EXHIBIT 4.5
PROMISSORY NOTE
$13,500,000.00 New York, New York
March __, 1999
FOR VALUE RECEIVED AERC OF NC, LLC, a Delaware limited
liability company, as maker, having its principal place of
business at 5025 Swetland Court, Cleveland, Ohio 44143
("Borrower"), hereby unconditionally promises to pay to the order
of THE CHASE MANHATTAN BANK, a New York banking corporation, as
payee, having an address at 380 Madison Avenue, 10th Floor, New
York, New York 10017 ("Lender"), or at such other place as the
holder hereof may from time to time designate in writing, the
principal sum of THIRTEEN MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($13,500,000.00) in lawful money of the United
States of America with interest thereon to be computed from the
date of this Note at the Applicable Interest Rate (defined
below), and to be paid in installments as follows:
ARTICLE 1 PAYMENT TERMS
(a) A payment of interest only on the tenth day of April,
1999;
(b) A payment of interest on the unpaid principal balance
on the tenth day of May, 1999 and on the tenth day of each
calendar month thereafter up to and including the tenth day of
April, 2000; and
(c) A payment of $95,106.45 on the tenth day of May, 2000
and on the tenth day of each calendar month thereafter up to and
including the tenth day of March, 2009;
each of the payments to be applied as follows:
(i) first, to the payment of interest computed at the
Applicable Interest Rate; and
(ii) the balance toward the reduction of the principal
sum;
and the balance of the principal sum and all interest thereon
shall be due and payable on the tenth day of April, 2009 (the
"Maturity Date"). Interest on the principal sum of this Note
shall be calculated by multiplying the actual number of days
elapsed in the applicable period by a daily rate based upon a
three hundred sixty (360) day year. The first interest accrual
period hereunder shall commence on and include the date that
principal is advanced hereunder and shall end on and include the
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next ninth (9th) day of a calendar month, unless principal is
advanced on the ninth (9th) day of a month, in which case the
first interest accrual period shall consist of only such ninth
(9th) day. Each interest accrual period thereafter shall
commence on the tenth (10th) day of each calendar month during
the term of this Note and shall end on and include the ninth
(9th) day of the next occurring calendar month.
ARTICLE 2 INTEREST
The term "Applicable Interest Rate" as used in the Security
Instrument (defined below) and this Note shall mean an interest
rate equal to seven and three eighths percent (7.375%) per annum.
ARTICLE 3 DEFAULT AND ACCELERATION
(a) The whole of the principal sum of this Note, (b)
interest, default interest, late charges and other sums, as
provided in this Note, the Security Instrument or the Other
Security Documents (defined below), (c) all other monies agreed
or provided to be paid by Borrower in this Note, the Security
Instrument or the Other Security Documents, (d) all sums advanced
pursuant to the Security Instrument to protect and preserve the
Property (defined below) and the lien and the security interest
created thereby, and (e) all sums advanced and costs and expenses
incurred by Lender in connection with the Debt (defined below) or
any part thereof, any renewal, extension, or change of or
substitution for the Debt or any part thereof, or the acquisition
or perfection of the security therefor, whether made or incurred
at the request of Borrower or Lender (all the sums referred to in
(a) through (e) above shall collectively be referred to as the
"Debt") shall without notice become immediately due and payable
at the option of Lender if any payment required in this Note is
not paid on or prior to the date when due or on the happening of
any other default, after the expiration of any applicable notice
and grace periods, herein or under the terms of the Security
Instrument or any of the Other Security Documents (collectively,
an "Event of Default").
ARTICLE 4 DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an
Event of Default, Lender shall be entitled to receive and
Borrower shall pay interest on the entire unpaid principal sum at
a rate equal to the lesser of (a) five percent (5%) plus the
Applicable Interest Rate and (b) the maximum interest rate which
Borrower may by law pay (the "Default Rate"). The Default Rate
shall be computed from the occurrence of the Event of Default
until the earlier of the date upon which the Event of Default is
cured or the date upon which the Debt is paid in full. Interest
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calculated at the Default Rate shall be added to the Debt, and
shall be deemed secured by the Security Instrument. This clause,
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 Lender by reason of the
occurrence of any Event of Default.
ARTICLE 5 PREPAYMENT; DEFEASANCE
(a) The principal balance of this Note may not be prepaid
in whole or in part prior to the Maturity Date except as
expressly permitted pursuant to Section 5(l) hereof.
(b) Subject to compliance with and satisfaction of the
terms and conditions of this Article 5 and provided that no Event
of Default exists under this Note, Borrower may elect on any
Monthly Payment Date (defined below) after the Lockout Period
Expiration Date (defined below), to release (the "Release") the
Property from the lien of the Security Instrument by delivering
to Lender (a "Defeasance"), as security for the payment of all
interest and principal due and to become due pursuant to this
Note throughout the term hereof, Defeasance Collateral (defined
below) sufficient to generate Scheduled Defeasance Payments
(defined below). "Monthly Payment Date" shall mean the tenth day
of each calendar month prior to the Maturity Date. "Lockout
Period Expiration Date" shall mean the earlier to occur of (A)
April 10, 2002, or (B) the second anniversary of the "startup
day" within the meaning of Section 860G(a)(9) of the IRS Code
(defined below) of a REMIC Trust (defined below).
(c) As a condition precedent to a Defeasance, and prior to
any Release, Borrower shall have complied with all of the
following:
(i) Borrower shall provide not less than sixty (60) days
prior written notice to Lender of the Monthly Payment
Date upon which it intends to effect a Defeasance
hereunder (the "Defeasance Date").
(ii) All accrued and unpaid interest and all other sums
due under this Note, the Security Instrument and the
Other Security Documents up to the Defeasance Date
shall be paid in full on or prior to the Defeasance
Date.
(iii) Borrower shall have delivered to Lender all necessary
documents to reflect that the principal balance of
this Note has been defeased. This Note shall
thereafter be secured by the Defeasance Collateral
delivered in connection with the Defeasance. After
Defeasance, this Note cannot be prepaid in whole or
in part or be the subject of any further Defeasance.
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(iv) Borrower shall execute and deliver to Lender any and
all certificates, opinions, documents or instruments
required by Lender in connection with the Defeasance
and Release, including, without limitation, a pledge
and security agreement satisfactory to Lender
creating a first priority lien on the Defeasance
Collateral (a "Defeasance Security Agreement").
(v) Borrower shall have delivered to Lender an opinion of
Borrower's counsel in form and substance satisfactory
to Lender stating (A) that the Defeasance Collateral
and the proceeds thereof have been duly and validly
assigned and delivered to Lender and that Lender has
a valid, perfected, first priority lien and security
interest in the Defeasance Collateral delivered by
Borrower and the proceeds thereof, and (B) that if
the holder of this Note shall at the time of the
Release be a REMIC (defined below), (1) the
Defeasance Collateral has been validly assigned to
the REMIC Trust which holds this Note (the "REMIC
Trust"), (2) the Defeasance has been effected in
accordance with the requirements of Treasury
Regulation 1.860(g)-2(a)(8) (as such regulation may
be amended or substituted from time to time) and will
not be treated as an exchange pursuant to Section
1001 of the IRS Code and (3) the tax qualification
and status of the REMIC Trust as a REMIC will not be
adversely affected or impaired as a result of the
Defeasance. The term "REMIC" shall mean a "real
estate mortgage investment conduit" within the
meaning of Section 860D of the IRS Code. "IRS Code"
shall mean the United States Internal Revenue Code of
1986, as amended, and the related Treasury Department
regulations, including temporary regulations.
(vi) Borrower shall have delivered to Lender written
confirmation from the Rating Agencies (defined in the
Security Instrument) that such Defeasance will not
result in a withdrawal, downgrade or qualification of
the then current ratings by the applicable Rating
Agencies of the Securities (defined in the Security
Instrument). If required by the Rating Agencies,
Borrower shall, at Borrower's expense, also deliver
or cause to be delivered a non-consolidation opinion
with respect to the Defeasance Obligor (as defined
below) in form and substance satisfactory to Lender
and the Rating Agencies.
(vii) Borrower shall have delivered to Lender a certificate
satisfactory to Lender given by Borrower's
independent certified public accountant (which
accountant shall be reasonably satisfactory to
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Lender) certifying that the Defeasance Collateral
shall generate monthly amounts equal to or greater
than the Scheduled Defeasance Payments required to be
paid under this Note through and including the
Maturity Date.
(d) In connection with any Defeasance hereunder, Borrower
shall (unless otherwise agreed to in writing by Lender), at
Borrower's expense, establish or designate a successor entity,
which shall be a single purpose, bankruptcy remote entity
approved by Lender, as such term is described in Section 4.2 of
the Security Instrument (the "Defeasance Obligor") and Borrower
shall transfer and assign all obligations, rights and duties
under and to this Note together with the pledged Defeasance
Collateral to such Defeasance Obligor. Such Defeasance Obligor
shall assume the obligations under this Note and any Defeasance
Security Agreement, and Borrower shall be relieved of its
obligations under such documents and, except with respect to any
provisions of the Note, the Security Instrument or the Other
Security Documents which by their terms expressly survive payment
of the Debt in full, the Note, the Security Instrument or the
Other Security Documents.
(e) Each of the obligations of the United States of
America that is part of the Defeasance Collateral shall be duly
endorsed by the holder thereof as directed by Lender or
accompanied by a written instrument of transfer in form and
substance wholly satisfactory to Lender (including, without
limitation, such instruments as may be required by the depository
institution holding such securities or by the issuer thereof, as
the case may be, to effectuate book-entry transfers and pledges
through the book-entry facilities of such institution) in order
to perfect upon the delivery of the Defeasance Collateral a first
priority security interest therein in favor of the Lender in
conformity with all applicable state and federal laws governing
the granting of such security interests. Borrower shall
authorize and direct that the payments received from such
obligations shall be made directly to Lender or Lender's designee
and applied to satisfy the obligations of Borrower or, if
applicable, the Defeasance Obligor, under this Note.
(f) The Defeasance Collateral shall generate payments on
or prior to, but as close as possible to, the Business Day
(defined below) prior to each successive Monthly Payment Date
after the date of the Defeasance upon which payments are
required under this Note and in amounts equal to or greater than
the payments due on such dates (including, without limitation
scheduled payments of principal, interest, servicing fees (if
any) and any other regularly scheduled amounts due under this
Note, the Security Instrument or the Other Security Documents on
such dates) together with the outstanding principal amount of
this Note which would be due on the Maturity Date (the "Scheduled
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Defeasance Payments"). The term "Business Day" shall mean a day
upon which commercial banks are not authorized or required by law
to close in New York, New York.
(g) Notwithstanding any release of the Security
Instrument granted pursuant to this Article 5 or any Defeasance
hereunder, the Defeasance Obligor shall, and hereby agrees to be,
bound by and obligated under Sections 3.1, 7.2, 7.4(a), 11.2,
11.7 and 14.2 and Articles 13 and 15 of the Security Instrument;
provided, however, that all references therein to "Property" or
"Personal Property" shall be deemed to refer only to the
Defeasance Collateral delivered to Lender.
(h) Any costs or expenses incurred or to be incurred in
connection with the Defeasance and any revenue, documentary stamp
or intangible taxes or any other tax or charge due in connection
with the transfer of this Note, or otherwise required to
accomplish the Defeasance shall be paid by Borrower
simultaneously with the occurrence of any Defeasance.
(i) The term "Defeasance Collateral" as used herein shall
mean non-callable and non-redeemable securities evidencing an
obligation to timely pay principal and interest in a full and
timely manner that are direct obligations of the United States of
America for the payment of which its full faith and credit is
pledged.
(j) Upon Borrower's compliance with all of the conditions
to Defeasance and a Release set forth in Article 5(b) through
(i), Lender shall release the Property from the lien of the
Security Instrument and the Other Security Documents. All costs
and expenses of Lender incurred in connection with the Defeasance
and Release, including, without limitation, Lender's counsel's
reasonable fees and expenses, shall be paid by Borrower
simultaneously with the delivery of the Release documentation.
(k) If a Default Prepayment (defined below) occurs,
Borrower shall pay to Lender the entire Debt, including, without
limitation, an amount (the "Default Consideration") equal to the
greater of (i) the amount (if any) which, when added to the
outstanding principal amount of the Note will be sufficient to
purchase Defeasance Collateral providing the required Scheduled
Defeasance Payments assuming Defeasance would be permitted
hereunder, or (ii) one percent (1%) of the Default Prepayment.
For purposes of this Note, the term "Default Prepayment" shall
mean a prepayment of the principal amount of this Note made after
the acceleration of the Maturity Date under any circumstances,
including, without limitation, a prepayment occurring after an
Event of Default or in connection with reinstatement of the
Security Instrument provided by statute under foreclosure
proceedings or exercise of a power of sale, any statutory right
of redemption exercised by Borrower or any other party having a
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statutory right to redeem or prevent foreclosure, any sale in
foreclosure or under exercise of a power of sale or otherwise.
(l) Notwithstanding anything to the contrary herein,
provided no Event of Default exists under this Note, the Security
Instrument or the Other Security Documents, (i) Borrower may
prepay the principal balance of this Note in whole during the
three (3) months prior to the Maturity Date and no prepayment
consideration shall be due in connection therewith, but Borrower
shall be required to pay all other sums due hereunder together
with all interest which would have accrued on the principal
balance of this Note after the date of prepayment to the next
Monthly Payment Date (the "Interest Shortfall Payment"), if such
prepayment occurs on a date which is not a Monthly Payment Date;
and (ii) if a complete or partial prepayment results from the
application of insurance proceeds or condemnation awards pursuant
to Sections 3.3, 3.6 or 4.3 of the Security Instrument, no
prepayment consideration or Default Consideration shall be due in
connection therewith, but Borrower shall be required to pay all
other sums due hereunder, including, without limitation, the
Interest Shortfall Payment, if applicable.
ARTICLE 6 SECURITY
This Note is secured by the Security Instrument and the
Other Security Documents. The term "Security Instrument" as used
in this Note shall mean the Deed of Trust and Security Agreement
dated the date hereof in the principal sum of $13,500,000.00
given by Borrower to (or for the benefit of) Lender covering the
fee estate of Borrower in certain premises located in Wake
County, State of North Carolina and other property, as more
particularly described therein (collectively, the "Property") and
intended to be duly recorded in said County. The term "Other
Security Documents" as used in this Note shall mean all and any
of the documents other than this Note or the Security Instrument
now or hereafter executed by Borrower and/or others and by or in
favor of Lender, which wholly or partially secure or guarantee
payment of this Note. Whenever used, the singular number shall
include the plural, the plural number shall include the singular,
and the words "Lender" and "Borrower" shall include their
respective successors, assigns, heirs, executors and
administrators.
All of the terms, covenants and conditions contained in the
Security Instrument and the Other Security Documents are hereby
made part of this Note to the same extent and with the same force
as if they were fully set forth herein.
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ARTICLE 7 SAVINGS CLAUSE
This Note is subject to the express condition that at no
time shall Borrower be obligated or required to pay interest on
the principal balance due hereunder at a rate which could subject
Lender to either civil or criminal liability as a result of being
in excess of the maximum interest rate which Borrower is
permitted by applicable law to contract or agree to pay. If by
the terms of this Note, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder
at a rate in excess of such maximum rate, the Applicable Interest
Rate or the Default Rate, as the case may be, shall be deemed to
be immediately reduced to such maximum rate and all previous
payments in excess of the maximum rate shall be deemed to have
been payments in reduction of principal and not on account of the
interest due hereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance, or detention of the Debt, shall,
to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term
of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the maximum
lawful rate of interest from time to time in effect and
applicable to the Debt for so long as the Debt is outstanding.
ARTICLE 8 LATE CHARGE
If any sum payable under this Note is not paid on or prior
to the date on which it is due, Borrower shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of the
unpaid sum or the maximum amount permitted by applicable law to
defray the expenses incurred by Lender in handling and processing
the delinquent payment and to compensate Lender for the loss of
the use of the delinquent payment and the amount shall be secured
by the Security Instrument and the Other Security Documents.
ARTICLE 9 NO ORAL CHANGE
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 Borrower or Lender, but only by an
agreement in writing signed by the party against whom enforcement
of any modification, amendment, waiver, extension, change,
discharge or termination is sought.
ARTICLE 10 JOINT AND SEVERAL LIABILITY
If Borrower consists of more than one person or party, the
obligations and liabilities of each person or party shall be
joint and several.
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ARTICLE 11 WAIVERS
Borrower 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
and notice of protest and non-payment and all other notices of
any kind. No release of any security for the Debt or extension
of time for payment of this Note or any installment hereof, and
no alteration, amendment or waiver of any provision of this Note,
the Security Instrument or the Other Security Documents made by
agreement between Lender or any other person or party shall
release, modify, amend, waive, extend, change, discharge,
terminate or affect the liability of Borrower, and any other
person or entity who may become liable for the payment of all or
any part of the Debt, under this Note, the Security Instrument or
the Other Security Documents. No notice to or demand on Borrower
shall be deemed to be a waiver of the obligation of Borrower or
of the right of Lender to take further action without further
notice or demand as provided for in this Note, the Security
Instrument or the Other Security Documents. If Borrower is a
partnership, the agreements contained herein shall remain in full
force and effect, notwithstanding any changes in the individuals
or entities comprising the partnership, and the term "Borrower,"
as used herein, shall include any alternate or successor
partnership, but any predecessor partnership and its partners
shall not thereby be released from any liability. If Borrower is
a corporation, the agreements contained herein shall remain in
full force and effect notwithstanding any changes in the
shareholders comprising, or the officers and directors relating
to, the corporation, and the term "Borrower" as used herein,
shall include any alternate or successor corporation, but any
predecessor corporation shall not be relieved of liability
hereunder. If Borrower is a limited liability company, the
agreements herein contained shall remain in full force and
effect, notwithstanding any changes in the individuals or
entities comprising the limited liability company and the term
"Borrower," as used herein, shall include any alternate or
successor limited liability company, but any predecessor limited
liability company and ts members shall not be released from any
liability. (Nothing in the foregoing sentence shall be construed
as a consent to, or a waiver of, any prohibition or restriction
on transfers of interests in such partnership, corporation or
limited liability company which may be set forth in the Security
Instrument or any Other Security Document.)
ARTICLE 12 TRANSFER
Upon the transfer of this Note, Borrower hereby waiving
notice of any such transfer, Lender may deliver all the
collateral mortgaged, granted, pledged or assigned pursuant to
the Security Instrument and the Other Security Documents, or any
part thereof, to the transferee who shall thereupon become vested
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with all the rights herein or under applicable law given to
Lender with respect thereto, and Lender shall thereafter forever
be relieved and fully discharged from any liability or
responsibility in the matter, but Lender shall retain all rights
hereby given to it with respect to any liabilities and the
collateral not so transferred.
ARTICLE 13 WAIVER OF TRIAL BY JURY
BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS NOTE, THE
APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE, THIS NOTE, THE
SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS
OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR
AGENTS IN CONNECTION THEREWITH.
ARTICLE 14 EXCULPATION
(a) Except as otherwise provided herein, in the Security
Instrument or in the Other Security Documents, Lender shall not
enforce the liability and obligation of Borrower to perform and
observe the obligations contained in this Note or the Security
Instrument or any of the Other Security Documents by any action
or proceeding wherein a money judgment shall be sought against
Borrower, except that Lender may bring a foreclosure action,
action for specific performance or other appropriate action or
proceeding to enable Lender to enforce and realize upon this
Note, the Security Instrument, the Other Security Documents, and
the interest in the Property, the Rents (as defined in the
Security Instrument) and any other collateral given to Lender
created by this Note, the Security Instrument and the Other
Security Documents; provided, however, that any judgment in any
such action or proceeding shall be enforceable against Borrower
only to the extent of Borrower's interest in the Property, in the
Rents and in any other collateral given to Lender. Lender, by
accepting this Note and the Security Instrument, agrees that it
shall not, except as otherwise provided in this Article 14, sue
for, seek or demand any deficiency judgment against Borrower in
any such action or proceeding, under or by reason of or under or
in connection with this Note, the Other Security Documents or the
Security Instrument. The provisions of this Section shall not,
however, (i) constitute a waiver, release or impairment of any
obligation evidenced or secured by this Note, the Other Security
Documents or the Security Instrument; (ii) impair the right of
Lender to name Borrower as a party defendant in any action or
suit for judicial foreclosure and sale under the Security
Instrument; (iii) affect the validity or enforceability of any
indemnity (including, without limitation, the Environmental
Indemnity (as defined in the Security Instrument)), guaranty,
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master lease or similar instrument made in connection with this
Note, the Security Instrument, or the Other Security Documents;
(iv) impair the right of Lender to obtain the appointment of a
receiver; (v) impair the enforcement of the Assignment of Leases
and Rents executed in connection herewith; (vi) impair the right
of Lender to enforce the provisions of Section 13.2, of the
Security Instrument; or (vii) impair the right of Lender to
obtain a deficiency judgment or other judgment on the Note
against Borrower if necessary to obtain any insurance proceeds or
condemnation awards to which Lender would otherwise be entitled
under this Security Instrument; provided however, Lender shall
only enforce such judgment to the extent of the insurance
proceeds and/or condemnation awards.
(b) Notwithstanding the provisions of this Article 14 to
the contrary, Borrower shall be personally liable to Lender for
the Losses (as defined in the Security Instrument) it incurs due
to: (i) fraud or intentional misrepresentation by Borrower or any
other person or entity in connection with the execution and the
delivery of this Note, the Security Instrument or the Other
Documents; (ii) Borrower's misapplication or misappropriation of
Rents received by Borrower after the occurrence of an Event of
Default; (iii) Borrower's misapplication or misappropriation of
tenant security deposits or Rents collected in advance; (iv) the
misapplication or the misappropriation of insurance proceeds or
condemnation awards; (v) Borrower's failure to pay Taxes (as
defined in the Security Instrument), Other Charges (as defined in
the Security Instrument) (except to the extent that sums
sufficient to pay such amounts have been deposited in escrow with
Lender pursuant to the terms of the Security Instrument), charges
for labor or materials or other charges that can create liens on
the Property; (vi) Borrower's failure to return or to reimburse
Lender for all Personal Property (as defined in the Security
Instrument) taken from the Property by or on behalf of Borrower
and not replaced with Personal Property of the same utility and
of the same or greater value; (vii) any act of actual waste or
arson by Borrower, any principal, affiliate, member or general
partner thereof or by any Indemnitor (as defined in the Security
Instrument) or Guarantor (as defined in the Security Instrument);
(viii) any fees or commissions paid by Borrower to any principal,
affiliate, member or general partner of Borrower, Indemnitor or
Guarantor in violation of the terms of this Note, the Security
Instrument or the Other Security Documents; or (ix) Borrower's
failure to comply with the provisions of Sections 12.1 and 12.2
of the Security Instrument.
(c) Notwithstanding the foregoing, the agreement of
Lender not to pursue recourse liability as set forth in
Subsection (a) above SHALL BECOME NULL AND VOID and shall be of
no further force and effect in the event of Borrower's default
under Sections 3.11 (after ten (10) days written notice) or 4.2
or Article 8 of the Security Instrument, or in the event of
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Principal's (as defined in the Security Instrument) default under
Section 4.2 of the Security Instrument; provided, however, that
with respect to Borrower's default under Section 3.11 of the
Security Instrument only, upon Borrower's cure of said default,
Lender's agreement not to pursue recourse liability shall be
reinstated, provided further, however, that Borrower shall be
liable to Lender for the losses it realizes due to Borrower's
failure to deliver the statements required pursuant to the terms
of Section 3.11 of the Security Instrument from the date of said
failure up to and including the date of said cure.
(d) Nothing herein shall be deemed to be a waiver of any
right which Lender may have under Section 506(a), 506(b), 1111(b)
or any other provision of the U.S. Bankruptcy Code to file a
claim for the full amount of the indebtedness secured by the
Security Instrument or to require that all collateral shall
continue to secure all of the indebtedness owing to Lender in
accordance with this Note, the Security Instrument and the Other
Security Documents.
ARTICLE 15 AUTHORITY
Borrower (and the undersigned representative of Borrower, if
any) represents that Borrower has full power, authority and legal
right to execute and deliver this Note, the Security Instrument
and the Other Security Documents and that this Note, the Security
Instrument and the Other Security Documents constitute valid and
binding obligations of Borrower.
ARTICLE 16 APPLICABLE LAW
This Note shall be deemed to be a contract entered into
pursuant to the laws of the State of New York and shall in all
respects be governed, construed, applied and enforced in
accordance with the laws of the State of New York.
ARTICLE 17 JURISDICTION
With respect to any claim or action arising hereunder or
under the Security Instrument or the Other Security Documents,
Borrower (a) irrevocably submits to the nonexclusive jurisdiction
of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York,
New York, and appellate courts from any thereof, and (b)
irrevocably waives any objection which it may have at any time to
the laying on venue of any suit, action or proceeding arising out
of or relating to this Note brought in any such court,
irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an
inconvenient forum. Nothing in this Note will be deemed to
preclude Lender from bringing an action or proceeding with
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respect hereto in any other jurisdiction.
ARTICLE 18 COUNSEL FEES
In the event that it should become necessary to employ
counsel to collect the Debt or to protect or foreclose the
security therefor, Borrower also agrees to pay all reasonable
fees and expenses of Lender, including, without limitation,
reasonable attorney's fees for the services of such counsel
whether or not suit be brought.
ARTICLE 19 NOTICES
All notices required or permitted hereunder shall be given
and become effective as provided in the Security Instrument.
ARTICLE 20 MISCELLANEOUS
(a) Wherever pursuant to this Note (i) Lender exercises
any right given to it to approve or disapprove, (ii) any
arrangement or term is to be satisfactory to Lender, or (iii) any
other decision or determination is to be made by Lender, the
decision of Lender to approve or disapprove, all decisions that
arrangements or terms are satisfactory or not satisfactory and
all other decisions and determinations made by Lender, shall be
in the sole and absolute discretion of Lender, except as may be
otherwise expressly and specifically provided herein.
(b) Wherever pursuant to this Note it is provided that
Borrower pay any costs and expenses, such costs and expenses
shall include, but not be limited to, reasonable legal fees and
disbursements of Lender, whether with respect to retained firms,
the reimbursement for the expenses of in-house staff, or
otherwise.
ARTICLE 21 DEFINITIONS
The terms set forth below are defined in the following
Sections of this Note:
(a) Applicable Interest Rate: Article 2;
(b) Borrower: Preamble, Articles 6 and 11;
(c) Business Day: Article 5, Section 5(f);
(d) Debt: Article 3;
(e) Default Consideration: Article 5, Section 5(l);
13
(f) Default Prepayment: Article 5, Section 5(l);
(g) Default Rate: Article 4;
(h) Defeasance: Article 5, Section 5(b);
(i) Defeasance Collateral: Article 5, Section 5(i);
(j) Defeasance Date: Article 5, Subsection 5(c)(i);
(k) Defeasance Obligor: Article 5, Section 5(d);
(l) Defeasance Security Agreement: Article 5, Subsection
5(c)(iv);
(m) Event of Default: Article 3;
(n) Interest Shortfall Payment: Article 5, Section 5(l);
(o) Lender: Preamble and Article 6;
(p) Lockout Period Expiration Date: Article 5, Section
5(b);
(q) Maturity Date: Article 1, Section 1(b);
(r) Monthly Payment Date Article 5, Section 5(b);
(s) Other Security Documents: Article 6;
(t) Property: Article 6;
(u) Release: Article 5, Section 5(b);
(v) REMIC Trust: Article 5, Subsection 5(c)(v);
(w) Scheduled Defeasance Payments: Article 5, Section
5(f); and
(x) Security Instrument: Article 6.
14
IN WITNESS WHEREOF, Borrower has duly executed this Note the
day and year first above written.
AERC OF NC, LLC,
a Delaware limited
liability company (SEAL)
By: (SEAL)
Gregory L. Golz
Vice President
15
IN WITNESS WHEREOF, Borrower has duly executed this Note the
day and year first above written.
Signed, sealed and delivered in the presence of:
AERC MORGAN PLACE, INC.,
a Delaware corporation
By: Gregory L. Golz
Vice President
Unofficial Witness
(SEAL)
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
16
STATE OF _____________
COUNTY OF ___________
I, _____________________, Notary Public for said County and
State, certify that Gregory L. Golz personally came before me
this day and acknowledged that he is the Vice President of AERC
OF NC, LLC, a Delaware limited liability company, and that by
authority duly given and as an act of the aforesaid limited
liability company, the foregoing instrument was signed in its
name by its Vice President.
Witness my hand and official seal this _____ day of March,
1999.
Notary Public
(Official Seal)
My commission expires: ______________, _____.
17
STATE OF )
) ss.:
COUNTY OF )
On March ___, 1999, before me, a notary public, duly
commissioned, qualified and acting, personally appeared Gregory
L. Golz, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed
to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on
the instrument the person, or the entity upon behalf of which the
person acted, executed the instrument.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
Notary Public
My Commission Expires:
___________________________
18
_____________________________________, as mortgagor
(Borrower)
to
THE CHASE MANHATTAN BANK, as mortgagee
(Lender)
___________________________________
MORTGAGE AND
SECURITY AGREEMENT
___________________________________
Dated:
Location:
Section:
Block:
Lot:
County:
PREPARED BY AND UPON
RECORDATION RETURN TO:
Messrs. Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention:
File No.:
Title No.:
19
THIS MORTGAGE AND SECURITY AGREEMENT (the "Security
Instrument") is made as of the ____ day of ________, 1999, by
, a , having its
principal place of business at as
mortgagor ("Borrower") to THE CHASE MANHATTAN BANK, a New York
banking corporation, having an address at 380 Madison Avenue,
10th Floor, New York, New York 10017 as mortgagee ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given
to Lender is indebted to Lender in the principal sum of
AND 00/100 DOLLARS ($______________) in lawful money
of the United States of America (the note together with all
extensions, renewals, modifications, substitutions and amendments
thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the
Note, principal and interest to be payable in accordance with the
terms and conditions provided in the Note.
Borrower desires to secure the payment of the Debt (as
defined in Article 2) and the performance of all of its
obligations under the Note and the Other Obligations (as defined
in Article 2).
Article 1 - GRANTS OF SECURITY
Section 1.1 Property Mortgaged. Borrower does hereby
irrevocably mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey to Lender, and grant a security
interest to Lender in, the following property, rights, interests
and estates now owned, or hereafter acquired by Borrower
(collectively, the "Property"):
(a) Land. The real property described in Exhibit A
attached hereto and made a part hereof (the "Land");
(b) Additional Land. All additional lands, estates and
development rights hereafter acquired by Borrower for use in
connection with the Land and the development of the Land and all
additional lands and estates therein which may, from time to
time, by supplemental mortgage or otherwise be expressly made
subject to the lien of this Security Instrument;
(c) Improvements. The buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located
on the Land (the "Improvements");
(d) Easements. All easements, rights-of-way or use,
rights, strips and gores of land, streets, ways, alleys,
passages, sewer rights, water, water courses, water rights and
20
powers, air rights and development rights, and all estates,
rights, titles, interests, privileges, liberties, servitudes,
tenements, hereditaments and appurtenances of any nature
whatsoever, in any way now or hereafter belonging, relating or
pertaining to the Land and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the
bed of any street, road or avenue, opened or proposed, in front
of or adjoining the Land, to the center line thereof and all the
estates, rights, titles, interests, dower and rights of dower,
curtesy and rights of curtesy, property, possession, claim and
demand whatsoever, both at law and in equity, of Borrower of, in
and to the Land and the Improvements and every part and parcel
thereof, with the appurtenances thereto;
(e) Fixtures and Personal Property. All machinery,
equipment, fixtures (including, but not limited to, all heating,
air conditioning, plumbing, lighting, communications and elevator
fixtures) and other property of every kind and nature whatsoever
owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon the Land and the
Improvements, or appurtenant thereto, and usable in connection
with the present or future operation and occupancy of the Land
and the Improvements and all building equipment, materials and
supplies of any nature whatsoever owned by Borrower, or in which
Borrower has or shall have an interest, now or hereafter located
upon the Land and the Improvements, or appurtenant thereto, or
usable in connection with the present or future operation and
occupancy of the Land and the Improvements (collectively, the
"Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be
subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the state or states
where any of the Property is located (the "Uniform Commercial
Code"), superior in lien to the lien of this Security Instrument
and all proceeds and products of the above;
(f) Leases and Rents. All leases, subleases and other
agreements affecting the use, enjoyment or occupancy of the Land
and/or the Improvements heretofore or hereafter entered into and
all extensions, amendments and modifications thereto, whether
before or after the filing by or against Borrower of any petition
for relief under 11 U.S.C. '101 et seq., as the same may be
amended from time to time (the "Bankruptcy Code") (the "Leases")
and all right, title and interest of Borrower, its successors and
assigns therein and thereunder, including, without limitation,
any guaranties of the lessees' obligations thereunder, cash or
securities deposited thereunder to secure the performance by the
lessees of their obligations thereunder and all rents, additional
rents, revenues, issues and profits (including all oil and gas or
other mineral royalties and bonuses) from the Land and the
Improvements whether paid or accruing before or after the filing
by or against Borrower of any petition for relief under the
21
Bankruptcy Code (the "Rents") and all proceeds from the sale or
other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;
(g) Condemnation Awards. All awards or payments,
including interest thereon, which may heretofore and hereafter be
made with respect to the Property, whether from the exercise of
the right of eminent domain (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of
the right), or for a change of grade, or for any other injury to
or decrease in the value of the Property;
(h) Insurance Proceeds. All proceeds of and any unearned
premiums on any insurance policies covering the Property,
including, without limitation, the right to receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to the Property;
(i) Tax Certiorari. All refunds, rebates or credits in
connection with a reduction in real estate taxes and assessments
charged against the Property as a result of tax certiorari or any
applications or proceedings for reduction;
(j) Conversion. All proceeds of the conversion,
voluntary or involuntary, of any of the foregoing including,
without limitation, proceeds of insurance and condemnation
awards, into cash or liquidation claims;
(k) Rights. The right, in the name and on behalf of
Borrower, to appear in and defend any action or proceeding
brought with respect to the Property and to commence any action
or proceeding to protect the interest of Lender in the Property;
(l) Agreements. All agreements, contracts, certificates,
instruments, franchises, permits, licenses, plans, specifications
and other documents, now or hereafter entered into, and all
rights therein and thereto, respecting or pertaining to the use,
occupation, construction, management or operation of the Land and
any part thereof and any Improvements or respecting any business
or activity conducted on the Land and any part thereof and all
right, title and interest of Borrower therein and thereunder,
including, without limitation, the right, upon the happening of
any default hereunder, to receive and collect any sums payable to
Borrower thereunder;
(m) Intangibles. All trade names, trademarks,
servicemarks, logos, copyrights, goodwill, books and records and
all other general intangibles relating to or used in connection
with the operation of the Property;
(n) Accounts. All reserves, escrows and deposit accounts
maintained by Borrower with respect to the Property including,
22
without limitation, any lockbox account and cash management
account, and all complete securities, investments, property and
financial assets held therein from time to time and all proceeds,
products, distributions or dividends or substitutions thereon and
thereof; and
(o) Other Rights. Any and all other rights of Borrower
in and to the items set forth in Subsections (a) through (n)
above.
Section 1.2 Assignment of Leases and Rents. Borrower
hereby absolutely and unconditionally assigns to Lender
Borrower's right, title and interest in and to all current and
future Leases and Rents; it being intended by Borrower that this
assignment constitutes a present, absolute assignment and not an
assignment for additional security only. Nevertheless, subject
to the terms of this Section 1.2 and Section 11.1(h), Lender
grants to Borrower a revocable license to collect and receive the
Rents. Borrower shall hold the Rents, or a portion thereof
sufficient to discharge all current sums due on the Debt, for use
in the payment of such sums.
Section 1.3 Security Agreement. This Security Instrument
is both a real property mortgage and a "security agreement"
within the meaning of the Uniform Commercial Code. The Property
includes both real and personal property and all other rights and
interests, whether tangible or intangible in nature, of Borrower
in the Property. By executing and delivering this Security
Instrument, Borrower hereby grants to Lender, as security for the
Obligations (defined in Section 2.3), a security interest in the
Personal Property to the full extent that the Personal Property
may be subject to the Uniform Commercial Code.
Section 1.4 Pledge of Monies Held. Borrower hereby
pledges to Lender any and all monies now or hereafter held by
Lender, including, without limitation, any sums deposited in the
Escrow Fund (as defined in Section 3.5), Net Proceeds (as defined
in Section 4.3) and condemnation awards or payments described in
Section 3.6, as additional security for the Obligations until
expended or applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
unto and to the use and benefit of Lender, and the successors and
assigns of Lender, forever;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Borrower shall well and truly pay to Lender
the Debt at the time and in the manner provided in the Note and
this Security Instrument, shall well and truly perform the Other
Obligations as set forth in this Security Instrument and shall
23
well and truly abide by and comply with each and every covenant
and condition set forth herein and in the Note, these presents
and the estate hereby granted shall cease, terminate and be void.
Article 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt. This Security Instrument and the
grants, assignments and transfers made in Article 1 are given for
the purpose of securing the following, in such order of priority
as Lender may determine in its sole discretion (the "Debt"):
(a) the payment of the indebtedness evidenced by the Note
in lawful money of the United States of America;
(b) the payment of interest, default interest, late
charges and other sums, as provided in the Note, this Security
Instrument or the Other Security Documents (defined below);
(c) the payment of the Default Consideration (as defined
in the Note), if any;
(d) the payment of all other moneys agreed or provided to
be paid by Borrower in the Note, this Security Instrument or the
Other Security Documents;
(e) the payment of all sums advanced pursuant to this
Security Instrument to protect and preserve the Property and the
lien and the security interest created hereby; and
(f) the payment of all sums advanced and costs and
expenses incurred by Lender in connection with the Debt or any
part thereof, any renewal, extension, or change of or
substitution for the Debt or any part thereof, or the acquisition
or perfection of the security therefor, whether made or incurred
at the request of Borrower or Lender.
Section 2.2 Other Obligations. This Security Instrument
and the grants, assignments and transfers made in Article 1 are
also given for the purpose of securing the following (the "Other
Obligations"):
(a) the performance of all other obligations of Borrower
contained herein;
(b) the performance of each obligation of Borrower
contained in any other agreement given by Borrower to Lender
which is for the purpose of further securing the obligations
secured hereby, and any amendments, modifications and changes
thereto; and
(c) the performance of each obligation of Borrower
24
contained in any renewal, extension, amendment, modification,
consolidation, change of, or substitution or replacement for, all
or any part of the Note, this Security Instrument or the Other
Security Documents.
Section 2.3 Debt and Other Obligations. Borrower's
obligations for the payment of the Debt and the performance of
the Other Obligations shall be referred to collectively below as
the "Obligations."
Section 2.4 Payments. Unless payments are made in the
required amount in immediately available funds at the place where
the Note is payable, remittances in payment of all or any part of
the Debt shall not, regardless of any receipt or credit issued
therefor, constitute payment until the required amount is
actually received by Lender in funds immediately available at the
place where the Note is payable (or any other place as Lender, in
Lender's sole discretion, may have established by delivery of
written notice thereof to Borrower) and shall be made and
accepted subject to the condition that any check or draft may be
handled for collection in accordance with the practice of the
collecting bank or banks. Acceptance by Lender of any payment in
an amount less than the amount then due shall be deemed an
acceptance on account only, and the failure to pay the entire
amount then due shall be and continue to be an Event of Default
(defined below).
Article 3 - BORROWER COVENANTS
Borrower covenants and agrees that:
Section 3.1 Payment of Debt. Borrower will pay the Debt
at the time and in the manner provided in the Note and in this
Security Instrument.
Section 3.2 Incorporation by Reference. All the
covenants, conditions and agreements contained in (a) the Note
and (b) all and any of the documents other than the Note or this
Security Instrument now or hereafter executed by Borrower and/or
others and by or in favor of Lender, which wholly or partially
secure or guaranty payment of the Note (the "Other Security
Documents"), are hereby made a part of this Security Instrument
to the same extent and with the same force as if fully set forth
herein.
Section 3.3 Insurance.
(a) Borrower shall obtain and maintain, or cause to be
maintained, insurance for Borrower and the Property providing at
least the following coverages:
25
(i) comprehensive all risk insurance on the Improvements
and the Personal Property, in each case (A) in an
amount equal to 100% of the "Full Replacement Cost,"
which for purposes of this Security Instrument shall
mean actual replacement value (exclusive of costs of
excavations, foundations, underground utilities and
footings) with a waiver of depreciation, but the
amount shall in no event be less than the outstanding
principal balance of the Note; (B) containing an
agreed amount endorsement with respect to the
Improvements and Personal Property waiving all
co-insurance provisions; (C) providing for no
deductible in excess of $10,000; and (D) providing
coverage for contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of
Construction Endorsements together with an "Ordinance
or Law Coverage" or "Enforcement" endorsement if any
of the Improvements or the use of the Property shall
at any time constitute legal non-conforming
structures or uses. The Full Replacement Cost shall
be redetermined from time to time (but not more
frequently than once in any twelve (12) calendar
months) at the reasonable request of Lender by an
appraiser or contractor designated and paid by
Borrower and approved by Lender, or by an engineer or
appraiser in the regular employ of the insurer.
After the first appraisal, additional appraisals may
be based on construction cost indices customarily
employed in the trade. No omission on the part of
Lender to request any such ascertainment shall
relieve Borrower of any of its obligations under this
Subsection;
(ii) commercial general liability insurance against claims
for personal injury, bodily injury, death or property
damage occurring upon, in or about the Property, such
insurance (A) to be on the so-called "occurrence"
form with a general aggregate limit of not less than
$2,000,000, or $6,000,000 if the Improvements contain
elevators, and a per occurrence limit of not less
than $2,000,000; (B) to continue at not less than the
aforesaid limit until required to be changed by
Lender in writing by reason of changed economic
conditions making such protection inadequate; and (C)
to cover at least the following hazards: (1) premises
and operations; (2) products and completed operations
on an "if any" basis; (3) independent contractors;
(4) blanket contractual liability for all written and
oral contracts; and (5) contractual liability
covering the indemnities contained in Article 13
hereof to the extent the same is available;
26
(iii) loss of rents insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered
by the insurance provided for in Subsection
3.3(a)(i); (C) in an amount equal to 100% of the
projected gross income from the Property for a period
of eighteen (18) months; and (D) containing an
extended period of indemnity endorsement which
provides that after the physical loss to the
Improvements and the Personal Property has been
repaired, the continued loss of income will be
insured until such income returns to the same level
it was prior to the loss, or the expiration of
eighteen (18) months from the date of the loss,
whichever first occurs, and notwithstanding that the
policy may expire prior to the end of such period.
The amount of such loss of rents insurance shall be
determined prior to the date hereof and at least once
each year thereafter based on Borrower's reasonable
estimate of the gross income from the Property for
the succeeding eighteen-month period. All insurance
proceeds payable to Lender pursuant to this
Subsection shall be held by Lender and shall be
applied to the obligations secured hereunder from
time to time due and payable hereunder and under the
Note and the Other Security Documents, and any excess
insurance proceeds remaining after such application
which are not required for application against future
obligations hereunder or under the Note and the Other
Security Documents shall, provided no Event of
Default shall exist, be disbursed to Borrower on a
monthly basis; provided further, however, that
nothing herein contained shall be deemed to relieve
Borrower of its obligations to pay the obligations
secured hereunder on the respective dates of payment
provided for in the Note except to the extent such
amounts are actually paid out of the proceeds of such
loss of rents insurance;
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to
the Improvements (A) owner's contingent or protective
liability insurance covering claims not covered by or
under the terms or provisions of the above mentioned
commercial general liability insurance policy; and
(B) the insurance provided for in Subsection
3.3(a)(i) written in a so-called builder's risk
completed value form (1) on a non-reporting basis,
(2) against all risks insured against pursuant to
Subsection 3.3(a)(i), (3) including permission to
occupy the Property, and (4) with an agreed amount
endorsement waiving co-insurance provisions;
27
(v) workers' compensation, subject to the statutory
limits of the state in which the Property is located,
and employer's liability insurance with a limit of at
least $1,000,000 per accident and per disease per
employee, and $1,000,000 for disease aggregate in
respect of any work or operations on or about the
Property, or in connection with the Property or its
operation (if applicable);
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably
required by Lender;
(vii) if any portion of the Improvements is at any time
located in an area identified by the Secretary of
Housing and Urban Development or any successor
thereto as an area having special flood hazards
pursuant to the National Flood Insurance Act of 1968,
the Flood Disaster Protection Act of 1973 or the
National Flood Insurance Reform Act of 1994, as each
may be amended, or any successor law (the "Flood
Insurance Acts"), flood hazard insurance in an amount
equal to the lesser of (A) the principal balance of
the Note, and (B) the maximum limit of coverage
available for the Property under the Flood Insurance
Acts;
(viii)earthquake, sinkhole and mine subsidence insurance, if
required in amounts, form and substance reasonably
satisfactory to Lender, provided that the insurance
pursuant to this Subsection (viii) shall be on terms
consistent with the all risk insurance policy
required under Section 3.3(a)(i); and
(ix) such other insurance and in such amounts as Lender
from time to time may reasonably request against such
other insurable hazards which at the time are
commonly insured against for property similar to the
Property located in or around the region in which the
Property is located.
(b) All insurance provided for in Subsection 3.3(a)
hereof shall be obtained under valid and enforceable policies
(the "Policies" or in the singular, the "Policy"), in such forms
and, from time to time after the date hereof, in such amounts as
may be reasonably satisfactory to Lender, issued by financially
sound and responsible insurance companies authorized to do
business in the state in which the Property is located and
reasonably approved by Lender. The insurance companies must have
a general policy rating of A or better and a financial class of
VIII or better by A.M. Best Company, Inc., and if there are any
Securities (defined in Section 19.1 below) issued which have been
28
assigned a rating by a credit rating agency approved by Lender (a
"Rating Agency"), the insurance company shall have a claims
paying ability rating of AAA@ (or its equivalent) or better by at
least two (2) of the Rating Agencies rating the Securities (one
of which will be Standard & Poor's Rating Group if they are
rating the Securities and one of which shall be Moody's Investors
Service, Inc. if they are rating the Securities), or if only one
Rating Agency is rating the Securities, then by such Rating
Agency approved by Lender, or in the event such insurance company
is not so rated, said insurance company shall be acceptable to
Lender in all respects (each such insurer shall be referred to
below as a "Qualified Insurer"). Not less than thirty (30) days
prior to the expiration dates of the Policies theretofore
furnished to Lender pursuant to Subsection 3.3(a), Borrower shall
deliver certified copies of the Policies marked "premium paid" or
accompanied by evidence satisfactory to Lender of payment of the
premiums due thereunder (the "Insurance Premiums"), provided,
however, that in the case of renewal Policies, Borrower may
furnish Lender with binders therefor to be followed by the
original Policies when issued.
(c) Borrower shall not obtain (i) any umbrella or blanket
liability or casualty Policy unless, in each case, such Policy is
approved in advance in writing by Lender and Lender's interest is
included therein as provided in this Security Instrument and such
Policy is issued by a Qualified Insurer, or (ii) separate
insurance concurrent in form or contributing in the event of loss
with that required in Subsection 3.3(a) to be furnished by, or
which may be reasonably required to be furnished by, Borrower.
In the event Borrower obtains separate insurance or an umbrella
or a blanket Policy, Borrower shall notify Lender of the same and
shall cause certified copies of each Policy to be delivered as
required in Subsection 3.3(a). Any blanket insurance Policy
shall specifically allocate to the Property the amount of
coverage from time to time reasonably required hereunder and
shall otherwise provide the same protection as would a separate
Policy insuring only the Property in compliance with the
provisions of Subsection 3.3(a). Lender acknowledges that it has
approved Borrower's blanket insurance Policy in effect as of the
date hereof. Notwithstanding Lender's approval of any umbrella
or blanket liability or casualty Policy hereunder, Lender
reserves the right, in its reasonable discretion, to require
Borrower to obtain a separate Policy in compliance with this
Section 3.3.
(d) All Policies of insurance provided for or
contemplated by Subsection 3.3(a), except for the Policy
referenced in Subsection 3.3(a)(v), shall name Lender and
Borrower as the insured or additional insured, as their
respective interests may appear, and in the case of property
damage, boiler and machinery, and flood insurance, shall contain
a so-called New York standard non-contributing mortgagee clause
29
in favor of Lender providing that the loss thereunder shall be
payable to Lender.
(e) All Policies of insurance provided for in Subsection
3.3(a) shall contain clauses or endorsements to the effect that:
(i) no act or negligence of Borrower, or anyone acting
for Borrower, or of any tenant under any Lease or
other occupant, or failure to comply with the
provisions of any Policy which might otherwise result
in a forfeiture of the insurance or any part thereof,
shall in any way affect the validity or
enforceability of the insurance insofar as Lender is
concerned;
(ii) the Policy shall not be materially changed (other
than to increase the coverage provided thereby) or
cancelled without at least 30 days' written notice to
Lender and any other party named therein as an
insured; and
(iii) each Policy shall provide that the issuers thereof
shall give written notice to Lender if the Policy has
not been renewed thirty (30) days prior to its
expiration; and
(iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
(f) Borrower shall furnish to Lender, on or before thirty
(30) days after the close of each of Borrower's fiscal years, a
statement certified by Borrower or a duly authorized officer of
Borrower of the amounts of insurance maintained in compliance
herewith, of the risks covered by such insurance and of the
insurance company or companies which carry such insurance and, if
reasonably requested by Lender, verification of the adequacy of
such insurance by an independent insurance broker or appraiser
acceptable to Lender.
(g) If at any time Lender is not in receipt of written
evidence that all insurance required hereunder is in full force
and effect, Lender shall have the right, without prior notice to
Borrower to take such action as Lender deems necessary to protect
its interest in the Property, including, without limitation, the
obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate, provided, however, that Lender
agrees to give Borrower notice after undertaking such action, and
all expenses incurred by Lender in connection with such action or
in obtaining such insurance and keeping it in effect shall be
paid by Borrower to Lender upon demand and until paid shall be
secured by this Security Instrument and shall bear interest in
accordance with Article 4 of the Note.
30
(h) If the Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Borrower shall give
prompt notice of such damage to Lender and shall promptly
commence and diligently prosecute the completion of the repair
and restoration of the Property as nearly as possible to the
condition the Property was in immediately prior to such fire or
other casualty, with such alterations as may be reasonably
approved by Lender (the "Casualty Restoration") and otherwise in
accordance with Section 4.3 of this Security Instrument.
Borrower shall pay all costs of such Restoration whether or not
such costs are covered by insurance.
Section 3.4 Payment of Taxes, etc.
(a) Borrower shall promptly pay all taxes, assessments,
water rates, sewer rents, governmental impositions, and other
charges, including without limitation vault charges and license
fees for the use of vaults, chutes and similar areas adjoining
the Land, now or hereafter levied or assessed or imposed against
the Property or any part thereof (the "Taxes"), all ground rents,
maintenance charges and similar charges, now or hereafter levied
or assessed or imposed against the Property or any part thereof
(the "Other Charges"), and all charges for utility services
provided to the Property as same become due and payable.
Borrower will deliver to Lender, promptly upon Lender's
reasonable request, evidence reasonably satisfactory to Lender
that the Taxes, Other Charges and utility service charges have
been so paid or are not then delinquent. Borrower shall not
suffer and shall promptly cause to be paid and discharged any
lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to
pay all Taxes and Other Charges have been deposited with Lender
in accordance with the terms of this Security Instrument,
Borrower shall furnish to Lender paid receipts for the payment of
the Taxes and Other Charges prior to the date the same shall
become delinquent.
(b) After prior written notice to Lender, Borrower, at
its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in
part of any of the Taxes, provided that (i) no Event of Default
has occurred and is continuing under the Note, this Security
Instrument or any of the Other Security Documents, (ii) Borrower
is permitted to do so under the provisions of any other mortgage,
deed of trust or deed to secure debt affecting the Property,
(iii) such proceeding shall suspend the collection of the Taxes
from Borrower and from the Property or Borrower shall have paid
all of the Taxes under protest, (iv) such proceeding shall be
permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject
and shall not constitute a default thereunder, (v) neither the
31
Property nor any part thereof or interest therein will be in
danger of being sold, forfeited, terminated, cancelled or lost,
(vi) Borrower shall have deposited with Lender adequate reserves
for the payment of the Taxes, together with all interest and
penalties thereon, unless Borrower has paid all of the Taxes
under protest, and (vii) Borrower shall have furnished the
security as may be required in the proceeding, or as may be
reasonably requested by Lender to insure the payment of any
contested Taxes, together with all interest and penalties
thereon.
Section 3.5 Escrow Fund. In addition to the initial
deposits with respect to Taxes and, if applicable, Insurance
Premiums made by Borrower to Lender on the date hereof to be held
by Lender in escrow, Borrower shall pay to Lender on the [MERRILL
LOANS ONLY -- first] [CHASE LOANS ONLY -- tenth] day of each
calendar month (a) one-twelfth of an amount which would be
sufficient to pay the Taxes payable, or estimated by Lender to be
payable, during the next ensuing twelve (12) months and (b) at
the option of Lender, if the liability or casualty Policy
maintained by Borrower covering the Property shall not constitute
a reasonably approved blanket or umbrella Policy pursuant to
Subsection 3.3(c) hereof, or Lender shall require Borrower to
obtain a separate Policy pursuant to Subsection 3.3(c) hereof,
one-twelfth of an amount which would be sufficient to pay the
Insurance Premiums due for the renewal of the coverage afforded
by the Policies upon the expiration thereof (the amounts in (a)
and (b) above shall be called the "Escrow Fund"). In the event
Lender shall elect to collect payments in escrow for Insurance
Premiums, Borrower shall pay to Lender an initial deposit to be
determined by Lender, in its reasonable discretion, to increase
the amounts in the Escrow Fund to an amount which, together with
anticipated monthly escrow payments, shall be sufficient to pay
all Insurance Premiums and Taxes as they become due. Borrower
agrees to notify Lender immediately of any changes to the
amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has or obtains knowledge and
authorizes Lender or its agent to obtain the bills for Taxes
directly from the appropriate taxing authority. The Escrow Fund
and the payments of interest or principal or both, payable
pursuant to the Note shall be added together and shall be paid as
an aggregate sum by Borrower to Lender. Lender will apply the
Escrow Fund to payments of Taxes and Insurance Premiums required
to be made by Borrower pursuant to Sections 3.3 and 3.4 hereof.
If the amount of the Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4
hereof, Lender shall, in its discretion, return any excess to
Borrower or credit such excess against future payments to be made
to the Escrow Fund. In allocating such excess, Lender may deal
with the person shown on the records of Lender to be the owner of
the Property. If the Escrow Fund is not sufficient to pay the
items set forth in (a) and (b) above, Borrower shall promptly pay
32
to Lender, upon demand, an amount which Lender shall estimate as
sufficient to make up the deficiency. The Escrow Fund shall not
constitute a trust fund and may be commingled with other monies
held by Lender. No earnings or interest on the Escrow Fund shall
be payable to orrower.
Section 3.6 Condemnation. Borrower shall promptly give
Lender notice of the actual or threatened commencement of any
condemnation or eminent domain proceeding and shall deliver to
Lender copies of any and all papers served in connection with
such proceedings. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise
(including but not limited to any transfer made in lieu of or in
anticipation of the exercise of such taking), and whether or not
any Award (defined below) is made available to Borrower for
Restoration in accordance with Section 4.3, Borrower shall
continue to pay the Debt at the time and in the manner provided
for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor
(an "Award") shall have been actually received and applied by
Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. Lender shall not be limited
to the interest paid on the award by the condemning authority but
shall be entitled to receive out of the award interest at the
rate or rates provided herein or in the Note. Borrower shall
cause the award or payment made in any condemnation or eminent
domain proceeding, which is payable to Borrower, to be paid
directly to Lender. Lender may apply any award or payment to the
reduction or discharge of the Debt whether or not then due and
payable. If there is a complete taking of the Property by any
condemning authority, then Lender shall, after the application of
an Award to the payment of all sums then due under the Note, this
Security Instrument and the Other Security Documents, promptly
deliver all remaining proceeds of the Award to Borrower. If
there is a partial taking of the Property by any condemning
authority, then (i) Borrower shall, subject to Force Majeure,
promptly proceed to restore, repair, replace or rebuild the
portion of the Property that was not taken by such condemning
authority in a workmanlike manner (to the extent practicable) to
a condition that is substantially equal in value and character to
the condition and value of the Property prior to such
condemnation or eminent domain proceeding (the "Condemnation
Restoration; the Condemnation Restoration and the Casualty
Restoration collectively hereinafter referred to as the
"Restoration") and (ii) Lender will apply the Award to such
Condemnation Restoration in accordance with the disbursement
procedures set forth in Section 4.3 of this Security Instrument.
If the Property is sold, through foreclosure or otherwise, prior
to the receipt by Lender of the award or payment, Lender shall
have the right, whether or not a deficiency judgment on the Note
shall have been sought, recovered or denied, to receive the award
or payment, or a portion thereof sufficient to pay the Debt.
33
Section 3.7 Leases and Rents.
(a) Borrower may enter into a proposed Lease (including
the renewal or extension of an existing Lease ("a Renewal
Lease")) without the prior written consent of Lender, provided
such proposed Lease or Renewal Lease (i) provides for rental
rates and terms comparable to existing local market rates and
terms (taking into account the type and quality of the tenant) as
of the date such Lease is executed by Borrower (unless, in the
case of a Renewal Lease, the rent payable during such renewal, or
a formula or other method to compute such rent, is provided for
in the original Lease), (ii) is an arms-length transaction with a
bona fide, independent third party tenant, (iii) does not have a
materially adverse effect on the value of the Property taken as a
whole, (iv) the terms of such Lease provide that such Lease is
subject and subordinate to the Security Instrument and the lessee
thereunder agrees to attorn to Lender, and (v) is written on the
standard form of residential lease currently used by Borrower at
the Property, which lease has been previously approved by Lender.
All proposed Leases which do not satisfy the requirements set
forth in this Subsection 3.7(a) shall be subject to the prior
approval of Lender and its counsel, at Borrower's expense.
Notwithstanding the foregoing, Lender agrees that Borrower shall
have the right from time to time, without the consent of Lender,
to make non-material modifications to its standard form of
residential lease so long as such modified lease does not (i)
materially and adversely affect the value of Property and (ii)
affect the subordination of said lease to any mortgage, deed of
trust, deed to secure debt or other similar security instrument
affecting the Property.
(b) Borrower (i) shall observe and perform all the
obligations imposed upon the lessor under the Leases and shall
not do or permit to be done anything to impair the value of any
of the Leases as security for the Debt; (ii) upon request of
Lender, shall promptly send copies to Lender of all notices of
default which Borrower shall send or receive thereunder; (iii)
shall enforce all of the material terms, covenants and conditions
contained in the Leases upon the part of the tenant thereunder to
be observed or performed; (iv) shall not collect any of the Rents
more than one (1) month in advance (except security deposits
shall not be deemed Rents collected in advance); (v) shall not
execute any other assignment of the lessor's interest in any of
the Leases or the Rents; and (vi) upon request of Lender, shall
not consent to any assignment of or subletting under any Leases
not in accordance with their terms, without the prior written
consent of Lender.
(c) Borrower may, without the consent of Lender, amend,
modify or waive the provisions of any Lease or terminate, reduce
rents under, accept a surrender of space under, or shorten the
term of, any Lease (including any guaranty, letter of credit or
34
other credit support with respect thereto) provided that such
action (taking into account, in the case of a termination,
reduction in rent, surrender of space or shortening of term, the
planned alternative use of the affected space) does not have a
materially adverse effect on the value of the Property taken as a
whole, and provided that such Lease, as amended, modified or
waived, is otherwise in compliance with the requirements of this
Security Instrument and any lease subordination agreement binding
upon Lender with respect to such Lease. A termination of a Lease
with a tenant who is in default beyond applicable notice and
grace periods shall not be considered an action which has a
materially adverse effect on the value of the Property taken as a
whole. Any amendment, modification, waiver, termination, rent
reduction, space surrender or term shortening which does not
satisfy the requirements set forth in this Subsection shall be
subject to the prior approval of Lender and its counsel, at
Borrower's expense. Upon Lender's reasonable request, Borrower
shall promptly deliver to Lender copies of all Leases,
amendments, modifications and waivers which are entered into
pursuant to this Subsection together with Borrower's
certification that it has satisfied all of the conditions of this
Subsection.
(d) Reserved.
(e) Upon the occurrence of an Event of Default, to the
extent permitted by law, Borrower shall promptly deposit with
Lender any and all monies representing security deposits under
the Leases, whether or not Borrower actually received such monies
(the "Security Deposits"). Lender shall hold the Security
Deposits in accordance with the terms of the respective Lease,
and shall only release the Security Deposits in order to return a
tenant's Security Deposit to such tenant if such tenant is
entitled to the return of the Security Deposit under the terms of
the Lease and is not otherwise in default under the Lease. To
the extent required by Applicable Laws (defined below), Lender
shall hold the Security Deposits in an interest bearing account
selected by Lender in its sole discretion. In the event Lender
is not permitted by law to hold the Security Deposits, Borrower
shall deposit the Security Deposits into an account with a
federally insured institution as approved by Lender.
Section 3.8 Maintenance and Use of Property. Borrower
shall cause the Property to be maintained in a good and safe
condition and repair. The Improvements and the Personal Property
shall not be removed, demolished or materially altered (except
for normal replacement of the Personal Property) without the
consent of Lender. Borrower shall promptly repair, replace or
rebuild any part of the Property which may be destroyed by any
casualty, or become damaged, worn or dilapidated or which may be
affected by any proceeding of the character referred to in
35
Section 3.6 hereof and shall complete and pay for any structure
at any time in the process of construction or repair on the Land.
Borrower shall not initiate, join in, acquiesce in, or consent to
any change in any private restrictive covenant, zoning law or
other public or private restriction, limiting or defining the
uses which may be made of the Property or any part thereof
without the consent of Lender, which consent will not be
unreasonably withheld, conditioned or delayed. If under
applicable zoning provisions the use of all or any portion of the
Property is or shall become a nonconforming use, Borrower will
not cause or permit the nonconforming use to be discontinued or
the nonconforming Improvement to be abandoned without the express
written consent of Lender.
Section 3.9 Waste. Borrower shall not commit or suffer
any waste of the Property or make any change in the use of the
Property which will in any way materially increase the risk of
fire or other hazard arising out of the operation of the
Property, or take any action that might invalidate or give cause
for cancellation of any Policy, or do or permit to be done
thereon anything that may in any way impair the value of the
Property or the security of this Security Instrument. Borrower
will not, without the prior written consent of Lender, permit any
drilling or exploration for or extraction, removal, or production
of any minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or
extraction thereof.
Section 3.10 Compliance With Laws.
(a) Borrower shall promptly comply with all existing and
future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting the
Property, or the use thereof ("Applicable Laws").
(b) Borrower shall from time to time, upon Lender's
reasonable request, provide Lender with evidence reasonably
satisfactory to Lender that the Property complies with all
Applicable Laws or is exempt from compliance with Applicable
Laws.
(c) Notwithstanding any provisions set forth herein or in
any document regarding Lender's approval of alterations of the
Property, Borrower shall not alter the Property in any manner
which would materially increase Borrower's responsibilities for
compliance with Applicable Laws without the prior written
approval of Lender. Lender's approval of the plans,
specifications, or working drawings for alterations of the
Property shall create no responsibility or liability on behalf of
Lender for their completeness, design, sufficiency or their
compliance with Applicable Laws. The foregoing shall apply to
tenant improvements constructed by Borrower or by any of its
36
tenants. Lender may condition any such approval upon receipt of
a certificate of compliance with Applicable Laws from an
independent architect, engineer, or other person acceptable to
Lender.
(d) Borrower shall give prompt notice to Lender of the
receipt by Borrower of any notice related to a violation of any
Applicable Laws and of the commencement of any proceedings or
investigations which relate to compliance with Applicable Laws.
(e) After prior written notice to Lender, Borrower, at
its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due
diligence, the Applicable Laws affecting the Property, provided
that (i) no Event of Default has occurred and is continuing under
the Note, this Security Instrument or any of the Other Security
Documents; (ii) Borrower is permitted to do so under the
provisions of any other mortgage, deed of trust or deed to secure
debt affecting the Property; (iii) such proceeding shall be
permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower or the
Property is subject and shall not constitute a default
thereunder; (iv) neither the Property, any part thereof or
interest therein, any of the tenants or occupants thereof, nor
Borrower shall be affected in any material adverse way as a
result of such proceeding; (v) non-compliance with the Applicable
Laws shall not impose civil or criminal liability on Lender or
with respect to Borrower or the Property, to the extent that such
non-compliance or liability shall not have a material adverse
effect on (A) Borrower's ability to fully perform all of its
obligations under the Note, this Security Instrument or the Other
Security Documents or (B) the value, operation or net operating
income of the Property; (vi) Borrower shall have furnished the
security as may be required in the proceeding or by Lender in its
reasonable discretion to ensure compliance by Borrower with the
Applicable Laws; and (vii) Borrower shall have furnished to
Lender all other items reasonably requested by Lender.
Section 3.11 Books and Records.
(a) Borrower and any Guarantors (defined in Subsection
10.1(e)) and Indemnitor(s) (defined in Section 13.4), if any,
shall keep adequate books and records of account in accordance
with generally accepted accounting principles ("GAAP"), or in
accordance with other methods acceptable to Lender in its
reasonable discretion, consistently applied and furnish to
Lender:
(i) monthly certified rent rolls signed and dated by
Borrower in the form previously furnished to Lender,
detailing the names of all tenants of the
Improvements, the portion of Improvements occupied by
37
each tenant, the base rent and any other charges
payable under each Lease and the term of each Lease,
including the expiration date, the extent to which
any tenant is in default under any Lease, and any
other information as is reasonably required by
Lender, within twenty (20) days after the end of each
calendar month;
(ii) quarterly operating statements of the Property,
prepared and certified by Borrower in the form
reasonably required by Lender, detailing the revenues
received, the expenses incurred and the net operating
income before and after debt service (principal and
interest) and major capital improvements for that
quarter and containing appropriate year to date
information, within forty-five (45) days after the
end of each fiscal quarter;
(iii) an annual operating statement of the Property
detailing the total revenues received, total expenses
incurred, total cost of all capital improvements,
total debt service and total cash flow, to be
prepared and certified by Borrower in the form
reasonably required by Lender, or if reasonably
required by Lender, an audited annual operating
statement prepared and certified by an independent
certified public accountant reasonably acceptable to
Lender, within ninety (90) days after the close of
each fiscal year of Borrower;
(iv) an annual balance sheet and profit and loss statement
of Borrower, any Guarantors and any Indemnitor(s) in
the form reasonably required by Lender, prepared and
certified by the respective Borrower, Guarantors
and/or Indemnitor(s), or if reasonably required by
Lender, audited financial statements prepared by an
independent certified public accountant reasonably
acceptable to Lender, within ninety (90) days after
the close of each fiscal year of Borrower, Guarantors
and Indemnitor(s), as the case may be; and
(v) an annual operating budget presented on a monthly
basis consistent with the annual operating statement
described above for the Property, including cash flow
projections for the upcoming year, and all proposed
capital replacements and improvements at least
fifteen (15) days prior to the start of each fiscal
year.
(b) Upon reasonable request from Lender, Borrower, any
Guarantor and any Indemnitor shall furnish in a timely manner to
Lender:
38
(i) a property management report for the Property,
showing the number of inquiries made and/or rental
applications received from tenants or prospective
tenants and deposits received from tenants and any
other information requested by Lender, in reasonable
detail and certified by Borrower (or an officer,
general partner, member or principal of Borrower if
Borrower is not an individual) under penalty of
perjury to be true and complete, to the best of its
knowledge, but no more frequently than quarterly; and
(ii) an accounting of all security deposits held in
connection with any Lease of any part of the
Property, including the name and identification
number of the accounts in which such security
deposits are held, the name and address of the
financial institutions in which such security
deposits are held and the name of the person to
contact at such financial institution, along with any
authority or release necessary for Lender to obtain
information regarding such accounts directly from
such financial institutions.
(c) Borrower, any Guarantor and any Indemnitor shall
furnish Lender with such other additional financial or management
information (including State and Federal tax returns) as may,
from time to time, be reasonably required by Lender in form and
substance reasonably satisfactory to Lender.
(d) Borrower, any Guarantor and any Indemnitor shall
furnish to Lender and its agents convenient facilities (located
at the Property or Borrower's corporate offices) for the
examination and audit of any such books and records.
(e) Any reports, statements or other information required
to be delivered under this Security Instrument shall be delivered
in paper form and in the event that Lender requires financial
statements in connection with subsection (f) below because the
Loan together with any Affiliated Loans (defined below) equal or
exceed 20% of the aggregate principal amount of all mortgage
loans included in a securitization, Borrower shall deliver such
reports, statements and other information (i) on a diskette, and
(ii) if reasonably requested by Lender and within the
capabilities of Borrower's data systems without change or
modification thereto, in electronic form and prepared using
Microsoft Word for Windows or WordPerfect for Windows files
(which files may be prepared using a spreadsheet program, such as
Microsoft Excel for Windows, and saved as word processing files).
(f) If requested by Lender, Borrower shall provide
Lender, promptly upon request, with the following financial
statements if, at the time a preliminary or final prospectus is
39
being prepared for a securitization, it is expected that the
principal amount of the Loan together with any Affiliated Loans
at the time of securitization may, or if the principal amount of
the Loan together with any Affiliated Loans at any time during
which the Loan and any Affiliated Loans are included in a
securitization does, equal or exceed 20% of the aggregate
principal amount of all mortgage loans included or expected to be
included, as applicable, in the securitization:
(i) A balance sheet with respect to the Property for the
two most recent fiscal years, meeting the
requirements of Section 210.3-01 of Regulation S-X of
the Securities Act of 1933, as amended and statements
of income and statements of cash flows with respect
to the Property for the three most recent fiscal
years, meeting the requirements of Section 210.3-02
of Regulation S-X, and, to the extent that such
balance sheet is more than 135 days old as of the
date of the document in which such financial
statements are included, interim financial statements
of the Property meeting the requirements of Section
210.3-01 and 210.3-02 of Regulation S-X (all of such
financial statements, collectively, the "Standard
Statements"); provided, however, that with respect to
a Property (other than properties that are hotels,
nursing homes, or other properties that would be
deemed to constitute a business and not real estate
under Regulation S-X or other legal requirements, if
any) that has been acquired by Borrower from an
unaffiliated third party (such Property, "Acquired
Property"), as to which the other conditions set
forth in Section 210.3-14 of Regulation S-X for
provision of financial statements in accordance with
such Section have been met, in lieu of the Standard
Statements otherwise required by this section,
Borrower shall instead provide the financial
statements required by such Section 210.3-14 of
Regulation S-X ("Acquired Property Statements").
(ii) Not later than 30 days after the end of each fiscal
quarter following the date hereof, a balance sheet of
the Property as of the end of such fiscal quarter,
meeting the requirements of Section 210.3-01 of
Regulation S-X, and statements of income and
statements of cash flows of the Property for the
period commencing following the last day of the most
recent fiscal year and ending on the date of such
balance sheet and for the corresponding period of the
most recent fiscal year, meeting the requirements of
Section 210.3-02 of Regulation S-X (provided, that if
for such corresponding period of the most recent
fiscal year Acquired Property Statements were
40
permitted to be provided hereunder pursuant to
subsection (i) above, Borrower shall instead provide
Acquired Property Statements for such corresponding
period).
(iii) Not later than 75 days after the end of each fiscal
year following the date hereof, a balance sheet of
the Property as of the end of such fiscal year,
meeting the requirements of Section 210.3-01 of
Regulation S-X, and statements of income and
statements of cash flows of the Property for such
fiscal year, meeting the requirements of Section
210.3-02 of Regulation S-X.
(iv) Within ten business days after notice from the Lender
in connection with the securitization of this Loan,
such additional financial statements, such that, as
of the date (each an "Offering Document Date") of
each Disclosure Document, Borrower shall have
provided Lender with all financial statements as
described in subsection (f)(i) above; provided that
the fiscal year and interim periods for which such
financial statements shall be provided shall be
determined as of such Offering Document Date.
(g) If requested by Lender, Borrower shall provide
Lender, promptly upon request, with summaries of the financial
statements referred to in Section 3.11(f) hereof if, at the time
a Disclosure Document is being prepared for a securitization, it
is expected that the principal amount of the Loan and any
Affiliated Loans at the time of securitization may, or if the
principal amount of the Loan and any Affiliated Loans at any time
during which the Loan and any Affiliated Loans are included in a
securitization does, equal or exceed 10% (but less than 20%) of
the aggregate principal amount of all mortgage loans included or
expected to be included, as applicable, in a securitization.
Such summaries shall meet the requirements for "summarized
financial information," as defined in Section 210.1-02(bb) of
Regulation S-X, or such other requirements as may be determined
to be necessary or appropriate by Lender.
(h) All financial statements provided by Borrower
hereunder pursuant to Section 3.11(f) and (g) hereof shall be
prepared in accordance with GAAP, and shall meet the requirements
of Regulation S-X and other applicable legal requirements, if
any. All financial statements referred to in Subsections
3.11(f)(i) and 3.11(f)(iii) above shall be audited by independent
accountants of Borrower reasonably acceptable to Lender in
accordance with Regulation S-X and all other applicable legal
requirements, shall be accompanied by the manually executed
report of the independent accountants thereon, which report shall
meet the requirements of Regulation S-X and all other applicable
41
legal requirements, if any, and shall be further accompanied by a
manually executed written consent of the independent accountants,
in form and substance acceptable to Lender, to the inclusion of
such financial statements in any Disclosure Document and any
Exchange Act Filing and to the use of the name of such
independent accountants and the reference to such independent
accountants as "experts" in any Disclosure Document which is
intended to be registered with the Securities and Exchange
Commission and Exchange Act Filing (as defined below), all of
which shall be provided at the same time as the related financial
statements are required to be provided. Lender agrees that
unless Lender notifies Borrower otherwise, Price Waterhouse
Coopers and any other big "A5" accounting firm is an acceptable
independent accountant. All financial statements (audited or
unaudited) provided by Borrower under this Section 3.11 shall be
certified by the chief financial officer or administrative member
of Borrower, which certification shall state that such financial
statements meet the requirements set forth in the first sentence
of this Section 3.11(h).
(i) If requested by Lender, Borrower shall provide
Lender, promptly upon request, with any other or additional
financial statements, or financial, statistical or operating
information, as Lender shall determine to be required pursuant to
Regulation S-X or any amendment, modification or replacement
thereto or other legal requirements in connection with any
Disclosure Document or any filing under or pursuant to the
Securities and Exchange Act of 1934, as amended, in connection
with or relating to a securitization (hereinafter an "Exchange
Act Filing") or as shall otherwise be reasonably requested by the
Lender.
(j) In the event Lender determines, in connection with a
securitization, that the financial statements required in order
to comply with Regulation S-X or other legal requirements are
other than as provided herein, then notwithstanding the
provisions of Section 3.11(f), (g) and (h) hereof, Lender may
request, and Borrower shall promptly provide, such combination of
Acquired Property Statement and/or Standard Statements or such
other financial statements as Lender reasonably determines to be
necessary or appropriate for such compliance.
(k) The term "Affiliated Loan" shall be a Loan by Lender
to a parent or subsidiary of, or such other entity affiliated to,
Borrower, Indemnitor or Guarantor.
Section 3.12 Payment For Labor and Materials. Subject to
Borrower's right to discharge liens as permitted under Subsection
10.1(h) hereof, Borrower will promptly pay when due all bills and
costs for labor, materials, and specifically fabricated materials
incurred in connection with the Property and never permit to
exist in respect of the Property or any part thereof any lien or
42
security interest, even though inferior to the liens and the
security interests hereof, and in any event never permit to be
created or exist in respect of the Property or any part thereof
any other or additional lien or security interest other than the
liens or security interests hereof, except for the Permitted
Exceptions (defined below).
Section 3.13 Performance of Other Agreements. Borrower
shall observe and perform each and every material term to be
observed or performed by Borrower pursuant to the terms of any
agreement or recorded instrument affecting or pertaining to the
Property, or given by Borrower to Lender for the purpose of
further securing an Obligation and any amendments, modifications
or changes thereto.
Section 3.14 Change of Name, Identity or Structure.
Except as may be permitted under Article 8 hereof, Borrower will
not change Borrower's name, identity (including its trade name or
names) or corporate, partnership or other structure without
notifying Lender of such change in writing at least thirty (30)
days prior to the effective date of such change and, in the case
of a change in Borrower's structure, without first obtaining the
prior written consent of Lender.
Section 3.15 Existence. Borrower will continuously
maintain (a) its existence and shall not dissolve or permit its
dissolution, (b) its rights to do business in the state where the
Property is located and (c) its franchises and trade names, if
any.
Section 3.16 Non-Consolidation Opinion. Borrower has
complied and will comply with each of the assumptions made with
respect to it in that certain substantive non-consolidation
opinion letter, dated the date hereof, delivered by Borrower's
counsel in connection with the Loan and any subsequent
non-consolidation opinion delivered in accordance with the terms
and conditions of this Security Instrument or the Cooperation
Letter (the "Non-Consolidation Opinion"), including, but not
limited to, any exhibits attached thereto. Borrower has caused
and shall cause each entity other than the Borrower with respect
to which an assumption is made in the Non-Consolidation Opinion,
including, but not limited to, any exhibits attached thereto, to
comply with each of the assumptions made with respect to it in
the Non-Consolidation Opinion, including, but not limited to, any
exhibits attached thereto.
Article 4 - SPECIAL COVENANTS
Borrower covenants and agrees that:
Section 4.1 Property Use. The Property shall be used
43
only for a multifamily apartment complex and incidental uses
thereto, and for no other use without the prior written consent
of Lender, which consent may be withheld in Lender's sole and
absolute discretion.
Section 4.2 Single Purpose Entity. It has not and shall
not:
(a) engage in any business or activity other than the
ownership, operation and maintenance of the Property, and
activities incidental thereto,[PA ONLY: except with respect to
prior activities under that certain [management agreement];
(b) acquire or own any material assets other than (i) the
Property, and (ii) such incidental Personal Property as may be
necessary for the operation of the Property;
(c) merge into or consolidate with any person or entity
or dissolve, terminate or liquidate in whole or in part, transfer
or otherwise dispose of all or substantially all of its assets or
change its legal structure, without in each case Lender's
consent;
(d) fail to observe its organizational formalities or
preserve its existence as an entity duly organized, validly
existing and in good standing (if applicable) under the laws of
the jurisdiction of its organization or formation, and
qualification to do business in the state where the Property is
located, if applicable, or without the prior written consent of
Lender, amend, modify, terminate or fail to comply with the
provisions of Borrower's Partnership Agreement, Articles or
Certificate of Incorporation, Articles of Organization or similar
organizational documents, as the case may be;
(e) own any subsidiary or make any investment in, any
person or entity without the consent of Lender;
(f) commingle its assets with the assets of any of its
members, general partners, affiliates, principals or of any other
person or entity, participate in a cash management system with
any other entity or person or fail to use its own separate
stationery, invoices and checks;
(g) incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than
the Debt, except for trade payables in the ordinary course of its
business of owning and operating the Property, provided that such
debt (i) is paid within sixty (60) days of the date it is
incurred, (ii) does not exceed four percent (4%) of the then
outstanding principal balance due under the Note and (iii) is not
evidenced by a note;
44
(h) become insolvent and fail to pay its debts and
liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same shall become due;
(i) fail to maintain its records, books of account and
bank accounts separate and apart from those of the members,
general partners, principals and affiliates of Borrower, the
affiliates of a member, general partner or principal of Borrower,
and any other person or entity. Notwithstanding anything to the
contrary contained herein, Borrower's financial position, results
of operations and cash flows may be included in the consolidated
financial statements of Associated Estates Realty Corporation
("AERC") in accordance with GAAP, provided, however, that any
such consolidated financial statements shall contain a note
indicating that Borrower and its affiliates are separate legal
entities and maintain records, books of account and bank accounts
separate and apart from any other person or entity;
(j) enter into any contract or agreement with any member,
general partner, principal or affiliate of Borrower, Guarantor or
Indemnitor, or any member, general partner, principal or
affiliate thereof, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would
be available on an arms-length basis with third parties other
than any member, general partner, principal or affiliate of
Borrower, Guarantor or Indemnitor, or any member, general
partner, principal or affiliate thereof;
(k) seek the dissolution or winding up in whole, or in
part, of Borrower;
(l) fail to correct any known misunderstandings regarding
the separate identity of Borrower;
(m) guarantee or become obligated for the debts of any
other entity or person or hold itself out to be responsible for
the debts of another person;
(n) make any loans or advances to any third party,
including any member, general partner, principal or affiliate of
Borrower or any member, general partner, principal or affiliate
thereof, and shall not acquire obligations or securities of any
member, general partner, principal or affiliate of Borrower or
any member, general partner, or affiliate thereof;
(o) fail to file its own tax returns (except that Lender
acknowledges that Borrower and its affiliates shall have the
right to file consolidated or combined federal, state and city
tax returns which shall provide that Borrower and its affiliates
are separate legal entities and pay their respective
proportionate shares of the taxes shown on such returns);
45
(p) fail either to hold itself out to the public as a
legal entity separate and distinct from any other entity or
person or to conduct its business solely in its own name in order
not (i) to mislead others as to the identity with which such
other party is transacting business, or (ii) to suggest that
Borrower is responsible for the debts of any third party
(including any member, general partner, principal or affiliate of
Borrower or any member, general partner, principal or affiliate
thereof);
(q) fail to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;
(r) file or consent to the filing of any petition, either
voluntary or involuntary, to take advantage of any applicable
insolvency, bankruptcy, liquidation or reorganization statute, or
make an assignment for the benefit of creditors;
(s) share any common logo with or hold itself out as or
be considered as a department or division of (i) any general
partner, principal, member or affiliate of Borrower, (ii) any
affiliate of a general partner, principal or member of Borrower,
or (iii) any other person or entity;
(t) fail to allocate fairly and reasonably any overhead
expenses that are shared with an affiliate, including paying for
office space and services performed by any employee of an
affiliate;
(u) pledge its assets for the benefit of any other person
or entity, other than with respect to the Loan;
(v) fail to maintain a sufficient number of employees in
light of its contemplated business operations;
(w) violate or cause to be violated the assumptions made
with respect to Borrower and its principals in that certain
opinion letter pertaining to substantive consolidation (the
"Non-Consolidation Opinion") delivered by Baker & Hostetler LLP
to Lender and the Rating Agencies;
(x) fail at any time to have at least one independent
director that is not and has not been for at least five (5)
years: (a) a stockholder, director, officer, employee, partner,
attorney or counsel of Borrower or any affiliate thereof; (b) a
customer, supplier or other person who derives any revenues from
its activities with Borrower or any affiliate thereof; (c) a
person or other entity controlling or under common control with
any such stockholder, partner, customer, supplier or other
person; or (d) a member of the immediate family of any such
stockholder, director, officer, employee, partner, customer,
46
supplier or other person. (As used herein, the term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of management, policies or
activities of a person or entity, whether through ownership of
voting securities, by contract or otherwise; or
(y) permit its board of directors to take any action
which, under the terms of any certificate of incorporation, by-
laws or any voting trust agreement with respect to any common
stock, requires the vote of Borrower's board of directors unless
at the time of such action there shall be at least one member who
is an independent director.
Section 4.3 Restoration. The following provisions shall
apply in connection with the Restoration of the Property:
(a) If the Net Proceeds (defined below) shall be less
than $150,000 and the costs of completing the Restoration shall
be less than $150,000, the Net Proceeds will be disbursed by
Lender to Borrower upon receipt, provided that all of the
conditions set forth in Subsection 4.3(b)(i) are met and Borrower
delivers to Lender a written undertaking to expeditiously
commence and to satisfactorily complete with due diligence,
subject to Force Majeure (defined below), the Restoration in
accordance with the terms of this Security Instrument. The term
"Force Majeure", as used herein, shall mean the failure of
Borrower to perform any obligation hereunder by reason of any act
of God, enemy or hostile government action, civil commotion,
insurrection, sabotage, strikes or lockouts, fire or other
casualty.
(b) If the Net Proceeds are equal to or greater than
$150,000 or the costs of completing the Restoration is equal to
or greater than $150,000, Lender shall make the Net Proceeds
available for the Restoration in accordance with the provisions
of this Section 4.3(b). The term "Net Proceeds" for the purposes
of this Section shall mean: (i) the net amount of all insurance
proceeds received by Lender pursuant to Sections 3.3(a)(i), (iv),
(vi), (vii), (viii) and, as applicable, (ix) of this Security
Instrument as a result of such damage or destruction, after
deduction of its reasonable costs and expenses (including, but
not limited to, reasonable counsel fees), if any, in collecting
same (Insurance Proceeds") or (ii) the net amount of the Award,
after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in
collecting same ("Condemnation Proceeds"), whichever the case may
be.
(i) The Net Proceeds shall be made available to Borrower
for the Restoration provided that each of the following
conditions are met:
47
(A) no Event of Default shall have occurred and be
continuing under the Note, this Security Instrument or any of the
Other Security Documents;
(B) (1) in the event the Net Proceeds are Insurance
Proceeds, not more than fifty percent (50%) of the total floor
area of the Improvements has been damaged, destroyed or rendered
unusable as a result of such fire or other casualty or (2) in the
event the Net Proceeds are Condemnation Proceeds, not more than
ten percent (10%) of the land constituting the Property has been
taken, such land is located along the perimeter or periphery of
the Property, no portion of the Improvements is located on such
land and such taking does not materially impair access to the
Property;
(C) Leases demising in the aggregate at least 50% of the
total rentable space in the Property which has been demised under
executed and delivered Leases in effect as of the date of the
occurrence of such fire or other casualty shall remain in full
force and effect during and after the completion of the
Restoration;
(D) Borrower shall commence the Restoration as soon as
reasonably practicable (but in no event later than thirty (30)
days after such damage or destruction occurs) and shall
diligently, subject to Force Majeure, pursue the same to
satisfactory completion;
(E) Lender shall be reasonably satisfied that any
operating deficits which will be incurred with respect to the
Property as a result of the occurrence of any such fire or other
casualty will be covered out of (1) the Net Proceeds, (2) the
insurance coverage referred to in Subsection 3.3(a)(iii), or (3)
by other funds of Borrower;
(F) Lender shall be reasonably satisfied that, upon the
completion of the Restoration, the gross cash flow and the net
cash flow of the Property will be restored to a level sufficient
to cover all carrying costs and operating expenses of the
Property, including, without limitation, debt service on the Note
at a coverage ratio (after deducting all required reserves as
required by Lender from net operating income) of at least 1.25 to
1.0, which coverage ratio shall be determined by Lender in its
reasonable discretion on the basis of the Applicable Interest
Rate (as defined in the Note);
(G) Lender shall be reasonably satisfied that, subject to
Force Majeure, the Restoration will be substantially completed on
or before the earliest to occur of (1) six (6) months prior to
the Maturity Date (as defined in the Note), (2) six (6) months
after the occurrence of such fire or other casualty, or (3) such
time as may be required under applicable zoning law, ordinance,
48
rule or regulation in order to repair and restore the Property to
the condition it was in immediately prior to such fire or other
casualty;
(H) Borrower shall execute and deliver to Lender a
completion guaranty in form and substance reasonably satisfactory
to Lender and its counsel pursuant to the provisions of which
Borrower shall guaranty to Lender the lien-free completion by
Borrower of the Restoration in accordance with the provisions of
this Subsection 4.3(b);
(I) the Property and the use thereof after the
Restoration will be in compliance with and permitted under all
applicable zoning laws, ordinances, rules and regulations; and
(J) the Restoration shall be done and completed by
Borrower in an expeditious and diligent fashion, subject to Force
Majeure, and in compliance with all applicable governmental laws,
rules and regulations (including, without limitation, all
applicable Environmental Laws (defined below).
(ii) The Net Proceeds shall be held by Lender and, until
disbursed in accordance with the provisions of this
Subsection 4.3(b), shall constitute additional
security for the Obligations. The Net Proceeds shall
be disbursed by Lender to, or as directed by,
Borrower from time to time during the course of the
Restoration, upon receipt of evidence reasonably
satisfactory to Lender that (A) all materials
installed and work and labor performed (except to the
extent that they are to be paid for out of the
requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there
exist no notices of pendency, stop orders, mechanic's
or materialman's liens or notices of intention to
file same, or any other liens or encumbrances of any
nature whatsoever on the Property arising out of the
Restoration which have not either been fully bonded
to the reasonable satisfaction of Lender and
discharged of record or in the alternative fully
insured to the reasonable satisfaction of Lender by
the title company insuring the lien of this Security
Instrument.
(iii) All plans and specifications required in connection
with the Restoration shall be subject to prior review
and acceptance in all reasonable respects by Lender
and by an independent consulting engineer reasonably
selected by Lender (the "Casualty Consultant").
Lender shall have the use of the plans and
specifications and all permits, licenses and
approvals required or obtained in connection with the
49
Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the
Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior
review and acceptance by Lender and the Casualty
Consultant. All costs and expenses incurred by
Lender in connection with making the Net Proceeds
available for the Restoration including, without
limitation, reasonable counsel fees and disbursements
and the Casualty Consultant's fees, shall be paid by
Borrower.
(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an
amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration,
as certified by the Casualty Consultant, minus the
Casualty Retainage. The term "Casualty Retainage" as
used in this Subsection 4.3(b) shall mean an amount
equal to 10% of the costs actually incurred for work
in place as part of the Restoration, as certified by
the Casualty Consultant, until such time as the
Casualty Consultant certifies to Lender that Net
Proceeds representing 50% of the required Restoration
have been disbursed. There shall be no Casualty
Retainage with respect to costs actually incurred by
Borrower for work in place in completing the last 50%
of the required Restoration. The Casualty Retainage
shall in no event, and notwithstanding anything to
the contrary set forth above in this Subsection
4.3(b), be less than the amount actually held back by
Borrower from contractors, subcontractors and
materialmen engaged in the Restoration. The Casualty
Retainage shall not be released until the Casualty
Consultant certifies to Lender that the Restoration
has been completed in accordance with the provisions
of this Subsection 4.3(b) and that all approvals
necessary for the re-occupancy and use of the
Property have been obtained from all appropriate
governmental and quasi-governmental authorities, and
Lender receives evidence reasonably satisfactory to
Lender that the costs of the Restoration have been
paid in full or will be paid in full out of the
Casualty Retainage, provided, however, that Lender
will release the portion of the Casualty Retainage
being held with respect to any contractor,
subcontractor or materialman engaged in the
Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily
completed all work and has supplied all materials in
accordance with the provisions of the contractor's,
50
subcontractor's or materialman's contract, and the
contractor, subcontractor or materialman delivers the
lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender
or by the titl company insuring the lien of this
Security Instrument. If required by Lender, the
release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any,
which has issued a payment or performance bond with
respect to the contractor, subcontractor or
materialman.
(v) Lender shall not be obligated to make disbursements
of the Net Proceeds more frequently than once every
calendar month.
(vi) If at any time the Net Proceeds or the undisbursed
balance thereof shall not, in the reasonable opinion
of Lender, be sufficient to pay in full the balance
of the costs which are reasonably estimated by the
Casualty Consultant to be incurred in connection with
the completion of the Restoration, Borrower shall
deposit the deficiency (the "Net Proceeds
Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The
Net Proceeds Deficiency deposited with Lender shall
be held by Lender and shall be disbursed for costs
actually incurred in connection with the Restoration
on the same conditions applicable to the disbursement
of the Net Proceeds, and until so disbursed pursuant
to this Subsection 4.3(b) shall constitute additional
security for the Obligations.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds
Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration
has been completed in accordance with the provisions
of this Subsection 4.3(b), and the receipt by Lender
of evidence reasonably satisfactory to Lender that
all costs incurred in connection with the Restoration
have been paid in full, shall be remitted by Lender
to Borrower, provided no Event of Default shall have
occurred and shall be continuing under the Note, this
Security Instrument or any of the Other Security
Documents.
(c) All Net Proceeds not required (i) to be made
available for the Restoration or (ii) to be returned to Borrower
as excess Net Proceeds pursuant to Subsection 4.3(b)(vii) may be
retained and applied by Lender toward the payment of the Debt
51
whether or not then due and payable in such order, priority and
proportions as Lender in its reasonable discretion shall deem
proper or, at the reasonable discretion of Lender, the same may
be paid, either in whole or in part, to Borrower for such
purposes as Lender shall designate, in its reasonable discretion.
If Lender shall receive and retain Net Proceeds, the lien of this
Security Instrument shall be reduced only by the amount thereof
received and retained by Lender and actually applied by Lender in
reduction of the Debt.
Section 4.4 ERISA. (a) Borrower shall not engage in any
transaction which would cause any obligation, or action taken or
to be taken, hereunder (or the exercise by Lender of any of its
rights under the Note, this Security Instrument and the Other
Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the
Employee Retirement Income Security Act of 1974, as amended
("ERISA").
(b) Borrower further covenants and agrees to deliver to
Lender such certifications (subject to Article 15 hereof) or
other evidence from time to time throughout the term of the
Security Instrument, as requested by Lender in its sole
discretion, that (i) Borrower is not an "employee benefit plan"
as defined in Section 3(3) of ERISA, which is subject to Title I
of ERISA, or a "governmental plan" within the meaning of Section
3(3) of ERISA; (ii) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following
circumstances is true:
(A) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. SS 2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of
equity interests in Borrower are held by "benefit plan investors"
within the meaning of 29 C.F.R. SS 2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29 C.F.R.
SS 2510.3-101(c) or (e) or an investment company registered under
The Investment Company Act of 1940.
Article 5 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
Section 5.1 Warranty of Title. Borrower has good title
to the Property and has the right to mortgage, grant, bargain,
sell, pledge, assign, warrant, transfer and convey the same and
that Borrower possesses an unencumbered fee simple absolute
52
estate in the Land and the Improvements and that it owns the
Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title
insurance policy insuring the lien of this Security Instrument
(the "Permitted Exceptions"). Borrower shall forever warrant,
defend and preserve the title and the validity and priority of
the lien of this Security Instrument and shall forever warrant
and defend the same to Lender against the claims of all persons
whomsoever.
Section 5.2 Legal Status And Authority. Borrower (a) is
duly organized, validly existing and in good standing under the
laws of its state of organization or incorporation; (b is duly
qualified to transact business and is in good standing in the
state where the Property is located; and (c) has all necessary
approvals, governmental and otherwise, and full power and
authority to own, operate and lease the Property. Borrower (and
the undersigned representative of Borrower, if any) has full
power, authority and legal right to execute this Security
Instrument, and to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the Property pursuant to the
terms hereof and to keep and observe all of the terms of this
Security Instrument on Borrower's part to be performed.
Section 5.3 Validity of Documents. (a) The execution,
delivery and performance of the Note, this Security Instrument
and the Other Security Documents and the borrowing evidenced by
the Note (i) are within the power and authority of Borrower; (ii)
have been authorized by all requisite organizational action;
(iii) have received all necessary approvals and consents,
corporate, governmental or otherwise; (iv) will not violate,
conflict with, result in a breach of or constitute (with notice
or lapse of time, or both) a material default under any provision
of law, any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership or
trust agreement, articles of organization, operating agreement,
or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by
which it or any of its assets or the Property is or may be bound
or affected; (v) will not result in the creation or imposition of
any lien, charge or encumbrance whatsoever upon any of its
assets, except the lien and security interest created hereby; and
(vi) will not require any authorization or license from, or any
filing with, any governmental or other body (except for (1) the
recordation of this Security Instrument in appropriate land
records in the State where the Property is located, (2) Uniform
Commercial Code filings relating to the security interest created
hereby, and (3) any required filings with the Securities and
Exchange Commission, provided, however, that Borrower covenants
to Lender that any such filings will be made in a timely manner);
and (b) the Note, this Security Instrument and the Other Security
53
Documents constitute the legal, valid and binding obligations of
Borrower.
Section 5.4 Litigation. Except as previously disclosed
in writing to Lender, there is no action, suit or proceeding,
judicial, administrative or otherwise (including any condemnation
or similar proceeding), pending or, to the best of Borrower's
knowledge, threatened or contemplated against, or affecting,
Borrower, a Guarantor, if any, an Indemnitor, if any, or the
Property.
Section 5.5 Status of Property.
(a) No portion of the Improvements is located in an area
identified by the Secretary of Housing and Urban Development or
any successor thereto as an area having special flood hazards
pursuant to the Flood Insurance Acts or, if any portion of the
Improvements is located within such area, Borrower has obtained
and will maintain the insurance prescribed in Section 3.3 hereof.
(b) Except as previously disclosed in writing to Lender,
Borrower has obtained all necessary certificates, licenses and
other approvals, governmental and otherwise, necessary for the
operation of the Property and the conduct of its business and all
required zoning, building code, land use, environmental and other
similar permits or approvals, all of which are in full force and
effect as of the date hereof and not subject to revocation,
suspension, forfeiture or modification.
(c) Except as previously disclosed in writing to Lender,
the Property and the present and contemplated use and occupancy
thereof are in full compliance with all applicable zoning
ordinances, building codes, land use and Environmental Laws
(hereinafter defined) and other similar laws.
(d) The Property is served by all utilities required for
the current or contemplated use thereof. All utility service is
provided by public utilities and the Property has accepted or is
equipped to accept such utility service.
(e) All public roads and streets necessary for service of
and access to the Property for the current or contemplated use
thereof have been completed, are serviceable and all-weather and
are physically and legally open for use by the public.
(f) The Property is served by public water and sewer
systems.
(g) The Property is free from damage caused by fire or
other casualty.
(h) All costs and expenses of any and all labor,
54
materials, supplies and equipment used in the construction of the
Improvements have been paid in full.
(i) Except for trade payables permitted pursuant to the
terms hereof, Borrower has paid in full for, and is the owner of,
all furnishings, fixtures and equipment (other than tenants'
property) used in connection with the operation of the Property,
free and clear of any and all security interests, liens or
encumbrances, except the lien and security interest created
hereby.
(j) All liquid and solid waste disposal, septic and sewer
systems located on the Property are in a good and safe condition
and repair and in compliance with all Applicable Laws.
(k) All the Improvements materially lie within the
boundaries of the Land.
Section 5.6 No Foreign Person. Borrower is not a
"foreign person" within the meaning of Section 1445(f)(3) of the
Internal Revenue Code of 1986, as amended and the related
Treasury Department regulations, including temporary regulations.
Section 5.7 Separate Tax Lot. The Property is assessed
for real estate tax purposes as one or more wholly independent
tax lot or lots, separate from any adjoining land or improvements
not constituting a part of such lot or lots, and no other land or
improvements is assessed and taxed together with the Property or
any portion thereof.
Section 5.8 Leases. Except as previously disclosed in
writing to Lender, whether in the rent roll for the Property
delivered to and approved by Lender or otherwise, (a) Borrower is
the sole owner of the entire lessor's interest in the Leases; (b)
the Leases are valid and enforceable and in full force and
effect; (c) all of the Leases are arms-length agreements with
bona fide, independent third parties; (d) no party under any
Lease is in default; (e) all Rents due have been paid in full;
(f) the terms of all alterations, modifications and amendments to
the Leases are reflected in the certified occupancy statement
delivered to and approved by Lender; (g) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or
hypothecated; (h) none of the Rents have been collected for more
than one (1) month in advance (except a security deposit shall
not be deemed rent collected in advance); (i) the premises
demised under the Leases have been completed and the tenants
under the Leases have accepted the same and have taken possession
of the same on a rent-paying basis; (j) there exist no offsets or
defenses to the payment of any portion of the Rents; (k) Borrower
has received no notice from any tenant challenging the validity
or enforceability of any Lease; (l) there are no agreements with
the tenants under the Leases other than expressly set forth in
55
each Lease; (m) the Leases are valid and enforceable against
Borrower and the tenants set forth therein; (n) no Lease contains
an option to purchase, right of first refusal to purchase, or any
other similar provision; (o) no person or entity has any
possessory interest in, or right to occupy, the Property except
under and pursuant to a Lease; (p) each Lease is subordinate to
this Security Instrument, either pursuant to its terms or a
recordable subordination agreement; (q) no Lease has the benefit
of a non-disturbance agreement that would be considered
unacceptable to prudent institutional lenders, (r) all security
deposits relating to the Leases reflected on the certified rent
roll or other certification delivered to Lender have been
collected by Borrower; and (s) no brokerage commissions or
finders fees are due and payable regarding any Lease.
Section 5.9 Solvency. Borrower (a) has not entered into
the transaction or executed the Note, this Security Instrument or
any Other Security Document with the actual intent to hinder,
delay or defraud any creditor and (b) has received reasonably
equivalent value in exchange for its obligations under such
documents. Giving effect to the Loan, the fair saleable value of
Borrower's assets exceeds and will, immediately following the
making of the Loan, exceed Borrower's total liabilities,
including, without limitation, subordinated, unliquidated,
disputed and contingent liabilities. The fair saleable value of
Borrower's assets is and will, immediately following the making
of the Loan, be greater than Borrower's probable liabilities,
including the maximum amount of its contingent liabilities on its
debts as such debts become absolute and matured. Borrower's
assets do not and, immediately following the making of the Loan
will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debt
and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debt and liabilities
as they mature (taking into account the timing and amounts of
cash to be received by Borrower and the amounts to be payable on
or in respect of obligations of Borrower). Except as expressly
disclosed to Lender in writing, no petition in bankruptcy has
been filed against Borrower, any Indemnitor, any Guarantor, any
principal or any related entity thereof, or any principal,
general partner or member thereof, in the last seven (7) years,
and neither Borrower, any Indemnitor, any Guarantor, any
principal nor any related entity thereof, nor any principal,
general partner or member thereof, in the last seven (7) years
has ever made an assignment for the benefit of creditors or taken
advantage of any insolvency act for the benefit of debtors.
Section 5.10 Business Purposes. The loan evidenced by the
Note secured by the Security Instrument and the Other Security
Documents (the "Loan") is solely for the business purpose of
Borrower, and is not for personal, family, household, or
56
agricultural purposes.
Section 5.11 Taxes. Borrower, any Guarantor and any
Indemnitor have filed all federal, state, county, municipal, and
city income and other tax returns required to have been filed by
them and have paid all taxes and related liabilities which have
become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor
nor any Indemnitor knows of any basis for any additional
assessment in respect of any such taxes and related liabilities
for prior years.
Section 5.12 Mailing Address. Borrower's mailing address,
as set forth in the opening paragraph hereof or as changed in
accordance with the provisions hereof, is true and correct.
Section 5.13 No Change in Facts or Circumstances. All
information in the application for the Loan submitted to Lender
(the "Loan Application") and in all financial statements, rent
rolls, reports, certificates and other documents submitted in
connection with the Loan Application or in satisfaction of the
terms thereof, are accurate, complete and correct in all material
respects. There has been no adverse change in any condition,
fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading.
Section 5.14 Disclosure. Borrower has disclosed to Lender
all material facts and has not failed to disclose any material
fact that could cause any representation or warranty made herein
to be materially misleading.
Section 5.15 Third Party Representations. Each of the
representations and the warranties made by each Guarantor and
Indemnitor herein or in any Other Security Document(s) is true
and correct in all material respects.
Section 5.16 Illegal Activity. No portion of the Property
has been or will be purchased, improved, equipped or furnished
with proceeds of any illegal activity and to the best of
Borrower's knowledge, there are no illegal activities or
activities relating to any controlled substance at the Property.
Section 5.17 Contracts. All contracts, agreements,
consents, waivers, documents and writings of every kind or
character at any time to which Borrower is a party to be
delivered to Lender pursuant to any of the provisions of this
Security Instrument are valid and enforceable against Borrower
and, to the best knowledge of Borrower, are enforceable against
all other parties thereto, and, to Borrower's actual knowledge,
in all respects are what they purport to be and, to the best
knowledge of Borrower, to the extent that any such writing shall
impose any obligation or duty on the party thereto or constitute
57
a waiver of any rights which any such party might otherwise have,
said writing shall be valid and enforceable against said party in
accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally.
Section 5.18 Non-Consolidation Opinion Assumptions. All
of the assumptions made in the Non-Consolidation Opinion,
including, but not limited to, any exhibits attached thereto, are
true and correct.
Section 5.19 ERISA. (a) As of the date hereof and
throughout the term of the Loan, (i) Borrower is not and will not
be an "employee benefit plan" as defined in Section 3(3) of
ERISA, which is subject to Title I of ERISA, and (ii) the assets
of Borrower do not and will not constitute "plan assets" of one
or more such plans for purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of the
Loan (i) Borrower is not and will not be a "governmental plan"
within the meaning of Section 3(32) of ERISA and (ii)
transactions by or with Borrower are not and will not be subject
to state statutes applicable to Borrower regulating investments
of and fiduciary obligations with respect to governmental plans.
Section 5.20 Federal Reserve Regulations. No part of the
proceeds of the Loan will be used for the purpose of purchasing
or acquiring any "margin stock" within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System or for
any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors,
or for any purposes prohibited by Legal Requirements or by the
terms and conditions of this Security Instrument, the Note or the
Other Security Documents.
Section 5.21 Forfeiture. There has not been and shall
never be committed by Borrower or any other person in occupancy
of or involved with the operation or use of the Property any act
or omission affording the federal government or any state or
local government the right of forfeiture as against the Property
or any part thereof or any monies paid in performance of
Borrower's obligations under the Note, this Security Instrument
or the Other Security Documents. Borrower hereby covenants and
agrees not to commit, permit or suffer to exist any act or
omission affording such right of forfeiture.
Section 5.22 Investment Company Act. Borrower is not (a) an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of
1940, as amended; (b) 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
58
the Public Utility Holding Company Act of 1935, as amended; or
(c) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
Article 6 - OBLIGATIONS AND RELIANCES
Section 6.1 Relationship of Borrower and Lender. The
relationship between Borrower and Lender is solely that of debtor
and creditor, and Lender has no fiduciary or other special
relationship with Borrower, and no term or condition of any of
the Note, this Security Instrument and the Other Security
Documents shall be construed so as to deem the relationship
between Borrower and Lender to be other than that of debtor and
creditor.
Section 6.2 No Reliance on Lender. The members, general
partners, principals, shareholders, and (if Borrower is a trust)
beneficial owners of Borrower are experienced in the ownership
and operation of properties similar to the Property, and Borrower
and Lender are relying solely upon such expertise and business
plan in connection with the ownership and operation of the
Property. Borrower is not relying on Lender's expertise,
business acumen or advice in connection with the Property.
Section 6.3 No Lender Obligations.
(a) Notwithstanding the provisions of Subsections 1.1(f) and
(l) or Section 1.2, Lender is not undertaking the performance of
(i) any obligations under the Leases; or (ii) any obligations
with respect to such agreements, contracts, certificates,
instruments, franchises, permits, trademarks, licenses and other
documents.
(b) By accepting or approving anything required to be
observed, performed or fulfilled or to be given to Lender
pursuant to this Security Instrument, the Note or the Other
Security Documents, including without limitation, any officer's
certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal, or insurance policy,
Lender shall not be deemed to have warranted, consented to, or
affirmed the sufficiency, the legality or effectiveness of same,
and such acceptance or approval thereof shall not constitute any
warranty or affirmation with respect thereto by Lender.
Section 6.4 Reliance. Borrower recognizes and
acknowledges that in accepting the Note, this Security Instrument
and the Other Security Documents, Lender is expressly and
primarily relying on the truth and accuracy of the warranties and
representations set forth in Article 5 and Article 12 without any
obligation to investigate the Property and notwithstanding any
investigation of the Property by Lender; that such reliance
59
existed on the part of Lender prior to the date hereof; that the
warranties and representations are a material inducement to
Lender in accepting the Note, this Security Instrument and the
Other Security Documents; and that Lender would not be willing to
make the Loan and accept this Security Instrument in the absence
of the warranties and representations as set forth in Article 5
and Article 12.
Article 7 - FURTHER ASSURANCES
Section 7.1 Recording of Security Instrument, etc.
Borrower forthwith upon the execution and delivery of this
Security Instrument and thereafter, from time to time, will cause
this Security Instrument and any of the Other Security Documents
creating a lien or security interest or evidencing the lien
hereof upon the Property and each instrument of further assurance
to be filed, registered or recorded in such manner and in such
places as may be required by any present or future law in order
to publish notice of and fully to protect and perfect the lien or
security interest hereof upon, and the interest of Lender in, the
Property. Borrower will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation,
execution, acknowledgment and/or recording of the Note, this
Security Instrument, the Other Security Documents, any note or
mortgage supplemental hereto, any security instrument with
respect to the Property and any instrument of further assurance,
and any modification or amendment of the foregoing documents, and
all federal, state, county and municipal taxes, duties, imposts,
assessments and charges arising out of or in connection with the
execution and delivery of this Security Instrument, any mortgage
supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except
where prohibited by law so to do.
Section 7.2 Further Acts, etc. Borrower will, at the
cost of Borrower, and without expense to Lender, do, execute,
acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignments,
transfers and assurances as Lender shall, from time to time,
require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender the Property and rights
hereby mortgaged, granted, bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or
hereafter so to be, or which Borrower may be or may hereafter
become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of
this Security Instrument or for filing, registering or recording
this Security Instrument, or for complying with all Applicable
Laws. Borrower, on demand, will execute and deliver and hereby
authorizes Lender, following twenty (20) days' notice to
60
Borrower, to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so,
one or more financing statements, chattel mortgages or other
instruments, to evidence more effectively the security interest
of Lender in the Property. Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and
remedies available to Lender at law and in equity, including
without limitation such rights and remedies available to Lender
pursuant to this Section 7.2.
Section 7.3 Changes in Tax, Debt Credit and Documentary
Stamp Laws.
(a) If any law is enacted or adopted or amended after the
date of this Security Instrument which deducts the Debt from the
value of the Property for the purpose of taxation or which
imposes a tax, either directly or indirectly, on the Debt or
Lender's interest in the Property, Borrower will pay the tax,
with interest and penalties thereon, if any. If Lender is
advised by counsel chosen by it that the payment of tax by
Borrower would be unlawful or taxable to Lender or unenforceable
or provide the basis for a defense of usury, then Lender shall
have the option, exercisable by written notice of not less than
ninety (90) days to declare the Debt immediately due and payable.
(b) Borrower will not claim or demand or be entitled to
any credit or credits on account of the Debt for any part of the
Taxes or Other Charges assessed against the Property, or any part
thereof, and no deduction shall otherwise be made or claimed from
the assessed value of the Property, or any part thereof, for real
estate tax purposes by reason of this Security Instrument or the
Debt. If such claim, credit or deduction shall be required by
law, Lender shall have the option, exercisable by written notice
of not less than ninety (90) days, to declare the Debt
immediately due and payable.
(c) If at any time the United States of America, any
State thereof or any subdivision of any such State shall require
revenue or other stamps to be affixed to the Note, this Security
Instrument, or any of the Other Security Documents or impose any
other tax or charge on the same, Borrower will pay for the same,
with interest and penalties thereon, if any.
Section 7.4 Estoppel Certificates.
(a) After request by Lender, Borrower, within ten (10)
days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the
amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the terms of payment and maturity date of the
61
Note, (v) the date installments of interest and/or principal were
last paid, (vi) that, except as provided in such statement and to
the best of Borrower's knowledge, there are no defaults or events
which with the passage of time or the giving of notice or both,
would constitute an event of default under the Note or the
Security Instrument, (vii) that the Note and this Security
Instrument are valid, legal and binding obligations and have not
been modified or if modified, giving particulars of such
modification, (viii) whether any offsets or defenses exist
against the obligations secured hereby and, if any are alleged to
exist, a detailed description thereof, (ix) that all Leases are
in full force and effect, (x) the date to which the Rents
thereunder have been paid pursuant to the Leases, (xi) whether or
not, to the best knowledge of Borrower, any of the lessees under
the Leases are in default under the Leases, and, if any of the
lessees are in default, setting forth the specific nature of all
such defaults, (xii) the amount of security deposits held by
Borrower under each Lease and that such amounts are consistent
with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably
related to the Leases, the obligations secured hereby, the
Property or this Security Instrument.
(b) With respect to commercial Leases, Borrower shall use
its best efforts to deliver to Lender, promptly upon request,
duly executed estoppel certificates from any one or more lessees
as required by Lender attesting to such facts regarding the Lease
as Lender may require, including but not limited to attestations
that each Lease covered thereby is in full force and effect with
no defaults thereunder on the part of any party, that none of the
Rents have been paid more than one month in advance, and that the
lessee claims no defense or offset against the full and timely
performance of its obligations under the Lease, provided,
however, that if any of the foregoing is not true, then the
estoppel certificates shall so state.
(c) Upon any transfer or proposed transfer contemplated
by Section 19.1 hereof, at Lender's request, Borrower, any
Guarantors and any Indemnitor(s) shall provide an estoppel
certificate to the Investor (defined in Section 19.1) or any
prospective Investor in such form, substance and detail as
Lender, such Investor or prospective Investor may require.
Section 7.5 Flood Insurance. After Lender's request,
Borrower shall deliver evidence satisfactory to Lender that no
portion of the Improvements is situated in a federally designated
"special flood hazard area" or if it is, that Borrower has
obtained insurance meeting the requirements of Section
3.3(a)(vii).
Section 7.6 Replacement Documents. Upon receipt of an
affidavit of an officer of Lender as to the loss, theft,
62
destruction or mutilation of the Note or any Other Security
Document which is not of public record, and, in the case of any
such mutilation, upon surrender and cancellation of such Note or
Other Security Document, Borrower will issue, in lieu thereof, a
replacement Note or Other Security Document, dated the date of
such lost, stolen, destroyed or mutilated Note or Other Security
Document in the same principal amount thereof and otherwise of
like tenor.
Article 8 - DUE ON SALE/ENCUMBRANCE
Section 8.1 No Sale/Encumbrance. Borrower agrees that
Borrower shall not, without the prior written consent of Lender,
sell, convey, mortgage, grant, bargain, encumber, pledge, assign,
or otherwise transfer the Property or any part thereof or permit
the Property or any part thereof to be sold, conveyed, mortgaged,
granted, bargained, encumbered, pledged, assigned, or otherwise
transferred, except that Borrower may lease space in the
Improvements to tenants in accordance with the provisions of
Section 3.7. Lender agrees that it shall not unreasonably
withhold or delay any consent as may be required from Lender
under this Section 8.1 with respect to utility easements with
utility providers, governmental entities or such other parties,
provided that any such utility easement does not have a material
adverse affect on the use or value of the Property and does not
impair the lien of this Security Instrument.
Section 8.2 Sale/Encumbrance Defined. A sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property within the meaning of
this Article 8 shall be deemed to include, but not limited to,
(a) an installment sales agreement wherein Borrower agrees to
sell the Property or any part thereof for a price to be paid in
installments; (b) an agreement by Borrower leasing all or a
substantial part of the Property for other than actual occupancy
by a space tenant thereunder or a sale, assignment or other
transfer of, or the grant of a security interest in, Borrower's
right, title and interest in and to any Leases or any Rents; (c)
if Borrower, any Guarantor, any Indemnitor, or any managing agent
affiliated with any of the foregoing (the "Affiliated Manager")
or any general or limited partner or member of Borrower, any
Guarantor, any Indemnitor or any Affiliated Manager is a
corporation, the voluntary or involuntary sale, conveyance,
transfer or pledge of such corporation's stock (or the stock of
any corporation directly or indirectly controlling such
corporation by operation of law or otherwise) or the creation or
issuance of new stock by which an aggregate of more than 10% of
such corporation's stock shall be vested in a party or parties
who are not now stockholders; (d) if Borrower, any Guarantor, any
Indemnitor or any Affiliated Manager or any general or limited
partner or member of Borrower, any Guarantor or any Indemnitor or
63
any Affiliated Manager is a limited or general partnership or
joint venture, the change, removal or resignation of a general
partner or managing partner or the transfer or pledge of the
partnership interest of any general partner or managing partner
or any profits or proceeds relating to such partnership interest
or the voluntary or involuntary sale, conveyance, transfer or
pledge of limited partnership interests (or the limited
partnership interests of any limited partnership directly or
indirectly controlling such limited partnership by operation of
law or otherwise) or the creation or issance of new limited
partnership interests, by which an aggregate of more than 10% of
such limited partnership interests are held by parties who are
not currently limited partners; and (e) if Borrower, any
Guarantor, any Indemnitor or any Affiliated Manager or any
general or limited partner or member of Borrower, any Guarantor
or any Indemnitor or any Affiliated Manager is a limited
liability company, the change, removal or resignation of a
managing member or the transfer of the membership interest of any
managing member or any profits or proceeds relating to such
membership interest or the voluntary or involuntary sale,
conveyance, transfer or pledge of membership interests (or the
membership interests of any limited liability company directly or
indirectly controlling such limited liability company by
operation of law or otherwise) or the creation or issuance of new
membership interests, by which an aggregate of more than 10% of
such membership interests are held by parties who are not
currently members; and (f) the removal or the resignation of the
managing agent (including, without limitation, the Affiliated
Manager) other than in accordance with that certain Conditional
Assignment of Management Agreement dated the date hereof between
Borrower and Lender. Notwithstanding the foregoing, the
following transfer shall not be deemed to be a sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or
transfer within the meaning of this Article 8:
(a) transfer by devise or descent or by operation of law
upon the death of a member, partner or stockholder of Borrower,
any Guarantor or any Indemnitor or any general partner or member
thereof;
(b) provided that no Event of Default has occurred and is
continuing under the Note, this Security Instrument or the Other
Security Documents, transfers of non-managing membership, limited
partnership or shareholder interests, as applicable, in Borrower
or Affiliated Manager (other than AERC to the extent that AERC is
a Publicly Traded Entity (defined below)) (the "Permitted
Transfers") up to 49%, respectively, in the aggregate; provided,
however, that (i) Lender must receive sixty (60) days prior
written notice of any transfer pursuant to this Section, (ii)
AERC must continue to hold after the Permitted Transfer at least
a 51% direct or indirect beneficial interest in Borrower or
Affiliated Manager (as the case may be), (iii) such transfers
64
shall not result in a change in control of Borrower or Affiliated
Manager (other than AERC to the extent that AERC is a Publicly
Traded Entity) (as the case may be) or in the day-to-day
operations of the Property, (iv) Lender shall have received
evidence satisfactory to it (which shall include a
non-consolidation opinion acceptable to Lender) that after such
transfer Borrower shall be in compliance with the terms hereof,
including without limitation, Section 4.2, and (v) Lender shall
have received payment of all fees and expenses set forth in
Section 8.3 (notwithstanding anything to the contrary contained
in Section 8.1 or this Subsection 8.2 (b), in the event that (A)
Borrower requests Lender's consent to a transfer of shareholder
interests in the Affiliated Manager in excess of 49%, (B) the
Affiliated Manager is a corporation which is not publically
traded on a nationally recognized exchange or shall no longer
continue to be a corporation which is publically traded on a
nationally recognized exchange as a result of such transfer, and
(C) if Securities are then rated by the Rating Agencies, Borrower
shall deliver to Lender written confirmation from the Rating
Agencies that the transfer shall not result in a downgrade,
withdrawal or qualification of the then current ratings by the
applicable Rating Agencies of the Securities and otherwise in
form and substance reasonably satisfactory to Lender, Lender's
consent with respect to such requested transfer shall not be
unreasonably withheld [;] [and];
(c) in the event the Affiliated Manager is a corporation
publicly traded on a nationally-recognized exchange (a Publicly
Traded Entity) and provided that the Affiliated Manager shall
continue to be publicly traded on a nationally-recognized
exchange after any such trade, transfers of shareholder interests
in the Affiliated Manager [; and] [.]
(d) [WITH RESPECT TO COUNTRY CLUB ONLY: (d) a transfer of
all of the shares of the Borrower by Associated Estates
Management Company, its sole shareholder, to Associated Estates
Realty Corporation provided Lender receives at least sixty (60)
days prior written notice of the transfer.]
Section 8.3 Lender's Rights. Lender reserves the right
to condition the consent required hereunder upon a modification
of the terms hereof and on assumption of the Note, this Security
Instrument and the Other Security Documents as so modified by the
proposed transferee, payment of a transfer fee of not less than
one percent (1%) of the principal balance of the Note (the
"Transfer Fee"), a $4,000 processing fee, and all of Lender's
expenses incurred in connection with such transfer, the approval
by a Rating Agency of the proposed transferee, the proposed
transferee's continued compliance with the covenants set forth in
this Security Instrument, including, without limitation, the
covenants in Section 4.2 hereof, or such other conditions as
Lender shall determine in its sole discretion to be in the
65
interest of Lender. Notwithstanding the preceding sentence, (i)
no Transfer Fee shall be payable in connection with any
Permitted Transfer and (ii) in the event of any transfer of
shareholder interests in Borrower other than a Permitted
Transfer, the Transfer Fee equal to seventy-five hundredths of a
percent (0.75%) of the principal balance of the Note. All of
Lender's expenses incurred and the $4,000 processing fee shall be
payable by Borrower whether or not Lender consents to the
transfer. Lender shall not be required to demonstrate any actual
impairment of its security or any increased risk of default
hereunder in order to declare the Debt immediately due and
payable upon Borrower's sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment, or transfer of the
Property without Lender's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer of the Property regardless of
whether voluntary or not, or whether or not Lender has consented
to any previous sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of the Property.
Article 9 - PREPAYMENT
Section 9.1 Prepayment. The Debt may not be prepaid in
whole or in part except in strict accordance with the express
terms and conditions of the Note.
Article 10 - DEFAULT
Section 10.1 Events of Default. The occurrence of any one
or more of the following events shall constitute an "Event of
Default":
(a) if any portion of the Debt is not paid on or prior to
[MERRILL LOANS ONLY -- the fifth (5th) day after the same is due]
[CHASE LOANS ONLY -- the date the same is due];
(b) if any of the Taxes or Other Charges is not paid when
the same is due and payable except to the extent sums sufficient
to pay such Taxes and Other Charges have been deposited with
Lender in accordance with the terms of this Security Instrument;
(c) if the Policies are not kept in full force and
effect, or if the Policies are not delivered to Lender upon
request;
(d) if Borrower or principal, as applicable, violates or
does not comply with any of the provisions of Section 4.2 or
Article 8, including, but not limited to, if Borrower or any
principal shall fail to comply with the provisions of its
operating agreement, articles or certificate of incorporation,
66
partnership agreement or any other governing documents;
(e) if any representation or warranty of Borrower, any
Indemnitor or any person guaranteeing payment of the Debt or any
portion thereof or performance by Borrower of any of the terms of
this Security Instrument (a "Guarantor"), or any member, general
partner, principal or beneficial owner of any of the foregoing,
made herein or in the Environmental Indemnity (defined below) or
in any guaranty, or in any certificate, report, financial
statement or other instrument or document furnished to Lender
shall have been false or misleading in any material respect when
made;
(f) if (i) Borrower or any managing member or general
partner of Borrower, or any Guarantor or Indemnitor shall
commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order
for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or
(B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any managing
member or general partner of Borrower, or any Guarantor or
Indemnitor shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Borrower or
any managing member or general partner of Borrower, or any
Guarantor or Indemnitor any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded
for a period of sixty (60) days; or (iii) there shall be
commenced against the Borrower or any managing member or general
partner of Borrower, or any Guarantor or Indemnitor any case,
proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry
of any order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within
sixty (60) days from the entry thereof; or (iv) the Borrower or
any managing member or general partner of Borrower, or any
Guarantor or Indemnitor shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or
(v) the Borrower or any managing member or general partner of
Borrower, or any Guarantor or Indemnitor shall generally not, or
shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due;
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(g) if Borrower shall be in default beyond applicable
notice and grace periods under any other mortgage, deed of trust,
deed to secure debt or other security agreement covering any part
of the Property whether it be superior or junior in lien to this
Security Instrument;
(h) if the Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real
estate taxes and assessments not then due and payable and the
lien shall remain undischarged of record (by payment, bonding or
otherwise) for a period of thirty (30) days;
(i) if any federal tax lien is filed against Borrower,
any member or general partner of Borrower, any Guarantor, any
Indemnitor or the Property and same is not discharged of record
within thirty (30) days after same is filed;
(j) if Borrower shall fail to deliver to Lender, within
fifteen (15) days after request by Lender, the estoppel
certificates required pursuant to the terms of Subsection 7.4(a)
and (c);
(k) if any default occurs under any guaranty or indemnity
executed in connection herewith (including, without limitation,
the Cooperation Letter (defined in Section 19.2) the Indemnity
Agreement (defined in Section 13.4), and the Environmental
Indemnity (defined in Section 13.4) and such default continues
after the expiration of applicable grace periods, if any;
(l) if any of the assumptions contained in the
Non-Consolidation Opinion, including, but not limited to, any
exhibits attached thereto, were not true and correct as of the
date of such Non-Consolidation Opinion or thereafter became
untrue or incorrect in any material respect; or
(m) if for more than ten (10) days after written notice
from Lender, Borrower shall continue to be in default under any
term, covenant or condition of the Note, this Security Instrument
or the Other Security Documents (including, without limitation,
the Cooperation Letter) not set forth in Subsections 10.1(a)
through (l) above, then, in the case of any default which can be
cured by the payment of a sum of money or for thirty (30) days
after written notice from Lender in the case of any other
default, provided that if such default cannot reasonably be cured
within such thirty (30) day period and Borrower shall have
commenced to cure such default within such thirty (30) day period
and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) day period shall be extended for so long
as it shall require Borrower in the exercise of due diligence to
cure such default, it being agreed that no such extension shall
be for a period in excess of sixty (60) days.
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Article 11 - RIGHTS AND REMEDIES
Section 11.1 Remedies. Upon the occurrence of any Event
of Default, Borrower agrees that Lender may take such action,
without notice or demand, as it deems advisable to protect and
enforce its rights against Borrower and in and to the Property,
including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and
in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and
remedies of Lender:
(a) declare the entire unpaid Debt to be immediately due
and payable;
(b) institute proceedings, judicial or otherwise, for the
complete foreclosure of this Security Instrument under any
applicable provision of law in which case the Property or any
interest therein may be sold for cash or upon credit in one or
more parcels or in several interests or portions and in any order
or manner;
(c) with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Security
Instrument for the portion of the Debt then due and payable,
subject to the continuing lien and security interest of this
Security Instrument for the balance of the Debt not then due,
unimpaired and without loss of priority;
(d) sell for cash or upon credit the Property or any part
thereof and all estate, claim, demand, right, title and interest
of Borrower therein and rights of redemption thereof, pursuant to
power of sale or otherwise, at one or more sales, in one or more
parcels, at such time and place, upon such terms and after such
notice thereof as may be required or permitted by law;
(e) subject to the provisions of Article 15, institute an
action, suit or proceeding in equity for the specific performance
of any covenant, condition or agreement contained herein, in the
Note or in the Other Security Documents;
(f) subject to the provisions of Article 15, recover
judgment on the Note either before, during or after any
proceedings for the enforcement of this Security Instrument or
the Other Security Documents;
(g) apply for the appointment of a receiver, trustee,
liquidator or conservator of the Property, without notice and
without regard for the adequacy of the security for the Debt and
without regard for the solvency of Borrower, any Guarantor,
Indemnitor or of any person, firm or other entity liable for the
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payment of the Debt;
(h) subject to any applicable law, the license granted to
Borrower under Section 1.2 shall automatically be revoked and
Lender may enter into or upon the Property, either personally or
by its agents, nominees or attorneys and dispossess Borrower and
its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its
agents or servants wholly therefrom, and take possession of all
books, records and accounts relating thereto and Borrower agrees
to surrender possession of the Property and of such books,
records and accounts to Lender upon demand, and thereupon Lender
may (i) use, operate, manage, control, insure, maintain, repair,
restore and otherwise deal with all and every part of the
Property and conduct the business thereat; (ii) complete any
construction on the Property in such manner and form as Lender
deems advisable; (iii) make alterations, additions, renewals,
replacements and improvements to or on the Property; (iv)
exercise all rights and powers of Borrower with respect to the
Property, whether in the name of Borrower or otherwise,
including, without limitation, the right to make, cancel, enforce
or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all Rents of the Property and every part
thereof; (v) require Borrower to pay monthly in advance to
Lender, or any receiver appointed to collect the Rents, the fair
and reasonable rental value for the use and occupation of such
part of the Property as may be occupied by Borrower; (vi) require
Borrower to vacate and surrender possession of the Property to
Lender or to such receiver and, in default thereof, Borrower may
be evicted by summary proceedings or otherwise; and (vii) apply
the receipts from the Property to the payment of the Debt, in
such order, priority and proportions as Lender shall deem
appropriate in its sole discretion after deducting therefrom all
expenses (including reasonable attorneys' fees) incurred in
connection with the aforesaid operations and all amounts necessry
to pay the Taxes, Other Charges, Insurance Premiums and other
expenses in connection with the Property, as well as just and
reasonable compensation for the services of Lender, its counsel,
agents and employees;
(i) exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing: (i)
the right to take possession of the Personal Property or any part
thereof, and to take such other measures as Lender may deem
necessary for the care, protection and preservation of the
Personal Property, and (ii) request Borrower at its expense to
assemble the Personal Property and make it available to Lender at
a convenient place acceptable to Lender. Any notice of sale,
disposition or other intended action by Lender with respect to
the Personal Property sent to Borrower in accordance with the
provisions hereof at least five (5) days prior to such action,
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shall constitute commercially reasonable notice to Borrower;
(j) apply any sums then deposited in the Escrow Fund and
any other sums held in escrow or otherwise by Lender in
accordance with the terms of this Security Instrument or any
Other Security Document to the payment of the following items in
any order in its sole discretion:
(i) Taxes and Other Charges;
(ii) Insurance Premiums;
(iii) interest on the unpaid principal balance of the Note;
(iv) amortization of the unpaid principal balance of the
Note; or
(v) all other sums payable pursuant to the Note, this
Security Instrument and the Other Security Documents,
including without limitation advances made by Lender
pursuant to the terms of this Security Instrument;
(k) surrender the Policies maintained pursuant to Article
3 hereof, collect the unearned Insurance Premiums and apply such
sums as a credit on the Debt in such priority and proportion as
Lender in its discretion shall deem proper, and in connection
therewith, Borrower hereby appoints Lender as agent and attorney-
in-fact (which is coupled with an interest and is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
(l) apply the undisbursed balance of any Net Proceeds
Deficiency deposit, together with interest thereon, to the
payment of the Debt in such order, priority and proportions as
Lender shall deem to be appropriate in its discretion;
(m) in conjunction with or pursuant to the exercise by
Lender of its rights under this Section 11.1 to institute
proceedings, judicial or otherwise, for the full or partial
foreclosure of this Security Instrument, terminate any agreement
with respect to the management of the Property; or
(n) pursue such other remedies as Lender may have under
applicable law.
In the event of a sale, by foreclosure, power of sale, or
otherwise, of less than all of the Property, this Security
Instrument shall continue as a lien and security interest on the
remaining portion of the Property unimpaired and without loss of
priority. Notwithstanding the provisions of this Section 11.1 to
the contrary, if any Event of Default as described in clause (i)
or (ii) of Subsection 10.1(f) shall occur, the entire unpaid Debt
shall be automatically due and payable, without any further
71
notice, demand or other action by Lender.
Section 11.2 Application of Proceeds. The purchase money,
proceeds and avails of any disposition of the Property, or any
part thereof, or any other sums collected by Lender pursuant to
the Note, this Security Instrument or the Other Security
Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall
deem proper.
Section 11.3 Right to Cure Defaults. Upon the occurrence
of any Event of Default or if Borrower fails to make any payment
or to do any act as herein provided, Lender may, but without any
obligation to do so and without notice to or demand on Borrower
and without releasing Borrower from any obligation hereunder,
make or do the same in such manner and to such extent as Lender
may deem necessary to protect the security hereof. Lender is
authorized to enter upon the Property for such purposes, or
appear in, defend, or bring any action or proceeding to protect
its interest in the Property or to foreclose this Security
Instrument or collect the Debt. The cost and expense of any cure
hereunder (including reasonable attorneys' fees to the extent
permitted by law), with interest as provided in this Section
11.3, shall constitute a portion of the Debt and shall be due and
payable to Lender upon demand. All such costs and expenses
incurred by Lender in remedying such Event of Default or such
failed payment or act or in appearing in, defending, or bringing
any such action or proceeding shall bear interest at the Default
Rate (as defined in the Note), for the period after notice from
Lender that such cost or expense was incurred to the date of
payment to Lender. All such costs and expenses incurred by
Lender together with interest thereon calculated at the Default
Rate shall be deemed to constitute a portion of the Debt and be
secured by this Security Instrument and the Other Security
Documents and shall be immediately due and payable upon demand by
Lender therefor.
Section 11.4 Actions and Proceedings. Lender has the
right to appear in and defend any action or proceeding brought
with respect to the Property, and after the occurrence and during
the continuance of an Event of Default, to bring any action or
proceeding, in the name and on behalf of Borrower, which Lender,
in its discretion, decides should be brought to protect its
interest in the Property.
Section 11.5 Recovery of Sums Required To Be Paid. Lender
shall have the right from time to time to take action to recover
any sum or sums which constitute a part of the Debt as the same
become due, without regard to whether or not the balance of the
Debt shall be due, and without prejudice to the right of Lender
thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by Borrower existing at the
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time such earlier action was commenced.
Section 11.6 Examination of Books and Records. Lender, its
agents, accountants and attorneys shall have the right, upon
prior written notice to Borrower (unless an Event of Default
exists, in which case no notice shall be required), to examine
and audit, during reasonable business hours, the records, books,
management and other papers of Borrower and its affiliates or of
any Guarantor or Indemnitor which pertain to their financial
condition or the income, expenses and operation of the Property,
at the Property or at any office regularly maintained by
Borrower, its affiliates or any Guarantor or Indemnitor where the
books and records are located. Lender and its agents shall have
the right to make copies and extracts from the foregoing records
and other papers.
Section 11.7 Other Rights, etc. (a) The failure of Lender
to insist upon strict performance of any term hereof shall not be
deemed to be a waiver of any term of this Security Instrument.
Borrower shall not be relieved of Borrower's obligations
hereunder by reason of (i) the failure of Lender to comply with
any request of Borrower, any Guarantor or any Indemnitor to take
any action to foreclose this Security Instrument or otherwise
enforce any of the provisions hereof or of the Note or the Other
Security Documents, (ii) the release, regardless of
consideration, of the whole or any part of the Property, or of
any person liable for the Debt or any portion thereof, or (iii)
any agreement or stipulation by Lender extending the time of
payment or otherwise modifying or supplementing the terms of the
Note, this Security Instrument or the Other Security Documents.
(b) It is agreed that the risk of loss or damage to the
Property is on Borrower, and Lender shall have no liability
whatsoever for decline in value of the Property, for failure to
maintain the Policies, or for failure to determine whether
insurance in force is adequate as to the amount of risks insured.
Possession by Lender shall not be deemed an election of judicial
relief, if any such possession is requested or obtained, with
respect to any Property or collateral not in Lender's possession.
(c) Lender may resort for the payment of the Debt to any
other security held by Lender in such order and manner as Lender,
in its discretion, may elect. Lender may take action to recover
the Debt, or any portion thereof, or to enforce any covenant
hereof without prejudice to the right of Lender thereafter to
foreclose this Security Instrument. The rights of Lender under
this Security Instrument shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the
others. No act of Lender shall be construed as an election to
proceed under any one provision herein to the exclusion of any
other provision. Lender shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every
73
right and remedy now or hereafter afforded at law or in equity.
Section 11.8 Right to Release Any Portion of the Property.
Lender may release any portion of the Property for such
consideration as Lender may require without, as to the remainder
of the Property, in any way impairing or affecting the lien or
priority of this Security Instrument, or improving the position
of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by
the actual monetary consideration, if any, received by Lender for
such release, and may accept by assignment, pledge or otherwise
any other property in place thereof as Lender may require without
being accountable for so doing to any other lienholder. This
Security Instrument shall continue as a lien and security
interest in the remaining portion of the Property.
Section 11.9 Violation of Laws. If the Property is not in
compliance with Applicable Laws, Lender may impose additional
requirements upon Borrower in connection herewith including,
without limitation, monetary reserves or financial equivalents.
Section 11.10 Right of Entry. Lender and its agents shall
have the right to enter and inspect the Property at all
reasonable times.
Section 11.11 Subrogation. If any or all of the proceeds
of the Note have been used to extinguish, extend or renew any
indebtedness heretofore existing against the Property, then, to
the extent of the funds so used, Lender shall be subrogated to
all of the rights, claims, liens, titles, and interests existing
against the Property heretofore held by, or in favor of, the
holder of such indebtedness and such former rights, claims,
liens, titles, and interests, if any, are not waived but rather
are continued in full force and effect in favor of Lender and are
merged with the lien and security interest created herein as
cumulative security for the repayment of the Debt, the
performance and discharge of Borrower's obligations hereunder,
under the Note and the Other Security Documents and the
performance and discharge of the Other Obligations.
Article 12 - ENVIRONMENTAL MATTERS
Section 12.1 Environmental Representations and Warranties.
Borrower represents and warrants, based upon an environmental
site assessment of the Property and information that Borrower
knows or should reasonably have known, that: (a) there are no
Hazardous Materials (defined below) or underground storage tanks
in, on, or under the Property, except those that are both (i) in
compliance with Environmental Laws (defined below) and with
permits issued pursuant thereto (if such permits are required),
and (ii) either (A) in amounts not in excess of that necessary to
74
operate the Property or (B) fully disclosed to and approved by
Lender in writing pursuant to the written reports resulting from
the environmental site assessments of the Property delivered to
Lender (the "Environmental Report"); (b) there are no past,
present or threatened Releases (defined below) of Hazardous
Materials in violation of any Environmental Law and which would
require remediation by a governmental authority in, on, under or
from the Property except as described in the Environmental
Report; (c) there is no threat of any Release of Hazardous
Materials migrating to the Property except as described in the
Environmental Report; (d) there is no past or present non-
compliance with Environmental Laws, or with permits issued
pursuant thereto, in connection with the Property except as
described in the Environmental Report; (e) Borrower does not know
of, and has not received, any written or oral notice or other
communication from any person or entity (including but not
limited to a governmental entity) relating to Hazardous Materials
in, on, under or from the Property; and (f) Borrower has
truthfully and fully provided to Lender, in writing, any and all
information relating to environmental conditions in, on, under or
from the Property known to Borrower or contained in Borrower's
files and records, including but not limited to any reports
relating to Hazardous Materials in, on, under or migrating to or
from the Property and/or to the environmental condition of the
Property. "Environmental Law" means any present and future
federal, state and local laws, statutes, ordinances, rules,
regulations, standards, policies and other government directives
or requirements, as well as common law, that apply to Borrower or
the Property and relate to Hazardous Materials, including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act and the Resource Conservation and
Recovery Act. "Hazardous Materials" shall mean petroleum and
petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives; flammable materials;
radioactive materials; polychlorinated biphenyls ("PCBs") and
compounds containing them; lead and lead-based paint; asbestos or
asbestos-containing materials in any form that is or could become
friable; underground or above-ground storage tanks, whether empty
or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local
authority; any substance that requires special handling; and any
other material or substance now or in the future defined as a
"hazardous substance," "hazardous material," "hazardous
waste,""toxic substance," "toxic pollutant," "contaminant,"
"pollutant" or other words of similar import within the meaning
of any Environmental Law. "Release" of any Hazardous Materials
includes but is not limited to any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, injecting,
pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Materials.
Section 12.2 Environmental Covenants. Borrower covenants
75
and agrees that so long as Borrower owns, manages, is in
possession of, or otherwise controls the operation of the
Property: (a) all uses and operations on or of the Property,
whether by Borrower or any other person or entity, shall be in
compliance with all Environmental Laws and permits issued
pursuant thereto; (b) there shall be no Releases of Hazardous
Materials in, on, under or from the Property; (c) there shall be
no Hazardous Materials in, on, or under the Property, except
those that are both (i) in compliance with all Environmental Laws
and with permits issued pursuant thereto, if and to the extent
required, and (ii) (A) in amounts not in excess of that necessary
to operate the Property or (B) fully disclosed to and approved by
Lender in writing; (d) Borrower shall keep the Property free and
clear of all liens and other encumbrances imposed pursuant to any
Environmental Law, whether due to any act or omission of Borrower
or any other person or entity (the "Environmental Liens"); (e)
Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section
12.3 below, including but not limited to providing all relevant
information and making knowledgeable persons available for
interviews; (f) Borrower shall, at its sole cost and expense,
perform any environmental site assessment or other investigation
of environmental conditions in connection with the Property,
pursuant to any reasonable written request of Lender, upon
Lender's reasonable belief that the Property is not in full
compliance with all Environmental Laws, and share with Lender the
reports and other results thereof, and Lender and other
Indemnified Parties (as defined in the Environmental Indemnity)
shall be entitled to rely on such reports and other results
thereof; (g) Borrower shall, at its sole cost and expense, comply
with all reasonable written requests of Lender to (i) reasonably
effectuate remediation of any Hazardous Materials in, on, under
or from the Property; and (ii) cmply with any Environmental Law;
(h) Borrower shall not allow any tenant or other user of the
Property to violate any Environmental Law; and (i) Borrower shall
immediately notify Lender in writing after it has become aware of
(A) any presence or Release or threatened Releases of Hazardous
Materials in, on, under, from or migrating towards the Property;
(B) any non-compliance with any Environmental Laws related in any
way to the Property; (C) any actual or potential Environmental
Lien; (D) any required or proposed remediation of environmental
conditions relating to the Property; and (E) any written or oral
notice or other communication of which Borrower becomes aware
from any source whatsoever (including but not limited to a
governmental entity) relating in any way to Hazardous Materials.
Section 12.3 Lender's Rights. Lender and any other person
or entity designated by Lender, including but not limited to any
representative of a governmental entity, and any environmental
consultant, and any receiver appointed by any court of competent
jurisdiction, shall have the right, but not the obligation, to
enter upon the Property at all reasonable times to assess any and
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all aspects of the environmental condition of the Property and
its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be
determined in Lender's sole and absolute discretion) and taking
samples of soil, groundwater or other water, air, or building
materials, and conducting other invasive testing. Borrower shall
cooperate with and provide access to Lender and any such person
or entity designated by Lender.
Article 13 - INDEMNIFICATIONS
Section 13.1 General Indemnification. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release
and hold harmless the Indemnified Parties from and against any
and all Losses (defined below) imposed upon or incurred by or
asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or
more of the following: (a) any accident, injury to or death of
persons or loss of or damage to property occurring in, on or
about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (b) any use, nonuse or condition in, on or about
the Property or any part thereof or on the adjoining sidewalks,
curbs, adjacent property or adjacent parking areas, streets or
ways; (c) performance of any labor or services or the furnishing
of any materials or other property in respect of the Property or
any part thereof; (d) any failure of the Property to be in
compliance with any Applicable Laws; (e) any and all claims and
demands whatsoever which may be asserted against Lender by reason
of any alleged obligations or undertakings on its part to perform
or discharge any of the terms, covenants, or agreements contained
in any Lease; or (f) the payment of any commission, charge or
brokerage fee to anyone which may be payable in connection with
the funding of the Loan evidenced by the Note and secured by this
Security Instrument, provided, however, that Borrower shall not
be obligated to protect, defend, indemnify, release and hold
harmless Lender from any commission, charge or brokerage fee
claimed solely through Lender. Any amounts payable to Lender by
reason of the application of this Section 13.1 shall become
immediately due and payable and shall bear interest at the
Default Rate from the date loss or damage is sustained by Lender
until paid.
The term "Losses" shall mean any and all claims, suits,
liabilities (including, without limitation, strict liabilities),
actions, proceedings, obligations, debts, damages, losses, costs,
expenses, fines, penalties, charges, fees, expenses, judgments,
awards, amounts paid in settlement of whatever kind or nature
(including but not limited to attorneys' fees and other costs of
defense).
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Section 13.2 Mortgage and/or Intangible Tax. Borrower
shall, at its sole cost and expense, protect, defend, indemnify,
release and hold harmless the Indemnified Parties from and
against any and all Losses imposed upon or incurred by or
asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on
the making and/or recording of this Security Instrument, the Note
or any of the Other Security Documents.
Section 13.3 Duty to Defend; Attorneys' Fees and Other
Fees and Expenses. Upon written request by any Indemnified
Party, Borrower shall defend such Indemnified Party (if requested
by any Indemnified Party, in the name of the Indemnified Party)
by attorneys and other professionals approved by the Indemnified
Parties. Notwithstanding the foregoing, any Indemnified Parties
may, in their sole and absolute discretion, engage their own
attorneys and other professionals to defend or assist them, and,
at the option of Indemnified Parties, their attorneys shall act
as co-counsel in connection with the resolution of any claim or
proceeding, provided, however, that upon an Event of Default, the
attorneys of Indemnified Parties shall control the resolution of
any claim or proceeding. Upon demand, Borrower shall pay or, in
the sole and absolute discretion of the Indemnified Parties,
reimburse, the Indemnified Parties for the payment of reasonable
fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection
therewith.
Section 13.4 Environmental Indemnity. Simultaneously with
this Security Instrument, Borrower and other persons or entities
defined therein have executed and delivered that certain
environmental indemnity agreement dated the date hereof
(collectively, the "Indemnitors") to Lender (the "Environmental
Indemnity"). AERC shall not be deemed an Indemnitor (as defined
hereunder) by virtue of the Cooperation Letter or that certain
Indemnity Agreement dated as of the date hereof made by Borrower
and AERC in favor of Lender (the "Indemnity Agreement").
Article 14 - WAIVERS
Section 14.1 Waiver of Counterclaim. Borrower hereby
waives the right to assert a counterclaim, other than a mandatory
or compulsory counterclaim, in any action or proceeding brought
against it by Lender arising out of or in any way connected with
this Security Instrument, the Note, any of the Other Security
Documents, or the Obligations.
Section 14.2 Marshalling and Other Matters. Borrower
hereby waives, to the extent permitted by law, the benefit of all
appraisement, valuation, stay, extension, reinstatement and
redemption laws now or hereafter in force and all rights of
78
marshalling in the event of any sale hereunder of the Property or
any part thereof or any interest therein. Further, Borrower
hereby expressly waives any and all rights of redemption from
sale under any order or decree of foreclosure of this Security
Instrument on behalf of Borrower, and on behalf of each and every
person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf
of all persons to the extent permitted by Applicable Laws.
Section 14.3 Waiver of Notice. Borrower shall not be
entitled to any notices of any nature whatsoever from Lender
except (a) with respect to matters for which this Security
Instrument specifically and expressly provides for the giving of
notice by Lender to Borrower, and (b) with respect to matters for
which Lender is required by Applicable Laws to give notice, and
Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Security
Instrument does not specifically and expressly provide for the
giving of notice by Lender to Borrower.
Section 14.4 Waiver of Statute of Limitations. Borrower
hereby expressly waives and releases to the fullest extent
permitted by law, the pleading of any statute of limitations as a
defense to payment of the Debt or performance of its Other
Obligations.
Section 14.5 Sole Discretion of Lender. Wherever pursuant
to this Security Instrument (a) Lender exercises any right given
to it to approve or disapprove, (b) any arrangement or term is to
be satisfactory to Lender, or (c) any other decision or
determination is to be made by Lender, the decision of Lender to
approve or disapprove, all decisions that arrangements or terms
are satisfactory or not satisfactory and all other decisions and
determinations made by Lender, shall be in the sole and absolute
discretion of Lender, except as may be otherwise expressly and
specifically provided herein.
SECTION 14.6 WAIVER OF TRIAL BY JURY. BORROWER HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER
IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY
TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR THE LOAN
EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE
OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
79
Article 15 - EXCULPATION
Section 15.1 Exculpation. The provisions of Article 14 of
the Note are hereby incorporated by reference to the fullest
extent as if the text of such Article were set forth in its
entirety herein.
Article 16 - NOTICES
Section 16.1 Notices. All notices or other written
communications hereunder shall be deemed to have been properly
given (i) upon delivery, if delivered in person or by facsimile
transmission with receipt acknowledged by the recipient thereof
and confirmed by telephone by sender, (ii) one (1) Business Day
(defined below) after having been deposited for overnight
delivery with any reputable overnight courier service, or (iii)
three (3) Business Days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to Borrower:
Attention:
Facsimile No.:
With a copy to:
Attention:
Facsimile No.:
If to Lender: The Chase Manhattan Bank
c/o Chase Commercial Mortgage Banking Corp.
Servicing Department
380 Madison Avenue
10th Floor
New York, New York 10017
Attention: Ms. Janice Smith
Facsimile No.: (212) 622-3553
and
The Chase Manhattan Bank
Legal Department
270 Park Avenue
39th Floor
New York, New York 10017
Attention: Ronald A. Wilcox, Esq.
Facsimile No.: (212) 270-2934
80
With a copy to: Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: Joseph Philip Forte, Esq.
Facsimile No.: (212) 912-7751
or addressed as such party may from time to time designate by
written notice to the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a
day on which commercial banks are not authorized or required by
law to close in New York, New York.
Article 17 - SUBMISSION TO JURISDICTION
Section 17.1 Submission to Jurisdiction. With respect to
any claim or action arising hereunder or under the Note or the
Other Security Documents, Borrower (a) irrevocably submits to the
nonexclusive jurisdiction of the courts of the State of New York
and the United States District Court located in the Borough of
Manhattan in New York, New York, and appellate courts from any
thereof, (b) irrevocably waives any objection which it may have
at any time to the laying on venue of any suit, action or
proceeding arising out of or relating to this Security Instrument
brought in any such court, and (c) irrevocably waives any claim
that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Nothing in this
Security Instrument will be deemed to preclude Lender from
bringing an action or proceeding with respect hereto in any other
jurisdiction.
Article 18 - APPLICABLE LAW
Section 18.1 CHOICE OF LAW. THIS SECURITY INSTRUMENT
SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE
LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE
GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, PROVIDED HOWEVER, THAT WITH
RESPECT TO THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF
THE LIEN OF THIS SECURITY INSTRUMENT, AND THE DETERMINATION OF
DEFICIENCY JUDGMENTS, THE LAWS OF THE STATE WHERE THE PROPERTY IS
LOCATED SHALL APPLY.
Section 18.2 Provisions Subject to Applicable Law. All
rights, powers and remedies provided in this Security Instrument
may be exercised only to the extent that the exercise thereof
does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will
not render this Security Instrument invalid, unenforceable or not
81
entitled to be recorded, registered or filed under the provisions
of any Applicable Law. If any term of this Security Instrument
or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application
of the term shall not be affected thereby.
Article 19 - SECONDARY MARKET
Section 19.1 Transfer of Loan. Lender may, at any time,
sell, transfer or assign the Note, this Security Instrument and
the Other Security Documents, and any or all servicing rights
with respect thereto, or grant participations therein (the
"Participations") or issue mortgage pass-through certificates or
other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (the "Securities").
Lender may forward to each purchaser, transferee, assignee,
servicer, participant, or investor in such Participations and/or
Securities (collectively, the "Investor") or any Rating Agency
rating such Participations and/or Securities and each prospective
Investor, and any organization maintaining databases on the
underwriting and performance of commercial mortgage loans, all
documents and information which Lender now has or may hereafter
acquire relating to the Debt and to Borrower, any Guarantor, any
Indemnitor(s) and the Property, whether furnished by Borrower,
any Guarantor, any Indemnitor(s) or otherwise, as Lender
determines necessary or desirable. Borrower irrevocably waives
any and all rights it may have under Applicable Laws to prohibit
such disclosure, including but not limited to any right of
privacy.
Section 19.2 Cooperation. Borrower, any Guarantor and any
Indemnitor agree to cooperate with Lender in connection with any
transfer made or any Securities created pursuant to this Section
19, including, without limitation, complying with all of the
terms and conditions of that certain Letter, dated the date
hereof, from Lender to Borrower and _________________ (the
"Cooperation Letter").
Article 20 - COSTS
Section 20.1 Performance at Borrower's Expense. Borrower
acknowledges and confirms that Lender shall impose certain
administrative processing and/or commitment fees in connection
with (a) the extension, renewal, modification, amendment and
termination of the Loan, (b) the release or substitution of
collateral therefor, (c) obtaining certain consents, waivers and
approvals with respect to the Property, or (d) the review of any
Lease or proposed Lease or the preparation or review of any
subordination, non-disturbance agreement (the occurrence of any
of the above shall be called an "Event"). Borrower further
acknowledges and confirms that it shall be responsible for the
82
payment of all costs of reappraisal of the Property or any part
thereof, whether required by law, regulation, Lender or any
governmental or quasi-governmental authority. Borrower hereby
acknowledges and agrees to pay, immediately, with or without
demand, all such fees (as the same may be increased or decreased
from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the
occurrence of any Event or otherwise. Wherever it is provided
for herein that Borrower pay any costs and expenses, such costs
and expenses shall include, but not be limited to, all legal fees
and disbursements of Lender, whether with respect to retained
firms, the reimbursement for the expenses of in-house staff or
otherwise.
Section 20.2 Legal Fees for Enforcement. (a) Borrower
shall pay all reasonable legal fees incurred by Lender in
connection with (i) the preparation of the Note, this Security
Instrument and the Other Security Documents and (ii) the items
set forth in Section 20.1 above, and (b) Borrower shall pay to
Lender on demand any and all expenses, including legal expenses
and attorneys' fees, incurred or paid by Lender in protecting its
interest in the Property or in collecting any amount payable
hereunder or in enforcing its rights hereunder with respect to
the Property (including commencing any foreclosure action),
whether or not any legal proceeding is commenced hereunder or
thereunder, together with interest thereon at the Default Rate
from the date paid or incurred by Lender until such expenses are
paid by Borrower.
Article 21 - DEFINITIONS
Section 21.1 General Definitions. Unless the context
clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Security
Instrument may be used interchangeably in singular or plural form
and the word "Borrower" shall mean "each Borrower and any
subsequent owner or owners of the Property or any part thereof or
any interest therein," the word "Lender" shall mean "Lender and
any subsequent holder of the Note," the word "Note" shall mean
"the Note and any other evidence of indebtedness secured by this
Security Instrument," the word "person" shall include an
individual, corporation, partnership, limited liability company,
trust, unincorporated association, government, governmental
authority, and any other entity, the word "Property" shall
include any portion of the Property and any interest therein, and
the phrases "attorneys' fees" and "counsel fees" shall include
any and all attorneys', paralegal and law clerk fees and
disbursements, including, but not limited to, fees and
disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the
Property, the Leases and the Rents and enforcing its rights
83
hereunder.
Section 21.2 Headings, etc. The headings and captions of
various Articles and Sections of this Security Instrument are for
convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the
provisions hereof.
Article 22 - MISCELLANEOUS PROVISIONS
Section 22.1 No Oral Change. This Security Instrument,
and any provisions hereof, may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act
or failure to act on the part of Borrower or Lender, but only by
an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
Section 22.2 Liability. If Borrower consists of more than
one person, the obligations and liabilities of each such person
hereunder shall be joint and several. This Security Instrument
shall be binding upon and inure to the benefit of Borrower and
Lender and their respective successors and assigns forever.
Section 22.3 Inapplicable Provisions. If any term,
covenant or condition of the Note or this Security Instrument is
held to be invalid, illegal or unenforceable in any respect, the
Note and this Security Instrument shall be construed without such
provision.
Section 22.4 Duplicate Originals; Counterparts. This
Security Instrument may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an
original. This Security Instrument may be executed in several
counterparts, each of which counterparts shall be deemed an
original instrument and all of which together shall constitute a
single Security Instrument. The failure of any party hereto to
execute this Security Instrument, or any counterpart hereof,
shall not relieve the other signatories from their obligations
hereunder.
Section 22.5 Number and Gender. Whenever the context may
require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
Article 23 - SPECIAL [NAME OF STATE] PROVISIONS
84
[NO FURTHER TEXT ON THIS PAGE]
85
IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been
executed by Borrower the day and year first above written.
[BORROWER]
Name:
Title:
86
ACKNOWLEDGEMENTS
(to be attached)
87
EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the
buildings and improvements thereon, situate, lying and being
88
TABLE OF CONTENTS
Page
Article I Grants of Security 2
Section 1.1 Property Mortgaged 2
Section 1.2 Assignment of Leases and Rents 5
Section 1.3 Security Agreement 5
Section 1.4 Pledge of Monies Held
Article 2 Debt and Obligations Secured 5
Section 2.1 Debt 5
Section 2.2 Other Obligations 6
Section 2.3 Debt and Other Obligations 6
Section 2.4 Payments 6
Article 3 Borrower Covenants 7
Section 3.1 Payment of Debt 7
Section 3.2 Incorporation by Reference 7
Section 3.3 Insurance 7
Section 3.4 Payment of Taxes, etc 11
Section 3.5 Escrow Fund 12
Section 3.6 Condemnation 13
Section 3.7 Leases and Rents 13
Section 3.8 Maintenance and Use of Property 15
Section 3.9 Waste 15
Section 3.10 Compliance with Laws 16
Section 3.11 Books and Records 17
Section 3.12 Payment for Labor and Materials 21
Section 3.13 Performance of Other Agreements 21
Section 3.14 Change of Name, Identity or 21
Structure
Section 3.15 Existence 21
Article 4 Special Covenants 22
Section 4.1 Property Use 22
Section 4.2 Single Purpose Entity 22
Section 4.3 Restoration 25
Article 5 Representations and Warranties 30
Section 5.1 Warranty of Title 30
Section 5.2 Legal Status and Authority 30
Section 5.3 Validity of Documents 30
Section 5.4 Litigation 31
Section 5.5 Status of Property 31
Section 5.6 No Foreign Person 32
Section 5.7 Separate Tax Lot 32
Section 5.8 Leases 32
Section 5.9 Solvency 32
Section 5.10 Business Purposes 33
Section 5.11 Taxes 33
Section 5.12 Mailing Address 33
Section 5.13 No Change in Facts or Circumstances 33
Section 5.14 Disclosure 33
Section 5.15 Third Party Representations 34
Section 5.16 Illegal Activity 34
Section 5.17 Contracts 34
Article 6 Obligations and Reliances 35
Section 6.1 Relationship of Borrower and Lender 35
Section 6.2 No Reliance on Lender 35
Section 6.3 No Lender Obligations 35
Section 6.4 Reliance 35
Article 7 Further Assurances 36
Section 7.1 Recording of Security Instrument, 36
etc.
Section 7.2 Further Acts, etc. 36
Section 7.3 Changes in Tax, Debt Credit and 37
Documentary Stamp Laws
Section 7.4 Estoppel Certificates 37
Section 7.5 Flood Insurance 38
Section 7.6 Replacement Documents 38
Article 8 Due on Sale/Encumbrance 38
Section 8.1 No Sale/Encumbrance 38
Section 8.2 Sale/Encumbrance Defined 38
Section 8.3 Lender's Rights 40
Article 9 Prepayment 40
Section 9.1 Prepayment 40
Article 10 Default 41
Section 10.1 Events of Default 41
Article 11 Rights and Remedies 43
Section 11.1 Remedies 43
Section 11.2 Application of Proceeds 45
Section 11.3 Right to Cure Defaults 45
Section 11.4 Actions and Proceedings 46
Section 11.5 Recovery of Sums Required to Be 46
Paid
Section 11.6 Examination of Books and Records 46
Section 11.7 Other Rights, etc. 46
Section 11.8 Right to Release any Portion of the 47
Property
Section 11.9 Violation of Laws 47
Section 11.10 Right of Entry 47
Section 11.11 Subrogation 47
Article 12 Environmental Matters 48
Section 12.1 Environmental Representations and 48
Warranties
Section 12.2 Environmental Covenants 48
Section 12.3 Lender's Rights 49
Article 13 Indemnifications 49
Section 13.1 General Indemnification 49
Section 13.2 Mortgage and/or Intangible Tax 50
Section 13.3 Duty to Defend; Attorneys' Fees and 50
Other Fees and Expenses
Section 13.4 Environmental Indemnity 50
Article 14 Waivers 51
Section 14.1 Waiver of Counterclaim 51
Section 14.2 Marshaling and Other Matters 51
Section 14.3 Waiver of Notice 51
Section 14.4 Waiver of Statute of Limitations 51
Section 14.5 Sole Discretion of Lender 51
Section 14.6 Waiver of Trial by Jury 51
Article 15 Exculpation 52
Section 15.1 Exculpation 52
Article 16 Notices 52
Section 16.1 Notices 52
Article 17 Submission to Jurisdiction 53
Section 17.1 Submission to Jurisdiction 53
Article 18 Applicable Law 53
Section 18.1 Choice of Law 53
Section 18.2 Provisions Subject to Applicable 54
Law
Article 19 Secondary Market 54
Section 19.1 Transfer of Loan 54
Section 19.2 Cooperation 54
Article 20 Costs 54
Section 20.1 Performance at Borrower's Expense 54
Section 20.2 Legal Fees for Enforcement 55
Article 21 Definitions 55
Section 21.1 General Definitions 55
Section 21.2 Headings, Etc. 55
Article 22 Miscellaneous Provisions 56
Section 22.1 No Oral Change 56
Section 22.2 Liability 56
Section 22.3 Inapplicable Provisions 56
Section 22.4 Duplicate Originals; Counter 56
Section 22.5 Number and Gender 56
Article 23 Special (Name of State) Provisions 56
Definitions v
91
Definitions
The terms set forth below are defined in the following Sections of this
Security Instrument:
(a) Applicable Laws: Article 3, Subsection 3.10(a);
(b) Attorneys' Fees/Counsel Fees: Article 21, Section 21.1;
(c) Bankruptcy Code: Article 1, Subsection 1.1(f);
(d) Borrower: Preamble and Article 21, Section 21.1;
(e) Business Day: Article 16, Section 16.1;
(f) Casualty Consultant: Article 4, Subsection 4.3(b)(iii);
(g) Casualty Retainage: Article 4, Subsection 4.3(b)(iv);
(h) Debt: Article 2, Section ?;
(i) Environmental Indemnity: Article 13, Section 13.4;
(j) Environmental Law: Article 12, Section 12.1;
(k) Environmental Liens: Article 12, Subsection 12.2(d);
(l) Environmental Report: Article 12, Subsection 12.1(a)
(m) Escrow Fund: Article 3, Section 3.5;
(n) Event: Article 20, Section 20.1;
(o) Event of Default: Article 10, Section 10.1;
(p) Flood Insurance Acts: Article 3, Subsection 3.3(a)(vii);
(q) Full Replacement Cost: Article 3, Subsection 3.3(a)(i)(A);
(r) GAAP: Article 3, Subsection 3.11(a);
(s) Guarantor: Article 10, Subsection 10.1(e);
(t) Hazardous Materials: Article 12, Section 12.1;
(u) Improvements: Article 1, Subsection 1.1(c);
(v) Indemnitor(s): Article 13, Subsection 13.4(o);
(w) Insurance Premiums: Article 3, Subsection 3.3(b);
(x) Investor: Article 19, Section 19.1;
(y) Land: Article 1, Subsection 1.1(a);
(z) Leases: Article 1, Subsection 1.1(f);
(aa) Lender: Preamble and Article 21, Section 21.1;
(bb) Loan: Article 5, Subsection 5.12;
(cc) Loan Application: Article 5, Section 5.10;
(dd) Losses: Article 13, Section 13.1;
(ee) Major Lease: Article 3, Subsection 3.7(d);
(ff) Net Proceeds: Article 4, Subsection 4.3(b);
(gg) Net Proceeds Deficiency: Article 4, Subsection 4.3(b)(vi);
(hh) Note: Recitals and Article 21, Section 21.1;
(ii) Obligations: Article 2, Section 2.3;
(jj) Other Charges: Article 3, Subsection 3.4(a);
(kk) Other Obligations: Article 2, Section 2.2;
(ll) Other Security Documents: Article 3, Section 3.2;
(mm) Participations: Article 19, Section 19.1;
(nn) Permitted Exceptions: Article 5, Section 5.1;
(oo) Person: Article 21, Section 21.1;
(pp) Personal Property: Article 1, Subsection 1.1(e);
(qq) Policies/Policy: Article 3, Subsection 3.3(b);
(rr) Property: Article 1, Section 1.1 and Article 21, Section 21.1;
(ss) Qualified Insurer: Article 3, Subsection 3.3(b);
(tt) Rating Agency: Article 3, Subsection 3.3(b);
(uu) Release: Article 12, Section 12.1;
(vv) Renewal Lease: Article 3, Subsection 3.7(c);
(ww) Rents: Article 1, Subsection 1.1(f);
(xx) Restoration: Article 3, Subsection 3.3(h);
(yy) Securities: Article 19, Section 19.1;
92
(zz) Security Instrument: Preamble;
(aaa) Taxes: Article 3, Subsection 3.4(a);
(bbb) Uniform Commercial Code: Article 1, Subsection 1.1(e)
93
Property/Loan Amount Borrower Name Type of Entity
------------------------------------------ ----------------------------- ------------------------
1. 20th & Campbell/$10,700,000 AERC Campbell, Inc. Delaware corporation
2. Central Park Place/$7,200,000 AERC Central Park Place, LLC Delaware LLC
3. Chestnut Ridge/$15,920,000 Associated Estates Realty Ohio corporation
Corporation of Pennsylvania
Inc.
4. Clinton Place/$9,500,000 AERC Clinton Place, LLC Delaware LLC
5. Country Club/$12,150,000 AERC Country Club, Inc. Delaware corporation
6. Fleetwood/$4,917,000 AERC Fleetwood, L.P. Delaware ltd. ptship.
7. Gables at White River/$9,030,000 AERC White River, LLC Delaware LLC
8. Hampton Point/$18,500,000 AERC Hampton Point, Inc. Delaware corporation
9. Heathermoor/$9,608,000 AERC Heathermoor, Inc. Delaware corporation
10. KTC Properties/$19,710,000 AERC KTC Properties, Inc. Delaware corporation
11. The Oaks at Hampton/$29,200,000 AERC Oaks Hampton, LLC Delaware LLC
12. Pendleton Lake East/$7,575,000 AERC Pendleton, Inc. Delaware corporation
13. Perimeter Lakes/$6,400,000 AERC Perimeter Lakes, Inc. Delaware corporation
14. Remington Place/$6,950,000 AERC Remington Place, Inc. Delaware corporation
15. Residence at Christopher Wren/$10,565,000 AERC Christopher Wren, Inc. Delaware corporation
16. Residence at Turnberry/$9,050,000 AERC Turnberry, Inc. Delaware corporation
17. Saw Mill Village/$12,500,000 AERC Saw Mill Village, Inc. Delaware corporation
18. Spring Valley/$12,000,000 AERC Spring Valley, LLC Delaware LLC
19. Summer Ridge/$9,900,000 AERC Summer Ridge, LLC Delaware LLC
20. Waterstone/$17,125,000 AERC Waterstone, LLC Delaware LLC
94