EXHIBIT 10.7
PROMISSORY NOTE
(LIBOR)
$34,440,000.00 December 20, 2002
FOR VALUE RECEIVED, and upon the terms and conditions set forth herein,
HARTMAN REIT OPERATING PARTNERSHIP II, L.P., a Texas limited partnership
("Borrower"), promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation ("Lender"), at Lender's office located at
200 Witmer Road, P.O. Box 809, Horsham, Pennsylvania 19044-8015, Attn: Servicing
- - Accounting Manager, or at such other place as Lender may designate to Borrower
in writing from time to time, the principal sum of Thirty-Four Million Four
Hundred Forty Thousand and 00/100ths Dollars ($34,440,000.00), or so much
thereof as is outstanding and unpaid, together with interest thereon at the
Applicable Interest Rate (hereinafter defined), in lawful money of the United
States of America which, at the time of payment, shall be legal tender in
payment of all debts and dues, public and private.
1. COMPUTATION OF INTEREST
1.01 Computation of Interest. Interest under this Note shall be :paid
in arrears and shall be calculated based on a 360-day year and paid for the
actual number of days elapsed for any whole or partial month in which interest
is being calculated.
1.02 Initial Applicable Interest Rate and Rate Adjustment Date.
Interest shall accrue on outstanding principal under this Note at the rate
("Applicable Interest Rate") which is the LIBOR Rate (defined below) plus the
Margin (as hereinafter defined). Adjustments to the Applicable Interest Rate in
connection with changes in the LIBOR Rate shall be made on the first (1st) day
of each calendar month ("Rate Adjustment Date"), except that the initial LIBOR
Rate shall be determined by Lender as of the date of this Note. As used herein,
"Margin" means (a) during the period commencing on the date hereof and ending on
the initial Maturity Date (as hereinafter defined)(such period, the "Initial
Term"), Two and One-Half Percent (2.5%) per annum, and (b) during the Extension
Term (as hereinafter defined), Three Percent (3%) per annum. In no event shall
the Applicable Interest Rate on any Rate Adjustment Date be lower than (1) Three
and 8188/10000 percent (3.8188%) during the Initial Term; and (2) Four and
3188/10000 percent (4.3188%) during the Extension Term.
1.03 LIBOR Rate. The London Interbank Offered Rate ("LIBOR Rate")
shall mean the average of London Interbank Offered Rates (in U.S. dollar
deposits) for a term of one month determined solely by Lender as of each Rate
Adjustment Date. On each Rate Adjustment Date, Lender will obtain the LIBOR Rate
from the appropriate Bloomberg display page available as of the close of
business announced on the last Business Day of the month immediately preceding
the Rate Adjustment Date. If Bloomberg ceases publication or ceases to publish
the LIBOR Rate, Lender shall select a comparable publication to determine the
LIBOR Rate and provide notice thereof to Borrower. The LIBOR Rate may or may not
be the lowest rate based upon the market for U.S. dollar deposits in the London
Interbank Eurodollar Market at which Lender prices loans on the date on which
the LIBOR Rate is determined by Lender as set forth above.
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1.04 LIBOR Unascertainable
(a) If (i) on any date on which the LIBOR Rate would
otherwise be set, Lender shall have determined in good faith (which
determination shall be conclusive) that (A) adequate and reasonable
means do not exist for ascertaining the LIBOR Rate or (B) a contingency
has occurred which materially and adversely affects the London Interbank
Eurodollar Market at which Lender prices loans on the date on which the
LIBOR Rate is determined by Lender hereunder, or (ii) at any time Lender
shall have determined in good faith (which determination shall be
conclusive) that the making, maintenance or funding of any part of the
loan evidenced by this Note has been made impracticable or unlawful by
Lender's compliance in good faith with any law or guideline or
interpretation or administration thereof by any governmental authority
charged with the interpretation or .administration thereof or with any
request or directive of any such governmental authority (whether or not
having the force of law); then, and in any such event, Lender may notify
Borrower of such determination. Upon the date specified by Lender in
such notice (which shall not be earlier than the date such notice is
given), Lender's obligation to charge interest to Borrower at the LIBOR
Rate shall be suspended until Lender shall notify Borrower of Lender's
determination in good faith (which determination shall be conclusive in
the absence of manifest error) that the circumstances giving rise to
such previous determination no longer exists
(b) If Lender notifies Borrower of a determination under
subsection (a) above, the LIBOR Rate shall automatically be converted to
the "Index" of the weekly average yield on United States Treasury
Securities adjusted to a constant maturity of one year, as made
available by the Federal Reserve Board forty-five (45) days prior to
each Rate Adjustment Date.
1.05 Adjustment Due to Calculations. If Lender at any time
determines, in its sole but reasonable discretion, that it has miscalculated the
amount of the Applicable Interest Rate (whether because of a miscalculation of
the LIBOR Rate or otherwise), then Lender shall notify Borrower of the corrected
amount of the monthly payment and Applicable Interest Rate, and (a) if the
corrected Applicable Interest Rate represents an increase in the applicable
monthly payment, Borrower shall, within ten (10) days thereafter, pay to Lender
any sums that Borrower would have otherwise been obligated under this Note to
pay to Lender had the amount of the Applicable Interest Rate not been
miscalculated, or (b) if the corrected amount of the Applicable Interest Rate
results in an overpayment by Borrower to Lender, and no Event of Default (as
hereafter defined) has then occurred, Lender shall thereafter pay to Borrower
the sums that Borrower would not have otherwise been obligated to pay to Lender
had the amount of the Applicable Interest Rate not been miscalculated or, at
Lender's option, Lender may credit such amounts against Borrower's outstanding
or ensuing payment obligations hereunder.
1.06 Increased Costs
(a) Borrower shall, from time to time upon demand by Lender,
pay to Lender as additional interest all amounts necessary to reimburse
Lender for any increase in the cost to Lender of agreeing to make or
making the indebtedness evidenced by this Note which may arise from (i)
any change (including, without limitation, any change by way
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of imposition or increase of reserve requirements) in or in the
interpretation of any law or regulation or (ii) Lender's compliance with
any guideline or request from any governmental authority (whether or not
having the force of law. Lender shall notify Borrower in writing of the
amount of any such increased costs, which Lender shall calculate in good
faith, and such calculation shall be conclusive and binding on Borrower
in the absence of manifest error.
(b) If (i) any law, or guideline, interpretation or
application thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance with any request
or directive of any governmental authority (whether or not having the
force of law) now existing or hereafter adopted (A) subjects Lender to
any tax or changes the basis of taxation with respect to this Note or
payments by Borrower of principal, interest or other amounts due from
Borrower hereunder or under the other Loan Documents (as hereafter
defined) (except for taxes on the overall net income or overall gross
receipts of Lender imposed as a result of a present or former connection
between the jurisdiction of the government or taxing authority imposing
such tax and Lender; provided, that this exclusion shall not apply to a
connection arising solely from Lender having executed, delivered,
performed its obligations under or received a payment under, or enforced
this Note or any of the other Loan Documents), or (B) imposes upon
Lender any other condition or expense with respect to this Note, or the
making, maintenance or funding of any part of the indebtedness evidenced
hereby or any security therefor, and (ii) the result of any occurrence
of the foregoing is to increase the cost to, reduce the income
receivable by, or impose any expense (including, without limitation,
loss of margin) upon Lender with respect to this Note, or the making,
maintenance or funding of any part of the indebtedness evidenced hereby
or any security therefor, by an amount which Lender deems to be
material, Lender may from time to time notify Borrower of the amount
determined in good faith (using any averaging and attribution methods)
by Lender (which determination shall be conclusive in the absence of
manifest error) to be necessary to compensate Lender for such
imposition.
(c) If Borrower is by law prohibited from paying any amount
due to Lender under subsections (a) or (b) above, Lender may elect to
declare the unpaid balance hereof and all interest accrued thereon
immediately due and payable.
2. PAYMENTS OF PRINCIPAL AND INTEREST
2.01 Payment of Principal and Interest. Borrower shall pay principal
and interest under this Note as follows:
(a) Commencing on the first day of February, 2003 ("First
Payment Date"), and continuing on the first day of each and every
successive month thereafter (each a "Payment Date") through and
including the Payment Date immediately prior to the Maturity Date
(defined below), monthly payments of accrued interest based on the
Applicable Interest Rate (determined as of the immediately preceding
Rate Adjustment Date) and the outstanding principal balance of this Note
shall be due; and
(b) On the first day of January, 2006 ("Maturity Date"), the
entire outstanding principal balance hereof, together with all accrued
but unpaid interest thereon and any
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other amounts due under the Note or the other Loan Documents (hereafter
defined) shall be due and payable in full.
(c) Borrower shall have the option to extend the Initial
Term and the corresponding Maturity Date for one (1) additional period
of two (2) years (the "Extension Term"), subject to the following
conditions:
(i) No Event of Default shall have occurred and be
continuing as of the date on which Borrower submits the Extension Notice
(as hereinafter defined) and as of the Maturity Date;
(ii) On or before the Maturity Date, Borrower shall deposit
with Lender the sum of Three Hundred Eighty-Five Thousand Dollars
($385,000.00)(the "Additional Roof Deposit") to beheld and disbursed by
Lender pursuant to the terms and conditions of that certain Replacement
Reserve Agreement of even date herewith between Borrower and Lender;
(iii) Borrower shall submit to Lender a written request to
extend the Initial Term not more than ninety (90) days and not less than
thirty (30) days prior to the initial Maturity Date (the "Extension
Notice");
(iv) In the Extension Notice, Borrower shall indicate whether
Borrower elects to borrow from Lender, pursuant to that certain Future
Funding Agreement of even date herewith between Lender and Borrower (the
"Future Funding Agreement"), an amount sufficient to fund the Additional
Roof Deposit;
(v) On the date of the delivery of the Extension Notice and
on the Maturity Date, the properties encumbered by the Security
Instrument (as hereinafter defined)(such properties, the "Mortgaged
Properties") shall be generating income sufficient to provide a debt
service coverage ratio of not less than 1.40:1.00 as determined by
Lender in Lender's sole and absolute discretion, based on (A) the
trailing 12-month cash flow before debt service; (B) the
then-outstanding principal balances of the Loan and the Second Loan (as
defined in the Security Instrument) (if Borrower has elected to borrow
the Second Loan pursuant to the Future Funding Agreement, the
outstanding principal balance thereof shall be deemed to be
$385,000.00); (C) the greater of an interest rate constant of 10.53% or
a market interest rate constant for a fixed-rate loan in the amount of
the outstanding principal balance of this Note and the outstanding
principal balance of the Second Loan for properties similar to the
Mortgaged Properties, (D) a stabilized underwritten vacancy rate equal
to the greatest of: (i) 10%, (ii) a market vacancy rate, as determined
by Lender in Lender's sole and absolute discretion, and (iii) the actual
vacancy rate inclusive of all leases which expire by their terms within
ninety (90) days after the date in question for which the tenant in
question has not extended pursuant to a written extension agreement in
form and substance satisfactory to Lender, and (e) Lender's then-current
conduit underwriting practices for loans of similar size and complexity;
and
(vi) If the Mortgaged Properties do not satisfy the
aforementioned minimum debt service coverage ratio, Borrower may, on or
before the Maturity Date, but subject to the Lockout Period (as
hereinafter defined) and the other prepayment requirements set
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forth in this Note, partially prepay the loan evidenced by this Note in
an amount sufficient to satisfy such minimum debt service coverage ratio
and, thereafter the remaining balance of the loan evidenced by this Note
and the Second Loan will be extended for the Extension Term.
2.02 Payment of Short Interest. If this Note is executed on a date
other, than the first day of a calendar month, Borrower shall pay to Lender,
contemporaneously with the execution of this Note, an interest payment
calculated by multiplying (a) the number of days from and including the date of
this Note to and including the last day of such month by (b) a daily rate based
on the Applicable Interest Rate calculated for a 360 day year.
2.03 Method of Payment. Each payment due hereunder shall not be
deemed received by Lender until received on a Business Day (as hereafter
defined) in Federal funds immediately available to Lender prior to 2:00 p.m.
local time at the place then designated by Lender. Any payment received on a
Business Day after the time established by the preceding sentence, shall be
deemed to have been received on the immediately following Business Day, for all
purposes. "Business Day" for purposes of this Note shall mean a day on which
commercial banks are not authorized or required by law to close in the State of
New York.
2.04 Application of Payments. Payments under this Note shall be
applied first to the payment of late fees and other costs and charges due in
connection with this Note, as Lender determines in its sole discretion, then to
the payment of accrued but unpaid interest, and then to reduction of the
outstanding principal balance (in inverse order of maturity whether or not then
due), but such application shall not reduce the amount of the fixed monthly
installments required to be paid hereunder. No principal amount repaid may be
reborrowed. All amounts due under this Note shall be payable without setoff,
counterclaim or any other deduction whatsoever.
2.05 Prepayment
(a) Provided no Event of Default exists, the principal
balance of this Note may be prepaid in whole or in part, provided (i)
Borrower so notifies Lender in writing no more than sixty (60) days and
not less than thirty (30) days prior to the intended date of such
prepayment, which date shall be a Payment Date, and (ii) such prepayment
is accompanied by all accrued interest and all other outstanding amounts
then due hereunder, and under the other Loan Documents. Except with
respect to prepayments made pursuant to Section 2.05(c)(vi) hereof or in
connection with Lender's application of casualty or condemnation awards,
all partial prepayments shall be in increments of $100,000.00.
Notwithstanding the foregoing, no prepayment shall be permitted until
after the thirtieth (30th) Payment Date of this Note ("Lockout Period").
If any prepayment is made prior to the end of the Lockout Period
(including, without limitation, any prepayment arising upon the'
acceleration of indebtedness hereunder), then a prepayment fee equal to
one percent (1%) of the outstanding principal balance of this Note shall
be due.
(b) If any prepayment is not made in accordance with
subsection 2.05(a) above, then, in addition to the aforementioned one
percent (1%) prepayment fee, if applicable, Borrower shall pay an amount
equal to the lesser of (i) thirty (30) days unearned interest computed
on the outstanding principal balance of this Note so prepaid,
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or (ii) unearned interest computed on the outstanding principal balance
of this Note so prepaid for the period from, and including, the date of
prepayment through the Maturity Date.
(c) Notwithstanding any provision of this Note to the
contrary, Borrower's notice of prepayment in accordance with subsection
(a) above shall be irrevocable, and the principal balance to be prepaid
shall be absolutely and unconditionally due and payable on the date
specified: in such notice.
2.06 Exit Fee. There is no exit fee applicable to the payment or
prepayment, whether in whole or in part, of this Note.
2.07 Maximum Interest. Notwithstanding anything to the contrary
contained herein, the sum of (a) interest payable in accordance with Paragraph
2.02, plus (b) prepayment fees in accordance with Paragraph 2.05(a), plus (c)
interest payable at the Default Interest Rate in accordance with Paragraph 4.03,
plus (d) all other consideration payable hereunder by Borrower which constitutes
interest under applicable law, shall not exceed the maximum nonusurious amount
allowed under applicable law.
2.08 Interest Recapture. If on any Payment Date or any other date on
which interest payments are required hereunder, Lender does not receive interest
on this Note computed at the applicable rate because the applicable rate exceeds
or has exceeded the maximum nonusurious rate, then Borrower shall, upon the
written demand of Lender, pay to Lender in addition to the interest otherwise
required to be paid hereunder, on each Payment Date thereafter, the "Excess
Interest Amount" (calculated as of each such later Payment Date); provided that,
notwithstanding anything to the contrary set forth herein, in no event shall
Borrower be required to pay, for any day, interest at a rate exceeding the
maximum nonusurious rate effective on such day. For purposes of this paragraph
2.08, "Excess Interest Amount" means, on any date, the amount by which (i) the
amount of all interest which would have accrued prior to such date on the
principal of this Note (had the applicable rate at all times been in effect
without limitation by the maximum nonusurious rate) exceeds (ii) the aggregate
amount of interest actually received by Lender on this Note on or prior to such
date.
3. SECURITY; LOAN DOCUMENTS. The indebtedness evidenced by this Note and
the obligations created hereby (including, without limitation, the amounts
authorized by Section 4 to be collected by Lender when due hereunder) are
secured by, among other things, a first deed of trust, security interest and
lien on certain real and personal property collateral of Borrower, tangible and
intangible as described more, particularly in that certain Deed of Trust and
Security Agreement ( "Security Instrument") from Borrower to Trustee for the
benefit of Lender, dated as of date hereof. The Security Instrument together
with this Note and all other documents to or of which Lender is a party or a
beneficiary now or hereafter evidencing, securing, guarantying, modifying or
otherwise relating to the indebtedness evidenced hereby, and all extensions,
renewals and modifications thereof, are collectively referred to herein as the
"Loan Documents."
4. DEFAULT
4.01 Event of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") under this Note: (a) if any
payment of principal and/or interest or
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any other payment required under this Note is not received by Lender on or
before the date such payment is due; or (b) if any default should occur under
any of the other Loan Documents which is not fully cured following applicable
notice or prior to the expiration of any applicable grace or cure period. Upon
the occurrence of an Event of Default, at Lender's option, the outstanding
principal balance of this Note, together with all unpaid interest accrued
thereon and all other sums due hereunder or under any other of the other Loan
Documents, shall, without notice or prior demand, immediately become due and
payable.
4.02 Late Charges. If any payment is not received by Lender on or
before the date that is ten (10) days after the date on which such payment
originally was due (without regard to any applicable grace period as referenced
in Section 4.01, if any), then, in addition to any default interest payments due
hereunder, Borrower also shall pay, to Lender a late charge in an amount equal
to five percent (5.0%) of the amount of such overdue payment to defray the
expenses incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of the delinquent payment. Such
late charge shall be immediately .due and payable, without notice or demand
therefor.
4.03 Default Interest Rate. If this Note is not paid in full on or
before the Maturity Date or the date on which the due date of the indebtedness
has been accelerated pursuant to the provisions hereof, the unpaid principal and
accrued interest and other amounts then due shall bear interest at a rate per
annum ("Default Interest Rate") equal to the lesser of (a) five percent (5.0%)
in excess of the Applicable Interest Rate or (b) the maximum rate of interest,
if any, which may be charged or collected from Borrower under applicable law in
addition, Lender shall have the right, without acceleration of the indebtedness,
to collect interest at the Default Interest Rate on any payment due hereunder
(including, without limitation, late charges and fees for legal counsel) which
is not received by Lender on or before the date on which such payment originally
was due (as such due date may be extended by applicable grace period, if any).
Interest at the Default Interest Rate shall be immediately due and payable from
the date specified herein and shall accrue until all Events of Default have been
fully cured or full payment is received, as applicable.
4.04 Interest on Judgments. Interest shall accrue on any judgment
obtained by Lender in connection with the enforcement or collection of this Note
until such judgment amount is paid in full at a rate equal to the greater of (a)
the Default Interest Rate or (b) the legal rate applicable to judgments within
such jurisdiction; provided, however, that interest shall not accrue at a rate
in excess of the maximum rate of interest, if any, which may be charged or
collected from Borrower under applicable law.
4.05 Cumulative Remedies; Attorney Fees. The remedies of Lender in
this Note and in the other Loan Documents, or at law or in equity, shall be
cumulative and concurrent, and may be pursued singly, successively or together
in Lender's sole discretion and as often as occasion therefor shall arise. If
Borrower's obligations under this Note or any of the other Loan Documents are
enforced by Lender through an attorney-at-law, or any payment due under this
Note or the other Loan Documents is collected by or through an attorney-at-law
or collection agency, Borrower agrees to pay all costs incurred by Lender in
connection therewith, including, but not limited to, reasonable fees and
disbursements of legal counsel (whether with respect to a retained firm or
Lender's in-house staff) and collection agency costs, whether or not suit be
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brought. No provision of this Section 4 shall be construed as an agreement or
privilege to extend the date on which any required payment is due (subject to
the applicable grace period, if any), nor as a waiver of any other right or
remedy accruing to Lender by reason of the occurrence of an Event of Default.
The payments required under this Section 4 shall be in addition to, and shall in
no way limit, any other rights and remedies provided for in this Note or any of
the other Loan Documents, nor any other remedies provided by law or in equity,
and shall be added to the principal evidenced by this Note and deemed secured by
the Security Instrument and other Loan Documents.
5. LIMITATIONS ON RECOURSE. Notwithstanding anything to the contrary
contained in this Note, the liability of Borrower and of any general partner,
principal or member of Borrower to pay the indebtedness evidenced by this Note
and for the performance of the other agreements, covenants and obligations
contained herein and in the other Loan Documents shall be limited as set forth
in Article 15 of the Security Instrument.
6. NO USURY. This Note is subject to the express condition that at no time
shall Borrower be required or obligated to pay interest (or any other amount
agreed to be paid hereunder which shall be deemed to be interest) at a rate
which would subject Lender to either civil or criminal liability as a result of
being in excess of the maximum interest rate which Borrower is permitted by
applicable law to pay. If, from any circumstance whatsoever, Borrower is at any
time required or obligated to pay interest (or any other amount agreed to be
paid hereunder shall be deemed to be interest) at a rate in excess of such
maximum rate, then the amount to be paid immediately shall be reduced to such
maximum rate, and, as required by applicable law, all previous payments in
excess of such maximum shall be deemed to have been payments in reduction of the
principal, balance owing under this Note in the inverse order of maturity
(whether or not then due) or, at the option of Lender, be paid over to Borrower
and not to the payment of interest. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the indebtedness evidenced hereby
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term of this Note until payment
in full so that the rate or amount of interest on account of said indebtedness
does not exceed the maximum lawful rate of interest from time to time in effect
and applicable to this Note for so long as the Note is outstanding. This Section
will control all agreements between Borrower and Lender in connection with this
Note. This Section will control all agreements between Borrower and Lender in
connection with this Note. To the extent that the Texas Finance Code is
applicable to this Note for purposes of determining the maximum lawful interest
rate, Lender and Borrower hereby elect and agree that for purposes of Chapter
303 of the Texas Finance Code, as it may from time to time be amended, the
"applicable ceiling" shall be the "weekly ceiling" from time to time in effect
as limited by Section 303.305 of the Texas Finance Code and provided, further
that Lender reserves the right (to the extent permitted by applicable law) to
change the "applicable ceiling" applicable to this Note.
7. GENERAL CONDITIONS
7.01 No Waiver by Lender. No failure to accelerate the debt evidenced
hereby nor failure or delay in exercising any other right or remedy upon the
occurrence of an Event of Default hereunder, or any acceptance of a partial or
past due payment, or indulgences granted from time to time shall be construed
(a) as a novation of this Note or as a reinstatement of the
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indebtedness evidenced hereby, (b) as a waiver or impairment of Lender's right
of acceleration or any other right or remedy available to Lender upon the
occurrence of an Event of Default, or (c) as a waiver of Lender's right
thereafter to insist upon strict compliance with the terms of this Note or any
of the other Loan Documents; and Borrower hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing. No extension of the time for payment of any amount due under this
Note or under any of the other Loan Documents made by Lender's agreement with
any person now or hereafter liable for the payment thereof shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note or any such other person, either in whole or in part unless
Lender agrees otherwise in writing.
7.02 Borrower's Waivers. Borrower, for itself and all others who may
become liable for payment of all or any part of the indebtedness evidenced by
this Note, hereby waives presentment for payment, demand, protest, and notice of
dishonor, protest, notice of protest and notice of nonpayment, demand, intent to
accelerate, and acceleration. Borrower, for itself and all others who may become
liable for payment of all or any part of the indebtedness evidenced by this
Note, hereby further waives and renounces, to the fullest extent permitted by
law, all rights to the benefits of any moratorium, reinstatement, marshaling,
forbearance, valuation, stay, extension, redemption, appraisement, exemption and
homestead now or hereafter provided by the Constitution and laws of the United
States of America and of each state thereof, both as to party and property (real
and personal), against the enforcement and collection of the obligations
evidenced by this Note or the other Loan Documents.
7.03 Unconditional Payment. If any payment received by Lender
hereunder shall be deemed by a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under any bankruptcy, insolvency or
other debtor relief law, then the obligation to make such payment shall survive
any cancellation or satisfaction of this Note or return thereof to Borrower and
shall not be discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand. No release of any security for
this Note or any party liable for payment of this Note shall release or affect
the liability of Borrower or any other party who may become liable for payment
of all or any part of the indebtedness evidenced by this Note. Lender may
release any guarantor, surety or indemnitor of this Note from liability, in
every instance without the consent of Borrower hereunder and without waiving any
rights which Lender may have hereunder or under any of the other Loan Documents
or under applicable law or in equity.
7.04 Authority. Borrower represents that Borrower has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, that the execution, delivery and performance of this Note
has been duly authorized, that the person executing this Note on Borrower's
behalf has authority to do so, and that this Note, once executed by Borrower,
constitutes the valid and binding obligation of Borrower, enforceable in
accordance with its terms.
7.05 Negotiable Instrument. Borrower agrees that this Note shall be
deemed a negotiable instrument, even though this Note, absent this paragraph,
may not otherwise qualify as a negotiable instrument under applicable law.
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7.06 Sale of Loan by Lender. Lender shall have the right to transfer,
sell or assign this Note, the Security Instrument, the other Loan Documents, and
the Obligations hereunder.
8. MISCELLANEOUS
8.01 Notices. All notices and other communications under this Note or
under the other Loan Documents are to be in writing, addressed to the respective
party as set forth in this section, and shall be deemed to have been duly given
(a) upon delivery, if delivered in person with receipt acknowledged by the
recipient thereof, (b) one (1) Business Day after having been deposited for
overnight delivery, fee prepaid, with any reputable overnight courier service,
or (c) three (3) Business Days after having been deposited in any post office or
mail depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested. Initial
addresses for each party are as follows:
Borrower: Hartman REIT Operating Partnership II, L.P.
c/o Hartman Management, Inc.
1450 West Sam Houston Parkway North, Suite 100
Houston, TX 77043
Attention: Allen R. Hartman, President
Facsimile: (713) 973-8912
Lender: GMAC COMMERCIAL MORTGAGE CORPORATION
200 Witmer Road
Horsham, Pennsylvania 19044-8015
Attn: Servicing - Executive Vice President
Each party may establish a new address from time to time by written
notice to the other given in accordance with this Section; provided, however,
that no such change of address will be effective until written notice thereof is
actually received by the party to whom such change of address is sent. Notice to
additional parties now or hereafter designated by a party entitled to notice ate
for convenience only and are not required for notice to a party to be effective
in accordance with this section.
8.02 Entire Agreement; Time of Essence. This Note, together with the
other Loan Documents and Lender's commitment letter to Borrower, contain the
entire agreements between Borrower and Lender relating to the subject matter
hereof and thereof and supersede all prior discussions and agreements (oral or
written) relative hereto and thereto which are not contained herein or therein.
Borrower represents and warrants that it is not relying on any promises,
covenants, representations or agreements in connection with this Note or the
other Loan Documents, other than as expressly set forth herein or therein. In
the event of any conflict between the terms of the Loan Documents, the following
order of priority shall be used to resolve such conflict: This Note shall
control over the Security Instrument and the Security Instrument shall control
over all other Loan Documents. Time is of the essence with respect to all
provisions of this Note.
8.03 Modification. Neither this Note nor any of the other Loan
Documents may be changed, waived, supplemented, discharged or terminated orally
or by any act or failure to act on
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the part of Borrower or Lender, but only by an agreement in writing signed by
the party against whom enforcement thereof is sought and then only to the extent
expressly set forth in such writing. No person other than a duly authorized
officer or agent of Lender shall be deemed an agent of Lender nor have any
authority to waive, modify, supplement or terminate in any manner whatsoever any
of the terms of this Note.
8.04 Binding Effect; Joint and Several Obligations. The terms and
provisions of this Note and the other Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective heirs,
executors, legal representatives, successors, successors and assigns, whether by
voluntary action of the parties or by operation of law. The foregoing shall not
be construed, however, to alter any limitations or restrictions applicable to
Borrower under the other Loan Documents. If Borrower consists of more than one
person or entity, each shall be jointly and severally liable to perform the
obligations of Borrower under this Note and the other Loan Documents.
8.05 Unenforceable Provisions. Any provision of this Note or the
other Loan Documents which may be determined by competent authority to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.06 Ambiguity and Construction of Certain Terms. Neither this Note
nor any uncertainty or ambiguity herein shall be construed or resolved against
Lender by virtue of the fact that such document has originated with Lender as
drafter. Borrower acknowledges that it has reviewed this Note and has had the
opportunity to consult with counsel on same. This Note, therefore, shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto. All
personal pronouns used herein, whether used in the masculine, feminine or neuter
gender, shall be deemed to include all other genders; the singular shall include
the plural and vice versa. Titles of articles and sections are for convenience
only and in no way define, limit, amplify or describe the scope or intent of any
provisions hereof. "Herein," "hereof" and "hereunder" and other words of similar
import refer to this Note as a whole and not to any particular section,
paragraph or other subdivision; "Section" refers to the entire section and not
to any particular subsection, paragraph of other subdivision. Reference to days
for performance shall mean calendar days unless Business Days are expressly
indicated.
8.07 Governing Law. This Note and the other Loan Documents shall be
interpreted, construed and enforced according to the laws of the state in which
the real property encumbered by the Security Instrument is located (without
giving effect to its conflict of laws rules).
8.08 Consent to Jurisdiction. Borrower and Lender, by its acceptance
of this Note, agree and consent to the exclusive jurisdiction and venue of any
state or federal court sitting in the county and state where the real property
encumbered by the Security Instrument is located with respect to any legal
action, proceeding, or controversy between them and hereby expressly waive any
and all rights under applicable law or in equity to object to the jurisdiction
and venue of said courts. Borrower further irrevocably consents to service of
process by certified mail,
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return receipt requested, to Borrower at the address for Borrower last provided
to Lender in accordance with the notice provision of this Note and agrees that
such service shall be effective ten (10) days after mailing. Nothing herein
shall, however, preclude or prevent Lender from bringing any one or more actions
against Borrower in any other jurisdiction as may be necessary to enforce or
realize upon the security or other collateral provided for this Note.
8.09 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY RIGHT BORROWER MAY HAVE TO TRIAL BY JURY IN ANY
LEGAL ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE INDEBTEDNESS EVIDENCED BY THIS
NOTE; THE APPLICATION OR COMMITMENT FOR THE LOAN EVIDENCED BY THIS NOTE; THE
INTERPRETATION, CONSTRUCTION, VALIDITY, ENFORCEMENT OR PERFORMANCE OF THIS NOTE
OR ANY OF THE OTHER LOAN DOCUMENTS; OR ANY ACTS OR OMISSION OF LENDER, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION WITH ANY OF THE
FOREGOING.
8.10 Tax Identification Number. Borrower represents and warrants that
its current tax identification number is as set forth on the signature page
hereto.
8.11 Interest Calculation. BORROWER HEREBY ACKNOWLEDGES THAT INTEREST
IN THIS NOTE IS TO BE CALCULATED BY LENDER ON THE BASIS OF A THREE HUNDRED SIXTY
(360) DAY YEAR, AND IS FULLY AWARE THAT SUCH CALCULATIONS MAY RESULT IN AN
ACCRUAL AND/OR PAYMENT OF INTEREST IN AMOUNTS GREATER THAN CORRESPONDING
INTEREST CALCULATIONS BASED ON A THREE HUNDRED SIXTY-FIVE (365) DAY YEAR.
8.12 Lender's Damages. Borrower recognizes that its default in making
any payment as provided herein or in any other Loan Document as agreed to be
paid when due, or the occurrence of any other Event of Default hereunder or
under any other Loan Document, will require Lender to incur additional expense
in servicing and administering the Loan, in loss to Lender of the use of the
money due and in frustration to Lender in meeting its other financial and loan
commitments and that the damages caused thereby would be extremely difficult and
impractical to ascertain. Borrower agrees (a) that an amount equal to the Late
Charge plus the accrual of interest at the Default Rate is a reasonable estimate
of the damage to Lender in the event of a late payment, and (b) that the accrual
of interest at the Default Rate following any other Event of Default is a
reasonable estimate of the damage to Lender in the event of such other Event of
Default, regardless of whether there has been an acceleration of the loan
evidenced hereby. Nothing in this Note shall be construed as an obligation on
the part of Lender to accept, at any time, less than the full amount then due
hereunder, or as a waiver or limitation of Lender's right to compel prompt
performance.
[Signature on Next Page]
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IN WITNESS WHEREOF, Borrower has executed this Note as of the date first
above written.
BORROWER:
HARTMAN REIT OPERATING PARTNERSHIP II, L.P.,
a Texas limited partnership
By: Hartman REIT Operating Partnership II GP, LLC,
a Delaware limited liability company
By: /s/ Allen R. Hartman
---------------------------------------
Allen R. Hartman
Manager
Taxpayer Identification Number: 81-0582425
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