM COVENANTS -- Multifamily -- 1/77 -- FNMA/FHLMC UNIFORM INSTRUMENT FORM
4050 (page 6 of 8 pages)
<PAGE>
NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as
follows:
27. ACCELERATION; REMEDIES. Upon Borrower's breach of any covenant or
agreement of Borrower in this Instrument, including, but not limited to,
the covenants to pay when due any sums secured by this Instrument, Lender
at Lender's option may declare all of the sums secured by this Instrument
to be immediately due and payable without further demand and may invoke the
power of sale and any other remedies permitted by applicable law or
provided herein. Borrower acknowledges that the power of sale herein
granted may be exercised by Lender without prior judicial hearing. Borrower
has the right to bring an action to assert the non-existence of a breach or
any other defense of Borrower to acceleration and sale. Lender shall be
entitled to collect all costs and expenses incurred in pursuing such
remedies, including, but not limited to, attorney's fees and costs of
documentary evidence, abstracts and title reports.
If Lender invokes the power of sale, Lender shall give notice of sale
in the manner provided by the laws of Wisconsin to Borrower and to such
other persons as the laws of Wisconsin prescribe, and shall sell the
Property according to the laws of Wisconsin. Lender may sell the Property
in one or more parcels and in such order as Lender may determine. Lender
may postpone sale of all or any parcel of the Property by public
announcement at the time and place of any previously scheduled sale. Lender
or Lender's designee may purchase the Property at any sale.
Lender shall deliver to the purchaser Lender's deed conveying the
Property so sold without any covenant or warranty, expressed or implied.
The recitals in Lender's deed shall be prima facie evidence of the truth of
the statements made therein. The proceeds of the sale shall be applied in
the following order: (a) to all costs and expenses of the sale, including,
but not limited to, attorney's fees and costs of title evidence; (b) to
all sums secured by this Instrument in such order as Lender, in Lender's
sole discretion, directs; and (c) the excess, if any, to the clerk of the
Circuit Court of the county in which the sale is held.
28. RELEASE. Upon payment of all sums secured by this Instrument, Lender
shall release this Instrument. Borrower shall pay Lender's reasonable costs
incurred in releasing this Instrument.
29. ACCELERATED REDEMPTION PERIODS. If Lender in an action to foreclosure
this Instrument waives all right to a judgement for deficiency and consents
to Borrower's remaining in possession of the Property, then the sale of the
Property may be three (3) months from the date judgment is entered. In any
event, if the Property has been abandoned, then the sale of the Property
may be (2) months from the date the judgment is entered.
30. FUTURE ADVANCES. Upon request of Borrower, Lender, at Lender's option
so long as this Instrument secures indebtedness held by Lender, may make
Future Advances to Borrower. Such Future Advances, with interest thereon,
shall be secured by this Instrument when evidenced by promissory notes
stating that said notes are secured hereby. At no time shall the principal
amount of the indebtedness secured by this Instrument, not including sums
advanced in accordance herewith to protect the security of this Instrument,
exceed the original amount of the Note (US $ 12,900,700.00) plus the
additional sum of US $ -0-
IN WITNESS WHEREOF, Borrower has executed this Instrument or has caused the
same to be executed by its representatives thereunto duly authorized.
WITNESS/ATTEST:
/s/ Robert F. Rice MAPLE GROVE APARTMENT HOMES, INC.,A
--------------------- a Wisconsin corporation
Robert F. Rice
By: /s/ Arnold K. Leas
---------------------------------
Name: Arnold K. Leas
Title: President
BORROWER'S ADDRESS:
-------------------
c/o The Wellington Companies
-------------------------------------
18650 West Corporate Drive, Suite 300
-------------------------------------
Brookfield, Wisconsin 53045
-------------------------------------
Form 4050 (page 7 of 8 pages)
<PAGE>
CORPORATE ACKNOWLEDGMENT
State of Wisconsin, Waukesha County ss:
........
The foregoing instrument was acknowledged before me this May , 1997
...................
(date)
by ARNOLD K. LEAS PRESIDENT of
...................................., ......................................
(person acknowledging) (office)
MAPLE GROVE APARTMENT HOMES, INC. a Wisconsin
......................................, ...................................
(name of corporation) (state)
corporation, on behalf of the corporation.
My Commission Expires: 7-26-98
/s/ [SIGNATURE ILLEGIBLE]
.....................................
Notary Public, State of Wisconsin
[SEAL APPEARS HERE]
INDIVIDUAL ACKNOWLEDGMENT
State of Wisconsin, ...................... County ss:
The foregoing instrument was acknowledged before me this ..................
(date)
by .............................................................................
(person acknowledging)
My Commission Expires:
.....................................
Notary Public, State of Wisconsin
INDIVIDUAL LIMITED PARTNERSHIP ACKNOWLEDGMENT
State of Wisconsin, ...................... County ss:
The foregoing instrument was acknowledged before me this ..................
(date)
by ......................................................., general partner on
(person acknowledging)
behalf of ......................................................................
(name of partnership)
a limited partnership.
My Commission Expires:
.....................................
Notary Public, State of Wisconsin
CORPORATE LIMITED PARTNERSHIP ACKNOWLEDGMENT
State of Wisconsin, ...................... County ss:
The foregoing instrument was acknowledged before me this ..................
(date)
by ............................................................................
(name of officer) (office)
........................................., a ...................................
(name of corporation) (state)
corporation general partner on behalf of .......................................
(name of partnership)
a limited partnership.
My Commission Expires:
.....................................
Notary Public, State of Wisconsin
This instrument was prepared by ................................................
WISCONSIN-MULTIFAMILY-7/78-FNMA/FHLMC UNIFORM INSTRUMENT FORM 4050 (PAGE 8 OF 8
PAGE
<PAGE>
RIDER TO MULTIFAMILY INSTRUMENT
THIS RIDER TO MULTIFAMILY INSTRUMENT (the "Rider") is made as of the 6th
day of May, 1997, and is incorporated into and shall be deemed to amend and
supplement the Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of the
same date (the "Instrument"), given by the undersigned MAPLE GROVE APARTMENT
HOMES, INC., a Wisconsin corporation (the "Borrower"), to secure Borrower's
Multifamily Note of the same date (the "Note") with Addendum to Multifamily Note
of the same date (the "Addendum") to AMERICAN PROPERTY FINANCING, INC., 6 East
43rd Street, New York, New York 10017 [Insert address of Lender], and its
successors, assigns and transferees (the "Lender"), covering the property
described in the Instrument and defined therein as the "Property," located at:
Maple Grove Apartments, 3013-3143 Maple Valley Drive, Madison, Wisconsin
................................................................................
[Property Address]
The Property is located entirely within the State of Wisconsin [Insert name of
state in which the Property is located] (the "Property Jurisdiction").
The term "Loan Documents" when used in this Rider shall mean, collectively,
the following documents: (i) the Instrument, as modified by this Rider and any
other riders to the Instrument given by Borrower to Lender and covering the
Property; (ii) the Note, as modified by the Addendum and any other addendum to
the Note; and (iii) all other documents or agreements, including any Collateral
Agreements (as defined below) or O&M Agreements (as defined below), arising
under, related to, or made in connection with, the loan evidenced by the Note,
as such Loan Documents may be amended from time to time. Any conflict between
the provisions of the Instrument and the Rider shall be resolved in favor of the
Rider.
The covenants and agreements of this Rider, and the covenants and
agreements of any other riders to the Instrument given by Borrower to Lender and
covering the Property, shall be incorporated into and shall amend and supplement
the covenants and agreements of the Instrument as if this Rider and the other
riders were a part of the Instrument and all references to the Instrument in the
Loan Documents shall mean the Instrument as so amended and supplemented.
ADDITIONAL COVENANTS. In addition to the covenants and agreements made in
the Instrument, Borrower and Lender further covenant and agree as follows:
A. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES
Uniform Covenant 2 of the Instrument ("Funds for Taxes, Insurance and Other
Charges") is amended to change the title to "Funds for Taxes, Insurance and
Other Charges; Collateral Agreements." Existing Uniform Covenant 2 is amended to
become Uniform Covenant 2A. The following new Uniform Covenant 2B is added at
the end of Uniform Covenant 2A:
2B REPLACEMENT RESERVE AGREEMENT, COMPLETION/REPAIR AGREEMENT, ACHIEVEMENT
AGREEMENT AND OTHER COLLATERAL AGREEMENTS
(A) REPLACEMENT RESERVE AGREEMENT
Borrower shall deposit with Lender the amounts required by the Replacement
Reserve and Security Agreement (the "Replacement Reserve Agreement") between
Borrower and Lender, dated the date of the Note, at the times required by the
Replacement Reserve Agreement, and shall perform all other obligations as and
when required pursuant to the Replacement Reserve Agreement.
(B) COMPLETION/REPAIR AGREEMENT
Borrower shall deposit with Lender the amount required by the
Completion/Repair and Security Agreement (the "Completion/Repair Agreement")
between Borrower and Lender (if any), dated the date of the Note, at the time
required by the Completion/Repair Agreement, and shall perform all other
obligations as and when required pursuant to the Completion/Repair Agreement.
(C) ACHIEVEMENT AGREEMENT
Borrower shall perform all of its obligations as and when required pursuant
to the Achievement Agreement between Borrower and Lender (if any), dated the
date of the Note.
(D) COLLATERAL AGREEMENTS
As used herein, the term "Collateral Agreement" shall mean any of the
Replacement Reserve Agreement, the Completion/Repair Agreement, the Achievement
Agreement and any similar agreement which has been entered into between Borrower
and Lender in connection with the loan evidenced by the Note.
B. APPLICATION OF PAYMENTS
Uniform Covenant 3 of the Instrument ("Application of Payments") is amended
to add the following sentence at the end thereof;
Notwithstanding the preceding sentence, (i) Lender shall be permitted to
apply any partial payment received from Borrower in any manner determined by
Lender and in any order of priority of application as determined by Lender, in
Lender's sole discretion, and (ii) upon any breach of any covenant or agreement
of Borrower in the Instrument, the Note or any other Loan Document, Lender shall
be permitted to apply any funds held pursuant to any Collateral Agreement in any
manner which is permitted pursuant to such Collateral Agreement and in any order
of priority of application as determined by Lender, in Lender's sole discretion.
RIDER TO MULTIFAMILY INSTRUMENT-FANNIE MAE UNIFORM INSTRUMENT FORM 4059 5/93
(PAGE 1 OF 8 PAGES)
<PAGE>
C. HAZARD INSURANCE; RESTORATION OF PROPERTY
Uniform Covenant 5 of the Instrument ("Hazard Insurance") is amended to add
the following sentence at the end thereof:
Lender shall not exercise Lender's option to apply insurance proceeds to
the payment of the sums secured by the Instrument if all of the following
conditions are met: (i) Borrower is not in breach or default of any provision of
the Instrument, the Note or any other Loan Document; (ii) Lender determines that
there will be sufficient funds to restore and repair the Property to a condition
approved by Lender; (iii) Lender determines that the rental income of the
Property, after restoration and repair of the Property to a condition approved
by Lender, will be sufficient to meet all operating costs and other expenses,
payments for reserves and loan repayment obligations relating to the Property;
and (iv) Lender determines that restoration and repair of the Property to a
condition approved by Lender will be completed prior to the earlier of either
(1) the maturity date of the Note or (2) within one year of the date of the loss
or casualty to the Property.
D. ENVIRONMENTAL HAZARDS PROVISION
In addition to Borrower's covenants and agreements under Uniform Covenant 6
of the Instrument ("Preservation and Maintenance of Property; Leaseholds"),
Borrower further covenants and agrees that Borrower shall not:
(a) cause or permit the presence, use, generation, manufacture,
production, processing, installation, release, discharge, storage
(including aboveground and underground storage tanks for petroleum or
petroleum products), treatment, handling, or disposal of any Hazardous
Materials (as defined below) (excluding the safe and lawful use and
storage of quantities of Hazardous Materials customarily used in the
operation and maintenance of comparable multifamily properties or for
normal household purposes) on or under the Property, or in any way
affecting the Property or its value, or which may form the basis for
any present or future demand, claim or liability relating to
contamination, exposure, cleanup or other remediation of the Property
or;
(b) cause or permit the transportation to, from or across the Property of
any Hazardous Material (excluding the safe and lawful use and storage
of quantities of Hazardous Materials customarily used in the operation
and maintenance of comparable multifamily properties or for normal
household purposes); or
(c) cause or exacerbate any occurrence or condition on the Property that
is or may be in violation of Hazardous Material Law (as defined
below).
(The matters described in (a), (b) and (c) above are referred to collectively
below as "Prohibited Activities or Conditions.")
Except with respect to any matters which have been disclosed in writing by
Borrower to Lender prior to the date of the Instrument, or matters which have
been disclosed in an environmental hazard assessment report of the Property
received by Lender prior to the date of the Instrument, Borrower represents and
warrants that it has not at any time caused or permitted any Prohibited
Activities or Conditions and to the best of its knowledge, no Prohibited
Activities or Conditions exist or have existed on or under the Property.
Borrower shall take all appropriate steps (including but not limited to
appropriate lease provisions) to prevent its employees, agents, and contractors,
and all tenants and other occupants on the Property, from causing, permitting or
exacerbating any Prohibited Activities or Conditions. Borrower shall not lease
or allow the sublease of all or any portion of the Property for non-residential
use to any tenant or subtenant that, in the ordinary course of its business,
would cause, permit or exacerbate any Prohibited Activities or Conditions, and
all non-residential leases and subleases shall provide that tenants and
subtenants shall not cause, permit or exacerbate any Prohibited Activities or
Conditions.
If Borrower has disclosed that Prohibited Activities or Conditions exist on
the Property, Borrower shall comply in a timely manner with, and cause all
employees, agents, and contractors of Borrower and any other persons present on
the Property to so comply with, (1) any program of operations and maintenance
("O&M Program") relating to the Property that is acceptable to Lender with
respect to one or more Hazardous Materials (which O&M Program may be set forth
in an agreement of Borrower (an "O&M Agreement")) and all other obligations set
forth in any O&M Agreement, and (2) all Hazardous Materials Laws. Any O&M
Program shall be performed by qualified personnel. All costs and expenses of the
O&M program shall be paid by Borrower, including without limitation Lender's
fees and costs incurred in connection with the monitoring and review of the O&M
Program and Borrower's performance thereunder. If Borrower fails to timely
commence or diligently continue and complete the O&M Program and comply with any
O&M Agreement, then Lender may, at Lender's option, declare all of the sums
secured by the Instrument to be immediately due and payable, and Lender may
invoke any remedies permitted by paragraph 27 of the Instrument.
Borrower represents that Borrower has not received, and has no knowledge of
the issuance of, any claim, citation or notice of any pending or threatened
suits, proceedings, orders, or governmental inquiries or opinions involving the
Property that allege the violation of any Hazardous Materials Law ("Governmental
Actions").
Borrower shall promptly notify Lender in writing of: (i) the occurrence of
any Prohibited Activity or Condition on the Property; (ii) Borrower's actual
knowledge of the presence on or under any adjoining property of any Hazardous
Materials which can reasonably be expected to have a material adverse impact on
the Property or the value of the Property, discovery of any occurrence or
condition on the Property or any adjoining real property that could cause any
restrictions on the ownership, occupancy, transferability or use of the Property
under Hazardous Materials Law. Borrower shall cooperate with any governmental
inquiry, and shall comply with the governmental or judicial order which arises
from any alleged Prohibited Activities or Conditions; (iii) any Governmental
Action; and (iv) any claim made or threatened by any third party against
Borrower, Lender, or the Property relating to loss or injury
Form 4059 5/93 (page 2 of 8 pages)
<PAGE>
resulting from any Hazardous Materials. Any such notice by Borrower shall not
relieve Borrower of, or result in a waiver of any obligation of Borrower under
this paragraph D.
Borrower shall pay promptly the costs of any environmental audits, studies
or investigations (including but not limited to advice of legal counsel) and the
removal of any Hazardous Materials from the Property required by Lender as a
condition of its consent to any sale or transfer under paragraph 19 of the
Instrument of all or any part of the Property or any transfer occurring upon a
foreclosure or a deed in lieu of foreclosure or any interest therein, or
required by Lender following a reasonable determination by Lender that there may
be Prohibited Activities or Conditions on or under the Property. Borrower
authorizes Lender and its employees, agents and contractors to enter onto the
Property for the purpose of conducting such environmental audits, studies and
investigations. Any such costs and expenses incurred by Lender (including but
not limited to fees and expenses of attorneys and consultants, whether incurred
in connection with any judicial or administrative process or otherwise) which
Borrower fails to pay promptly shall become immediately due and payable and
shall become additional indebtedness secured by the Instrument pursuant to
Uniform Covenant 8 of the Instrument.
Borrower shall hold harmless, defend and indemnify Lender and its officers,
directors, trustees, employees, and agents from and against all proceedings
(including but not limited to Government Actions), claims, damages, penalties,
costs and expenses (including without limitation fees and expenses of attorneys
and expert witnesses, investigatory fees, and cleanup and remediation expenses,
whether or not incurred within the context of the judicial process), arising
directly or indirectly from (i) any breach of any representation, warranty, or
obligation of Borrower contained in this paragraph D or (ii) the presence or
alleged presence of Hazardous Materials on or under the Property. Lender agrees
that the liability created under this paragraph shall be limited to the assets
of Borrower and Lender shall not seek to recover any deficiency from any natural
persons who are general partners of Borrower (if Borrower is a partnership).
The term "Hazardous Materials," for purposes of this paragraph D, includes
petroleum and petroleum products, flammable explosives, radioactive materials
(excluding radioactive materials in smoke detectors), polychlorinated biphenyls,
lead, asbestos in any form that is or could become friable, hazardous waste,
toxic or hazardous substances or other related materials whether in the form of
a chemical, element, compound, solution, mixture or otherwise including, but not
limited to, those materials defined as "hazardous substances," "extremely
hazardous substances," "hazardous chemicals," "hazardous materials," "toxic
substances," "solid waste," "toxic chemicals," "air pollutants," "toxic
pollutants," "hazardous wastes," "extremely hazardous waste," or "restricted
hazardous waste" by Hazardous Materials Law or regulated by Hazardous Materials
Law in any manner whatsoever.
The term "Hazardous Materials Law," for the purposes of this paragraph D,
means all federal, state, and local laws, ordinances and regulations and
standards, rules, policies and other binding governmental requirements and any
court judgments applicable to Borrower or to the Property relating to industrial
hygiene or to environmental or unsafe conditions or to human health including,
but not limited to, those relating to the generation, manufacture, storage,
handling, transportation, disposal, release, emission or discharge of Hazardous
Materials, those in connection with the construction, fuel supply, power
generation and transmission, waste disposal or any other operations or processes
relating to the Property, and those relating to the atmosphere, soil, surface
and ground water, wetlands, stream sediments and vegetation on, under, in or
about the Property.
The representations, warranties, covenants, agreements, indemnities and
undertakings of Borrower contained in this paragraph D shall continue and
survive notwithstanding the satisfaction, discharge, release, assignment,
termination, subordination or cancellation of the Instrument or the payment in
full of the principal of and interest on the Note and all other sums payable
under the Loan Documents or the foreclosure of the Instrument or the tender or
delivery of a deed in lieu of foreclosure or the release of any portion of the
Property from the lieu of the Instrument, except with respect to any Prohibited
Activities or Conditions or violation of any of the Hazardous Materials Laws
which first commences and occurs after the satisfaction, discharge, release,
assignment, termination or cancellation of the Instrument following the payment
in full of the principal of and interest on the Note and all other sums payable
under the Loan Documents or which first commences or occurs after the actual
dispossession from the entire Property of the Borrower and all entities which
control, are controlled by, or are under common control with the Borrower (each
of the foregoing persons or entities is hereinafter referred to as a
"Responsible Party") following foreclosure of the Instrument or acquisition of
the Property by a deed in lieu of foreclosure. Nothing in the foregoing sentence
shall relieve the Borrower from any liability with respect to any Prohibited
Activities or Conditions or violation of Hazardous Materials Laws where such
Prohibited Activities or Conditions or violation of Hazardous Materials Laws
commences or occurs, or is present as a result of, any act or omission by any
Responsible Party or by any person or entity acting on behalf of a Responsible
Party.
E. BOOKS, RECORDS AND FINANCIAL INFORMATION
Uniform Covenant 10 of the Instrument ("Books and Records") is amended to
read as follows:
Borrower shall keep and maintain at all times and upon Lender's request,
Borrower shall make available at the Property address, complete and accurate
books of accounts and records in sufficient detail to correctly reflect the
results of the operation of the Property and copies of all written contracts,
leases and other instruments which affect the Property (including but not
limited to all bills, invoices and contracts for electrical service, gas
service, water and sewer service, waste management service, telephone service
and management services). These books, records, contracts, leases and other
instruments shall be subject to examination and inspection at any reasonable
time by Lender. Borrower shall furnish to Lender the following: (i) within 120
days after the end of each fiscal year of
FORM 4059 5/93 (PAGE 3 OF 8 PAGES)
<PAGE>
Borrower, a statement of income and expenses of the Property and a statement of
changes in financial position, and when requested by Lender, a balance sheet,
each in reasonable detail and certified by Borrower and, if Lender shall
require, the foregoing statements shall be audited by an independent certified
public accountant; (ii) together with the foregoing financial statements and at
any other time upon Lender's request, a rent schedule for the Property, in the
form required by Lender and certified by Borrower, showing the name of each
tenant, and for each tenant, the space occupied, the lease expiration date, the
rent payable, the rent paid and any other information requested by Lender; (iii)
upon Lender's request, an accounting of all security deposits held in connection
with any lease of any part of the Property, including the name and
identification number of the accounts in which such security deposits are held,
the name and address of the financial institutions in which such security
deposits are held and the name of the person to contact at such financial
institution, along with any authority or release necessary for Lender to access
information regarding such accounts; and (iv) promptly upon Borrower's receipt,
copies of any complaint filed against the Borrower or the Property management
alleging any violation of fair housing law, handicap access or the Americans
with Disabilities Act and any final administrative or judicial dispositions of
such complaints. If Borrower shall fail to timely provide the financial
statements required by clause (i) above, Lender shall have the right to have the
Borrower's books and records audited in order to obtain such financial
statements, and any such costs and expenses incurred by Lender which Borrower
fails to pay promptly shall become immediately due and payable and shall become
additional indebtedness secured by the Instrument pursuant to paragraph 8 of
the Instrument.
F. TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER
FEES
Uniform Covenant 19 of the Instrument ("Transfers of the Property or
Beneficial Interests in Borrower, Assumption") is amended to read as set forth
below:
TRANSFERS OF THE PROPERTY OR SIGNIFICANT INTERESTS IN BORROWER; TRANSFER FEES
(A) DEFINITIONS
For purposes of the Instrument (and the Rider), the following terms have
the respective meanings set forth below:
(1) The term "Key Principal" means the natural person(s) identified
as such at the foot of the Rider, and any natural person who
becomes a Key Principal after the date of the Note and are
identified as such in an amendment or supplement to the Loan
Documents.
(2) The term "Transfer" means a sale, assignment, transfer or other
disposition (whether voluntary or by operation of law) of, or the
granting or creating of a lien, encumbrance or security interest
in, the Property or in ownership interests, and the issuance or
other creation of ownership interests in an entity and the
reconstitution of one type of entity to another type of entity.
(3) A "Significant Interest" in any entity shall mean the following:
(i) if the entity is a general partnership or a joint venture,
(A) any partnership interest in the general partnership,
or (B) any interest of a joint venturer in a joint
venture;
(ii) if the entity is a limited partnership, (A) any limited
partnership interest in the entity which, together with
all other limited partnership interests in the entity
Transferred since the date of the Note, exceeds 49% of all
of the limited partnership interests in the entity, or (B)
any general partnership interest in the entity;
(iii) if the entity is a limited liability company, any
membership interest which, together with all other
membership interests in the limited liability company
Transferred since the date of the Note, exceeds 49% of all
of the membership interests in the limited liability
company;
(iv) if the entity is a corporation, any voting stock in the
corporation which, together with all other voting stock of
the corporation Transferred since the date of the Note,
exceeds 49% of all of the voting stock of the corporation;
or
(v) if the entity is a trust, any beneficial interest in such
trust which, together with all other beneficial interests
in the trust Transferred since the date of the Note,
exceeds 49% of all of the beneficial interests in the
trust.
(B) ACCELERATION OF THE LOAN UPON TRANSFERS OF THE PROPERTY OR SIGNIFICANT
INTERESTS
Lender may, at Lender's option, declare all sums secured by the Instrument
immediately due and payable and Lender may invoke any remedies permitted by
paragraph 27 of the Instrument if, without the Lender's prior written consent,
any of the following shall occur:
(1) a Transfer of all or any part of the Property or any interest in
the Property;
(2) a Transfer of any Significant Interest in Borrower;
(3) a Transfer of any Significant Interest in a corporation,
partnership, limited liability company, joint venture, or trust
which owns a Significant Interest in the Borrower;
(4) if the Borrower is a trust, or if any trust owns a Significant
Interest in the Borrower, the addition, deletion or substitution
of a trustee of such trust, which addition, deletion or
substitution has not been approved by Lender; or
Form 4059 5/93 (page 4 of 8 pages)
<PAGE>
(5) a Transfer of all or any part of any Key Principal's ownership
interest (other than limited partnership interests) in the
Borrower, or in any other entity which owns, directly or
indirectly, through one or more intermediate entities, an
ownership interest in the Borrower.
(c) TRANSFERS PERMITTED WITH LENDER'S PRIOR CONSENT
Lender shall consent to a Transfer which would otherwise violate this
paragraph 19 if, prior to the Transfer:
(1) Borrower causes to be submitted to Lender all information
required by Lender to evaluate the transferee and the Property as
if a new loan were being made to the transferee and secured by
the Property, in the case of a Transfer of all or any part of the
Property or an interest therein, or to the Borrower (as
reconstituted after the proposed Transfer), in the case of a
Transfer of Significant Interests;
(2) The transferee, in the case of a Transfer of all or any part of
the Property or an interest therein, or the Borrower (as
reconstituted after the proposed Transfer), in the case of a
Transfer of Significant Interests, meet the eligibility, credit,
management and other standards, and the Property meets the
physical maintenance and replacement reserve requirements,
customarily applied by Lender for approval of new borrowers and
properties for loans secured by liens on multifamily properties;
(3) In the case of a Transfer of all or any part of the Property, the
proposed transferee (i) executes an agreement acceptable to
Lender pursuant to which the proposed transferee agrees, upon
consummation of the Transfer, to assume and to pay and perform
all obligations of the Borrower under the Note, the Instrument
and the other Loan Documents, (ii) causes one or more individuals
acceptable to Lender to execute and deliver to Lender an
amendment or supplement to the Loan Documents as "Key Principal,"
and (iii) executes such documents and otherwise provides such
documents and information as required by Lender in connection
with the Transfer;
(4) In the case of a Transfer of a Principal's ownership interest
pursuant to paragraph 19(b)(5), (i) the Borrower (as
reconstituted after the proposed Transfer) executes an agreement
acceptable to Lender that ratifies and confirms the obligations
of Borrower under the Note, the Instrument and the other Loan
Documents, (ii) one or more individuals acceptable to Lender
execute and deliver to Lender an amendment or supplement to the
Loan Documents as "Key Principal," and (iii) the Borrower
executes such documents and otherwise provides such documents and
information as required by Lender in connection with the
Transfer; and
(5) Borrower pays to Lender a $3000 non-refundable application fee
and a transfer fee equal to one percent (1%) of the sums secured
by the Instrument. In addition, Borrower shall be required to
reimburse Lender for all of Lender's out of pocket expenses
incurred in connection with the assumption, to the extent such
expenses exceed $3000.
(d) NO ACCELERATION OF THE LOAN FOR TRANSFERS CAUSED BY CERTAIN EVENTS
Notwithstanding the foregoing provisions of this covenant. Lender shall not
be entitled to declare sums secured by the Instrument immediately due and
payable or to invoke any remedy permitted by paragraph 27 of the Instrument
solely upon the occurrence of any of the following:
(1) A Transfer that occurs by inheritance, devise, or bequest or by
operation of law upon the death of a natural person who is an
owner of the Property or the owner of a direct or indirect
ownership interest in the Borrower.
(2) The grant of a leasehold interest in individual dwelling units
for a term of two years or less and leases for commercial uses as
long as commercial leases do not exceed 20 percent of the
rentable space of the Property (measured as required by Lender)
and provided that all such leasehold interests do not contain an
option to purchase the Property.
(3) A sale or other disposition of obsolete or worn out personal
property which is contemporaneously replaced by comparable
personal property of equal or greater value which is free and
clear of liens, encumbrances and security interests other than
those created by the Loan Documents.
(4) The creation of a mechanic's or materialmen's lien or judgment
lien against the Property which is released of record or
otherwise remedied to Lender's satisfaction, within 30 days of
the date of creation.
(5) The grant of an easement, if prior to the granting of the
easement the Borrower causes to be submitted to Lender all
information required by Lender to evaluate the easement, and if
Lender determines that the easement will not materially affect
the operation of the Property or Lender's interest in the
Property and Borrower pays to Lender, on demand, all cost and
expenses incurred by Lender in connection with reviewing
Borrower's request.
G. NOTICE
Uniform Covenant 20 of the Instrument ("Notice") is amended to read as
follows:
Each notice, demand, consent, or other approval (collectively, "notices"
and singly, "notice") given under the Note, the Instrument, and any other Loan
Document, shall be in writing to the other party, and if to Borrower, at its
address set forth below Borrower's signature on the Instrument, and if to Lender
at its address set forth at the beginning of the Rider, or at such other address
as such party may designate by notice to the other party and shall be deemed
given (a) three (3) Business Days after mailing, by certified or registered U.S.
mail, return receipt requested, postage prepaid, (b) one (1) Business Day after
delivery, fee prepaid, to a national overnight delivery
Form 4059 5/93 (page 5 of 8 pages)
<PAGE>
service (such as Federal Express, Purolator Courier, or U.P.S. Next Day Air), or
(c) when delivered, if personally delivered with proof of delivery thereof.
Borrower and Lender each agrees that it will not refuse or reject delivery
of any notice given hereunder, that it will acknowledge, in writing, the receipt
of the same upon request by the other party and that any notice rejected or
refused by it shall be deemed for all purposes of this Agreement to have been
received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the
courier service. As used in the Instrument, the term "Business Day" means any
day other than a Saturday, a Sunday or any other day on which Lender is not open
for business.
Lender shall not be required to deliver notice to Key Principal in
connection with any notice given to Borrower. However, if Lender shall deliver
notice to Key Principal, such notice shall be given in the manner provided in
this Uniform Covenant 20, at Key Principal's address set forth at the foot of
the Rider.
H. GOVERNING LAW
In addition to the governing law provision of Uniform Covenant 22 of the
Instrument ("Uniform Multifamily Instrument; Governing Law; Severability"), the
Borrower and Lender covenant and agree as follows:
(a) CHOICE OF LAW
The validity of the Instrument and the other Loan Documents, each of their
terms and provisions, and the rights and obligations of Borrower under the
Instrument and the other Loan Documents, shall be governed by, interpreted,
construed, and enforced pursuant to and in accordance with the laws of the
Property Jurisdiction.
(b) CONSENT TO JURISDICTION
Borrower consents to the exclusive jurisdiction of any and all state and
federal courts with jurisdiction in the Property Jurisdiction over Borrower and
the Borrower's assets. Borrower agrees that such assets shall be used first to
satisfy all claims of creditors organized or domiciled in the United States of
America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.
Borrower agrees that any controversy arising under or in relation to the
Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction. The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which may arise under or in relation to the
Note, and any security for the debt evidenced by the Note, including without
limitation those controversies relating to the execution, interpretation,
breach, enforcement, or compliance with the Note, the Instrument, or any other
issue arising under, related to, or in connection with any of the Loan
Documents. Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any litigation arising from the Note, the Instrument or any of
the other Loan Documents, and waives any other venue to which it might be
entitled by virtue of domicile, habitual residence or otherwise.
I. ACCELERATION; REMEDIES
Covenant 27 of the Instrument ("Acceleration; Remedies") is amended to add
the following at the end of the first paragraph:
Upon the breach of any covenant or agreement by Borrower in the Instrument,
(including, but not limited to, the covenants to pay when due sums secured by
the Instrument) or any other Loan Document, Lender, at Lender's option may, in
addition to any remedies specified in this covenant, invoke any other remedies
provided in any Collateral Agreement.
If Borrower is in default under any promissory note (other than the Note)
evidencing a loan (the "Subordinate Loan") secured by a security instrument
(other than the Instrument) covering all or any portion of the Property (the
"Subordinate Instrument") or under any Subordinate Instrument or other loan
document executed in connection with the Subordinate Loan, (and whether or not
the Borrower has obtained the prior approval of Lender to the placement of such
Subordinate Instrument on the Property) which default remains uncured after any
applicable cure period, Borrower also then will be in default under the Note and
the Instrument. In that event, the entire unpaid principal balance of the Note,
accrued interest and any other sums due Lender secured by the Instrument then
will become due and payable, at Lender's option. If Lender exercises this option
to accelerate, Lender will do so in accordance with the provisions of the Note
and the Instrument, and the Lender may invoke any and all remedies permitted by
applicable law, the Note, the Instrument, or any of the other Loan Documents.
J. SINGLE ASSET BORROWER
Until the debt evidenced by the Note is paid in full, Borrower shall not
(1) acquire any real or personal property other than the Property and assets
(such as accounts) related to the operation and maintenance of the Property, or
(2) operate any business other than the management and operation of the
Property.
K. NON-RECOURSE LIABILITY
Subject to the provisions of paragraph L and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if Borrower is a partnership), and any Key
Principal to pay the principal of and interest on the debt evidenced by the Note
and any other agreement evidencing Borrower's obligations under the Note and the
Instrument shall be limited to (1) the real and personal property described as
the "Property" in the Instrument, (2) the personal property described in and
pledged under any Collateral Agreement executed in connection with the loan
evidenced by the Note, (3) the rents, profits, issues, products and income of
the Property received or collected by or on behalf of Borrower (the "Rents and
Profits") to the extent such receipts
FORM 4059 5/93 (PAGE 6 OF 8 PAGES)
<PAGE>
are necessary, first, to pay the reasonable expenses of operating, managing,
maintaining and repairing the Property, including but not limited to real estate
taxes, utilities, assessments, insurance premiums, repairs, replacements and
ground rents, if any (the "Operating Expenses") then due and payable as of the
time of receipt of such Rents and Profits, and then, to pay the principal and
interest due under the Note, and any other sums due under the Instrument or any
other Loan Document (including but not limited to deposits or reserves due under
any Collateral Agreement), except to the extent that Borrower did not have the
legal right, because of a bankruptcy, receivership or similar judicial
proceeding, to direct the disbursement of such sums.
Except as provided in paragraph L, Lender shall not seek (a) any judgment
for a deficiency against Borrower, any general partner of Borrower (if Borrower
is a partnership) or any Key Principal, or Borrower's or any such general
partner's or Key Principal's heirs, legal representatives, successors or
assigns, in any action to enforce any right or remedy under the Instrument, or
(b) any judgment on the Note except as may be necessary in any action brought
under the Instrument to enforce the lien against the Property or to exercise any
remedies under any Collateral Agreement.
L. EXCEPTIONS TO NON-RECOURSE LIABILITY
If, without obtaining Lender's prior written consent, (i) a Transfer shall
occur which, pursuant to Uniform Covenant 19 of the Instrument, gives Lender the
right, at its option, to declare all sums secured by the Instrument immediately
due and payable, (ii) Borrower shall encumber the Property with the lien of any
Subordinate Instrument in connection with any financing by Borrower, or (iii)
Borrower shall violate the single asset covenant in paragraph J of the Rider,
any of such events shall constitute a default by Borrower under the Note, the
Instrument and the other Loan Documents and if such event shall continue for 30
days, paragraph K shall not apply from and after the date which is 30 days after
such event and the Borrower, any general partner of Borrower (if Borrower is a
partnership) and Key Principal (each individually on a joint and several basis
if more than one) shall be personally liable on a joint and several basis for
full recourse liability under the Note and the other Loan Documents.
Notwithstanding paragraph K, Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint and
several basis if more than one), shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including but not
limited to attorneys' fees) resulting from (A) fraud or intentional
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants and other sums or payments received by or on behalf of
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right, because of a bankruptcy, receivership or similar
judicial proceeding, to direct disbursement of such sums or payments), (C) all
Rents and Profits (except to the extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and all other sums due under the Instrument and all other Loan
Documents (including but not limited to deposits or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due under paragraph 19(c) of the Instrument, or (E) Borrower's failure following
a default under any of the Loan Documents to deliver to Lender on demand all
Rents and Profits, and security deposits (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceeding to direct disbursement of such sums), books and records
relating to the Property.
No provision of paragraphs K or L shall (i) affect any guaranty or similar
agreement executed in connection with the debt evidenced by the Note, (ii)
release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.
M. WAIVER OF JURY TRAIL
Borrower and Key Principal (each for himself if more than one) (i) covenant
and agree not to elect a trial by jury with respect to any issue arising under
any of the Loan Documents triable by a jury and (ii) waive any right to trial by
jury to the extent that any such right shall now or hereafter exist. This waiver
of right to trial by jury is separately given, knowingly and voluntarily with
the benefit of competent legal counsel by the Borrower and Key Principal, and
this waiver is intended to encompass individually each instance and each issue
as to which the right to a jury trial would otherwise accrue. Further, Borrower
and Key Principal hereby certify that no representative or agent of the Lender
(including, but not limited to, the Lender's counsel) has represented, expressly
or otherwise, to Borrower or Key Principal that Lender will not seek to enforce
the provisions of this paragraph M.
Form 4059 5/93 (page 7 or 8 pages)
<PAGE>
By Signing Below, Borrower accepts and agrees to the covenants and agreements
contained in this Rider.
Borrower:
MAPLE GROVE APARTMENT HOMES, INC.,
-----------------------------------
a Wisconsin corporation
-----------------------------------
By: /s/ Arnold K. Leas
------------------------- (Seal)
Name: Arnold K. Leas
-----------------------------
Title: President
----------------------------
ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO PERSONAL LIABILITY FOR THE
EXCEPTIONS TO NON-RECOURSE
Key Principal (each for himself if more than one) hereby represents to
Lender that he has a direct or indirect ownership interest in the Borrower and
that he participates in the management of the Borrower.
By Signing Below, the undersigned Key Principal (each for himself if more
than one) understands, accepts and agrees to the provisions of paragraph F, G,
L, and M above. No transfer of Key Principal's ownership interest in Borrower or
in any entity which directly or indirectly has an ownership interest in Borrower
shall release Key Principal from liability hereunder, unless the Borrower and
Key Principal shall have complied with the provisions of paragraph F above and
Lender shall have approved the transfer and the substituted Key Principal. Key
Principal shall have no right of subrogation against the Borrower or any general
partner of Borrower by reason of any payment by Key Principal pursuant to
paragraph L.
Key Principal:
/s/ Arnold K. Leas
--------------------------------- (Seal)
Name: Arnold K. Leas
-----------------------------------
Address: 18650 W. Corporate Drive, Ste.
---------------------------------
300 Brookfield, Wisconsin 53045
-----------------------------------------
---------------------------------- (Seal)
Name:------------------------------------
Address:---------------------------------
-----------------------------------------
---------------------------------- (Seal)
Name:------------------------------------
Address:---------------------------------
-----------------------------------------
Attach notarial acknowledgment(s) for Key Principal. [Attach notarial
acknowledgment(s) for Borrower signatories, if applicable]
Form 4059 5/93 (page 8 of 8 pages)
<PAGE>
[KEY PRINCIPAL ACKNOWLEDGMENT]
STATE OF WISCONSIN )
: ss.
COUNTY OF WAUKESHA )
On the 1st day of May, 1997, before me personally came ARNOLD K. LEAS to me
known and known to me to be the individual described in and who executed the
foregoing instrument, and acknowledged to me that he executed the same.
[SEAL] [SIGNATURE ILLEGIBLE]^^
----------------------------------
NOTARY PUBLIC
<PAGE>
SECOND RIDER TO MULTIFAMILY INSTRUMENT
--------------------------------------
N. CONDOMINIUM DECLARATION
(1) Borrower agrees that the certain Declaration of Condominium for Maple
Grove Apartments Homes (the "Condominium Declaration") recorded May 21, 1993 in
Volume 22828 of Records, page 15, as Document No. 2469320 in Office of the land
records of Dane County, Wisconsin shall be subordinate to the Instrument.
(2) Borrower agrees that none of the units as defined in the Condominium
Declaration or an interest in them shall be sold, conveyed or otherwise
transferred, in whole or in part, or converted, partitioned or subdivided into
additional condominium units, without the prior written consent of Lender as
defined in the Instrument. Any such sale, conveyance or other transfer of fewer
than all of the units, or conversion, partition or subdivision, without the
required consent of Lender shall be an event of default under the Instrument,
and at the option of Lender, any and all sums due under the Note and secured by
the Instrument shall become immediately due and payable. A sale of all of the
units shall be subject to the acceleration-upon-transfer provisions and
restrictions set forth in paragraph F of the Rider to the Instrument.
(3) Borrower agrees that the Condominium Declaration will not be modified
or amended without the prior written consent of the Lender until any and all
sums due and owing to Lender under the Note and secured by the Instrument
have been paid in full. Any such modification or amendment made without the
prior written consent of Lender shall be an event of default under the
instrument, and at the option of the Lender, all sums due and owing under the
Instrument shall become immediately due and payable.
O. INDEMNIFICATION OF LENDER
Borrower herby agrees to indemnify and hold Lender, its successors and
assigns harmless from and against any and all losses, costs, liabilities or
damages (including attorneys fees and disbursements) arising out of (i) the
failure of the Borrower to comply with any state or local law, ordinance,
statute or regulation by any governmental authority covering the condominium at
the Property; or (ii) any claim of any unit owner or tenant of any unit owner as
a result of any violation, breach, misrepresentation, fraud, act or omission of
any obligation of Borrower as set forth in the Condominium Declaration.
BY SIGNING BELOW, Borrower accepts and agrees to the agreements and
covenants contained in this Second Rider to Multifamily Mortgage.
Dated: as of May 6, 1997
BORROWER:
MAPLE GROVE APARTMENT HOMES, INC.,
a Wisconsin corporation
By: /s/ Arnold K. Leas
--------------------------------
Name: Arnold K. Leas
Title: President
