-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GDBfjEj5vgnt6OyvXTKUmNsybWVR/UgHXX6Af8u9xkzhan1rrBXSPMeSKgLY8dYb CcaxC4Dxzmn7pzVoi0ZvLw== 0000889812-96-000288.txt : 19960401 0000889812-96-000288.hdr.sgml : 19960401 ACCESSION NUMBER: 0000889812-96-000288 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PROPERTIES FUND XVI CENTRAL INDEX KEY: 0000351931 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942704651 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-10435 FILM NUMBER: 96540844 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ P STREET 2: PO BOX 1089 C/O INSIGNIA FINANICAL GROUP CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: POST & HEYMANN STREET 2: 5665 NORTHSIDE DR NW CITY: ATLANTA STATE: GA ZIP: 30328 10-K405 1 ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995, or ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number 0-10435 CENTURY PROPERTIES FUND XVI (Exact name of Registrant as specified in its charter) CALIFORNIA 94-2704651 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Insignia Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (864) 239-1000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] No market for the Limited Partnership Units exists and therefore a market value for such Units cannot be determined. DOCUMENTS INCORPORATED HEREIN BY REFERENCE: Prospectus of Registrant dated August 17, 1981 and thereafter supplemented incorporated in Parts I and IV. CENTURY PROPERTIES FUND XVI (A limited partnership) PART I Item 1. Business. Century Properties Fund XVI (the "Registrant") was organized in December 1980 as a California limited partnership under the Uniform Limited Partnership Act of the California Corporations Code. Fox Capital Management Corporation (the "Managing General Partner"), a California corporation, and Fox Realty Investors ("FRI"), a California general partnership, are the general partners of the Registrant. The Registrant's Registration Statement, filed pursuant to the Securities Act of 1933 (No. 2-71473), was declared effective by the Securities and Exchange Commission ("Commission") on August 17, 1981. the Registrant marketed its securities pursuant to its Prospectus dated August 17, 1981 and thereafter supplemented (hereinafter the "Prospectus"). The Prospectus was filed with the Commission pursuant to Rule 424(b) of the Securities Act of 1933. The principal business of the Registrant is and has been to acquire, hold for investment and ultimately sell income-producing real property. The Registrant is a "closed" limited partnership real estate syndicate formed to acquire multi-family residential properties. For a further description of the business of the Registrant, see the sections entitled "Risk Factors" and "Investment Objectives and Policies" of the Prospectus. Beginning in August 1981 through April 1982, the Registrant offered and sold $65,000,000 in Limited Partnership Units. The net proceeds of this offering were used to purchase ten income-producing real properties, or interests therein. The Registrant's original property portfolio was geographically diversified with properties acquired in six states. The Registrant's acquisition activities were completed in 1983, and since then, the principal activity of the Registrant has been managing its portfolio. In the period from 1986 through 1991, eight multi-family residential properties have been sold or otherwise disposed of. See "Item 2, Properties" for a description of the Registrant's properties. The Registrant is involved in only one industry segment, as described above. The Registrant does not engage in any foreign operations or derive revenues from foreign sources. Both the income and the expenses of operating the properties owned by the Registrant are subject to factors outside of the Registrant's control, such as oversupply of similar rental facilities resulting from overbuilding, increases in unemployment or population shifts, changes in zoning laws or changes in patterns of needs of the users. Expenses, such as local real estate taxes, are subject to change and cannot always be reflected in rental increases due to market conditions or existing leases. The profitability and marketability of developed real property may be adversely affected by changes in general and local economic conditions and in prevailing interest rates, and favorable changes in such factors will not necessarily enhance the profitability or marketability of such properties. Even under the most favorable market conditions there is no guarantee that any property owned by the Registrant can be sold or, if sold, that such sale can be made upon favorable terms. It is possible that legislation on the state or local level may be enacted in the states where the Registrant's properties are located which may include some form of rent control. There have been, and it is possible there may be other Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Managing General Partner is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties still owned by the Registrant. The Registrant monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed, which resulted in no material adverse conditions or liabilities. In no case has the Registrant received notice that it is a potentially responsible party with respect to an environmental clean up site. The Registrant maintains property and liability insurance on its properties and believes such coverage to be adequate. It appears that the original investment objective of capital growth from the inception of the Registrant will not be attained and that investors will not receive a return of all their invested capital. The extent to which invested capital is returned to investors is dependent upon the success of the Registrant's strategy as set forth in "Item 7" as well as upon significant improvement in the performance of the Registrant's remaining properties and the markets in which such properties are located and on the sales price of the remaining properties. In this regard, the remaining properties have been held longer than originally expected. Property Matters The Landings - On December 29, 1995, the first mortgage encumbering the Landings Apartments was refinanced. The principal amount of the refinanced mortgage was $2,300,000. The loan bears interest at 7.88% per annum, has a 30 year amortization and matures in January 2006. See "Item 8, Consolidated Financial Statements and Supplementary Data, Note 4" for additional information with respect to this loan. Woods of Inverness - On December 29, 1995, the first mortgage encumbering the Landings Apartments was refinanced. The principal amount of the refinanced mortgage was $5,250,000. The loan bears interest at 7.88% per annum, has a 30 year amortization and matures in January 2006. See "Item 8, Consolidated Financial Statements and Supplementary Data, Note 4" for additional information with respect to this loan. In connection with the refinancing of The Landings and Woods of Inverness, the lender required the Registrant to transfer each property into a separate single asset entity. As a result, the Registrant transferred each of these properties into a separate limited partnership in which the Registrant holds a 99% limited partnership interest. The general partners of these partnerships are corporations in which the Registrant is the sole stockholder. Employees Services are performed for the Registrant at its remaining properties by on-site personnel all of whom are employees of NPI-AP Management, L.P., ("NPI-AP") an affiliate of the Managing General Partner, which directly manages the Registrant's remaining properties. All payroll and associated expenses of such on-site personnel are fully reimbursed by the Registrant to NPI-AP. Pursuant to a management agreement, NPI-AP provides certain property management services to the Registrant in addition to providing on-site management. Change in Control From March 1988 through December 1993, the Registrant's affairs were managed by Metric Management, Inc. ("MMI") or a predecessor. On December 16, 1993, the services agreement with MMI was modified and, as a result thereof, the Managing General Partner began directly providing real estate advisory and asset management services to the Registrant. As advisor, such affiliate provides all partnership accounting and administrative services, investment management, and supervisory services over property management and leasing. On December 6, 1993, the shareholders of the Managing General Partner entered into a Voting Trust Agreement with NPI Equity Investments II, Inc. ("NPI Equity II") pursuant to which NPI Equity II was granted the right to vote 100% of the outstanding stock of the Managing General Partner. In addition, NPI Equity II became the managing partner of FRI. As a result, NPI Equity II indirectly became responsible for the operation and management of the business and affairs of the Registrant and the other investment partnerships originally sponsored by the Managing General Partner and/or FRI. The individuals who had served previously as partners of FRI and as officers and directors of the Managing General Partner contributed their general partnership interests in FRI to a newly formed limited partnership, Portfolio Realty Associates, L.P. ("PRA"), in exchange for limited partnership interests in PRA. The shareholders of the Managing General Partner and the prior partners of FRI, in their capacity as limited partners of PRA, continue to hold indirectly certain economic interests in the Registrant and such other investment limited partnerships, but have ceased to be responsible for the operation and management of the Registrant and such other partnerships. On August 10, 1994, an affiliate of Apollo Real Estate Advisors, L.P. ("Apollo") obtained general and limited partnership interests in NPI-AP. On October 12, 1994, Apollo acquired one-third of the stock of National Property Investors, Inc., ("NPI") the parent corporation of NPI Equity II. Pursuant to the terms of the stock acquisition, Apollo was entitled to designate three of the seven directors of the Managing General Partner and NPI Equity II. In addition, the approval of certain major actions on behalf of the Registrant required the affirmative vote of at least five directors of the Managing General Partner. On August 17, 1995, the stockholders of NPI entered into an agreement to sell to IFGP Corporation, a Delaware corporation, an affiliate of Insignia Financial Group, Inc., a Delaware corporation ("Insignia"), all of the issued and outstanding common stock of NPI, for an aggregate purchase price of $1,000,000. NPI is the sole shareholder of NPI Equity II, the general partner of FRI, and the entity which controls the Managing General Partner. The closing of the transactions contemplated by the above mentioned agreement (the "Closing") occurred on January 19, 1996. Upon the Closing, the officers and directors of NPI, NPI Equity II and the Managing General Partner resigned and IFGP Corporation caused new officers and directors of each of those entities to be elected. See Item 10, "Directors and Executive Officers of the Registrant." The Tender Offer On October 12, 1994, affiliates of Apollo acquired (i) one-third of the stock of the respective general partners of DeForest Ventures I L.P. ("DeForest I") and DeForest Ventures II L.P. and (ii) an additional equity interest in NPI-AP (bringing its total equity interest in such entity to one-third). NPI-AP is a limited partner of DeForest I which was formed for the purpose of making tender offers for limited partnership units in the Registrant as well as 11 affiliated limited partnerships. On January 19, 1996, DeForest I and certain of its affiliates sold all of its interest in the Registrant to Insignia NPI L.L.C. ("Insignia LLC"), an affiliate of Insignia. Pursuant to a Schedule 13-D filed by Insignia LLC with the Securities and Exchange Commission, Insignia LLC acquired 47,336.68 limited partnership units or approximately 36.4% of the total limited partnership units of the Registrant. (See "Item 12, Security Ownership of Certain Beneficial Owners and Management.") Competition The Registrant is affected by and subject to the general competitive conditions of the residential real estate industry. Many of the Registrant's properties which are or were located in oil industry dependent and other weakened markets have been adversely affected by unfavorable economic conditions in these markets. In addition, both of the Registrant's properties compete in areas which normally contain numerous other real properties which may be considered competitive. Item 2. Properties. A description of the multi-family residential properties in which the Registrant has an ownership interest is as follows. All of the Registrant's properties are owned in fee. Date of Name and Location Purchase Size The Landings Apartments 06/82 200 units 2803 West Sligh Avenue Tampa, Florida Woods of Inverness Apartments 07/82 272 units 21717 Inverness Forest Drive Houston, Texas See, "Item 8, Financial Statements and Supplementary Data" for information regarding any encumbrances to which the properties of the Registrant are subject. The following chart sets forth the occupancy rate at December 31, 1995, 1994, 1993, 1992 and 1991 for the Registrant's remaining properties: OCCUPANCY SUMMARY Average Occupancy Rate(%) for the Year Ended December 31, 1995 1994 1993 1992 1991 The Landings Apartments. 96 96 92 92 92 Woods of Inverness Apartments 96 95 93 90 94 Item 3. Legal Proceedings. Lawrence M. Whiteside, on behalf of himself and all others similarly situated, v. Fox Capital Management Corporation et, al., Superior Court of the State of California, San Mateo County, Case No. 390018. ("Whiteside") Bonnie L. Ruben and Sidney Finkel, on behalf of themselves and all others similarly situated, v. DeForest Ventures I L.P., DeForest Capital I Corporation, MRI Business Properties Fund, Ltd. II, MRI Business Properties Fund, Ltd. III, NPI Equity Investments II, Inc., Montgomery Realty Company-84, MRI Associates, Ltd. II, Montgomery Realty Company-85 and MRI Associates, Ltd. III, United States District Court, Northern District of Georgia, Atlanta Division("Ruben"). Roger L. Vernon, individually and on behalf of all similarly situated persons v. DeForest Ventures I L.P. et. al., Circuit Court of Cook County, County Departments, Chancery Division, Case No. 94CH0100592. ("Vernon") James Andrews, et al., on behalf of themselves and all others similarly situated v. Fox Capital Management Corporation, et al., United States District Court, Northern District of Georgia, Atlanta Division, Case No. 1-94-CV-3351-JEC. ("Andrews") In the fourth quarter of fiscal 1994, limited partners in certain limited partnerships affiliated with the Registrant, commenced actions against, among others, the Managing General Partner. The actions alleged, among other things, that the tender offers made by DeForest Ventures I L.P. ("DeForest I") and DeForest Ventures II L.P. ("DeForest II") in October 1994 constituted (a) breach of the fiduciary duty owed by the Managing General Partner to the limited partners of the Registrant, and (b) a breach of, and an inducement to breach, the provisions of the Partnership Agreement of the Registrant. The actions, which had been brought as class actions on behalf of limited partners sought monetary damages in an unspecified amount and, in the Whiteside action, to enjoin the tender offers. The temporary restraining order sought in the Whiteside action was denied by the court on November 3, 1994 and on November 18, 1994, the court denied Whiteside a preliminary injunction. On March 16, 1995, the United States Court for the Northern District of Georgia, Atlanta, Division, entered an order which granted preliminary approval to a settlement agreement (the "Settlement Agreement") in the Ruben and Andrews actions, conditionally certified two classes for purpose of settlement, and authorized the parties to give notice to the classes of the terms of the proposed settlement. Plaintiffs counsel in the Vernon and Whiteside action joined in the Settlement Agreement as well. The Settlement Agreement received final approval on May 19, 1995 and the actions were dismissed subject to satisfaction of the terms of the Settlement Agreement. The two certified classes constituted all limited partners of the Registrant and the eighteen other affiliated partnerships who either tendered their units in connection with the October tender offers or continued to hold their units in the Registrant and the other affiliated partnerships. Pursuant to the terms of the Settlement Agreement, which were described in the notice sent to the class members in March 1995, (and more fully described in the Amended Stipulation of Settlement submitted in the court on March 14, 1995) all claims which either were made or could have been asserted in any of the class actions would be dismissed with prejudice and/or released. In consideration for the dismissal and/or release of such claims, among other things, DeForest I paid to each unit holder who tendered their units in the Registrant an amount equal to 15% of the original tender offer price less attorney's fees and expenses. In addition, DeForest I commenced a second tender offer on June 2, 1995 for an aggregate number of units of the Registrant (including the units purchased in the initial tender) constituting up to 49% of the total number of units of the Registrant at a price equal to the initial tender price plus 15% less attorney's fees and expenses. Furthermore, under the terms of the Settlement Agreement, the Managing General Partner agreed, among other things, to provide the Registrant a credit line of $150,000 per property which would bear interest at the lesser of the prime rate plus 1% and the rate permitted under the partnership agreement of the Registrant. The second tender offer closed on June 30, 1995. Item 4. Submission of Matters to a Vote of Security Holders. No matter was submitted to a vote of security holders during the period covered by this Report. PART II Item 5. Market for the Registrant's Equity and Related Security Holder Matters. The Limited Partnership Unit holders are entitled to certain distributions as provided in the Partnership Agreement. To date, unit holders have received $25 to $34 in distributions for each unit of original invested capital based upon when admission to the Registrant occurred. Total distributions were from operations and have been suspended since 1985. No market for Limited Partnership Units exists, nor is any expected to develop. No distributions from operations were made during the years ended December 31, 1995 and 1994. See "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the Registrant's financial ability to make distributions. As of March 1, 1996, the approximate number of holders of Limited Partnership Units was 5,549. Item 6. Selected Financial Data. The following represents selected financial data for the Registrant for the years ended December 31, 1995, 1994, 1993, 1992 and 1991. The data should be read in conjunction with the financial statements included elsewhere herein. This data is not covered by the independent auditors' report.
For the Year Ended December 31, 1995 1994 1993 1992 1991 (Amounts in thousands except per unit data) TOTAL REVENUES $ 2,678 $ 2,547 $ 2,436 $ 2,337 $ 2,343 ======= ======= ======= ======= ======== LOSS BEFORE EXTRAORDINARY ITEM $ (475) $ (755) $ (425) $ (925) $ (898) EXTRAORDINARY ITEM - Gain on extinguishment of debt (220) - - $2,473 - -------- ------- ------- ------ -------- NET INCOME (LOSS) $ (695) $ (755) $ (425) $ 1,548 $ (898) ======== ======== ======= ======= ======== NET LOSS PER LIMITED PARTNERSHIP UNIT(1): Loss before extraordinary item $ (3.40) $ (5.41) $ (3.05) $ (6.62) $ (6.43) Extraordinary item - Gain on extinguishment of debt (1.58) - - $ 17.71 - -------- ------- ------- ------ -------- NET INCOME (LOSS) $ (4.98) $ (5.41) $ (3.05) $ 11.09 $ (6.43) ======== ======== ======= ======= ======== TOTAL ASSETS $ 9,471 $ 9,783 $10,506 $10,937 $ 11,601 ======= ======= ======= ======= ======== LONG-TERM OBLIGATIONS: Notes Payable $ 7,550 $ 7,000 $ 7,000 $ 7,000 $ 9,244 ======= ======= ======= ======= ========
- -------------------- (1) $500 original contribution per unit, after giving effect to the allocation of net income (loss) to the general partners. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources The Registrant holds investments in and operates two residential real estate properties with apartments leased to tenants subject to leases of up to one year. The properties are located in Texas and Florida. The Registrant receives rental income from its properties and is responsible for operating expenses, administrative expenses, capital improvements and debt service payments. For the year ended December 31, 1995, the Registrant's Woods of Inverness Apartments generated positive cash flow while The Landings Apartments generated negative cash flow. As of March 1, 1996, eight of the ten properties originally purchased by the Registrant were sold or otherwise disposed. The Registrant uses working capital reserves from any undistributed cash flows from operations, sales and refinancing proceeds as its primary source of liquidity. There have been no cash distributions since 1985. The level of liquidity based upon cash and cash equivalents experienced an $86,000 decrease at December 31, 1995, as compared to December 31, 1994. The Registrant's $248,000 of net cash from financing activities (see below) was more than offset by $276,000 of cash used in operating activities and $58,000 of cash used for real estate improvements (investing activities). The Registrant has no plans for material capital improvements during the next twelve months. All other increases (decreases) in certain assets and liabilities are the result of the timing of receipt and payment of various operating activities. Working capital reserves are invested in a money market account or in repurchase agreements secured by United States Treasury obligations. In December 1995, the Registrant refinanced at a favorable rate, its existing mortgages on The Landings ("Landings") and Woods of Inverness Apartments ("Woods"), which had balloon payments due in June 1997 of $3,000,000 and $4,000,000, respectively. The two new mortgages of $2,300,000 and $5,250,000, requiring monthly payments of $55,000 mature in January 2006, with balloon payments of $2,052,000 and $4,685,000. In connection with the refinancings, the Registrant was required to transfer the assets and liabilities of Woods and Landings to Woods of Inverness CPF 16, L.P. and Landings CPF 16, L.P., respectively, both newly formed, wholly-owned subsidiaries. The Registrant incurred closing costs and fees of $315,000 in connection with these refinancings, of which $190,000 was paid during 1995. The Managing General Partner believes that, if market conditions remain relatively stable, cash flow from operations, when combined with working capital reserves, will be sufficient to fund required capital improvements and regular debt service payments until January 2006. The ability to hold and operate these properties is dependent on being able to obtain refinancings or debt modifications, as required, if the properties are not sold before the balloon mortgage payments are due. As required by the terms of the settlement of the actions brought against, among others, DeForest Ventures I L.P. ("DeForest") relating to the tender offer made by DeForest in October 1994 (the "First Tender Offer") for units of limited partnership interest in the Registrant and certain affiliated partnerships, DeForest commenced a second tender offer (the "Second Tender Offer") on June 2, 1995 for units of limited partnership interest in the Registrant. Pursuant to the Second Tender Offer, DeForest acquired an additional 6,825 units of the Registrant which, when added to the units acquired during the First Tender Offer, represented approximately 36% of the total number of outstanding units of Registrant. Also in connection with the settlement, an affiliate of the Managing General Partner has made available to the Registrant a credit line of up to $150,000 per property owned by the Registrant. The Registrant has no outstanding amounts due under this line of credit. Based on present plans, the Managing General Partner does not anticipate the need to borrow in the near future. Other than cash and cash equivalents the line of credit is the Registrant's only unused source of liquidity. On January 19, 1996, the stockholders of NPI, the sole shareholder of NPI Equity II, sold to IFGP Corporation all of the issued and outstanding stock of NPI. In addition, Insignia also purchased the limited partnership units held by DeForest and certain of its affiliates. IFGP Corporation caused new officers and directors of NPI Equity II and the Managing General Partner to be elected. The Managing General Partner does not believe these transactions will have a significant effect on the Registrant's liquidity or results of operations. See Item 1 "Business - Change in Control." At this time, it appears that the original investment objective of capital growth from the inception of the Registrant will not be attained and that investors will not receive a return of all of their invested capital. The extent to which invested capital is returned to investors is dependent upon the performance of the Registrant's remaining properties and the markets in which such properties are located and on the sales price of the remaining properties. In this regard, the remaining properties have been held longer than originally expected. The ability to hold and operate these properties is dependent on the Registrant's ability to obtain refinancing or debt modification as required. Real Estate Market The business in which the Registrant is engaged is highly competitive, and the Registrant is not a significant factor in its industry. Each investment property is located in or near a major urban area and, accordingly, competes for rentals not only with similar properties in its immediate area but with hundreds of similar properties throughout the urban area. Such competition is primarily on the basis of location, rents, services and amenities. In addition, the Registrant competes with significant numbers of individuals and organizations (including similar partnerships, real estate investment trusts and financial institutions) with respect to the sale of improved real properties, primarily on the basis of the prices and terms of such transactions. Results of Operations 1995 Compared to 1994 Operating results before the extraordinary item, improved by $280,000 for the year ended December 31, 1995, as compared to 1994, as a result of an increase in revenues of $131,000 and a decrease in expenses of $149,000. The extraordinary item results from a $220,000 loss on extinguishment of debt which consists of prepayment premiums, loan termination fees and the write-off of deferred financing costs in connection with the refinancings. Revenues increased by $131,000 for the year ended December 31, 1995, as compared to 1994, due to an increase of $125,000 in rental income and an increase of $6,000 in interest and other income. Rental revenue increased due to increased rental rates at both of the Registrant's properties. Occupancy remained constant. Expenses decreased by $149,000 for the year ended December 31, 1995, as compared to 1994, due to decreases in operating expense of $162,000, depreciation expense of $3,000 and general and administrative expenses of $45,000 which were partially offset by an increase in interest expense of $61,000. Interest expense increased due to an increase in the variable interest rate on the mortgage loans. Operating expenses decreased primarily due to decreases in exterior painting, general repairs and maintenance, and a decrease in real estate taxes at one of the Registrant's properties. General and administrative expenses decreased due to the decrease in asset management costs effective July 1, 1994. Depreciation expense remained relatively constant. 1994 Compared to 1993 Operating results declined by $330,000 for the year ended December 31, 1994, as compared to 1993, as the increase in expenses of $441,000 was only partially offset by the increase in revenues of $111,000. Revenues increased by $111,000 for the year ended December 31, 1994, as compared to 1993, due to an increase of $142,000 in rental income, which was partially offset by a decrease of $31,000 in interest and other income. Rental revenues increased primarily due to an increase in rates and occupancy at the Registrant's properties. Interest and other income decreased due to a decline in average working capital reserves available for investment in 1994 and tax refunds received in 1993, which were included in other income. Expenses increased by $441,000 for the year ended December 31, 1994, as compared to 1993, due to increases in operating expenses of $342,000, general and administrative expenses of $95,000 and interest expense of $4,000. Operating expenses increased due to exterior painting at the Registrant's The Landings Apartments along with continuing deferred maintenance and rent-up expenses associated with the increase in occupancy at both of the Registrant's properties. General and administrative expenses increased primarily due to the costs associated with the management transition. Depreciation and interest expense remained relatively constant. Item 8. Consolidated Financial Statements and Supplementary Data. CENTURY PROPERTIES FUND XVI (A Limited Partnership) CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995 INDEX
Page ---- Independent Auditors' Reports............................................................................................ F - 2 Consolidated Financial Statements: Balance Sheets at December 31, 1995 and 1994........................................................................ F - 4 Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993....................................... F - 5 Statements of Partners' Equity for the Years Ended December 31, 1995, 1994 and 1993................................................................................. F - 6 Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993....................................... F - 7 Notes to Consolidated Financial Statements.......................................................................... F - 8 Financial Statement Schedule: Schedule III - Real Estate and Accumulated Depreciation at December 31, 1995................................. F - 14 Financial statements and financial statement schedules not included have been omitted because of the absence of conditions under which they are required or because the information is included elsewhere in this Report.
To the Partners Century Properties Fund XVI Greenville, South Carolina Independent Auditors' Report We have audited the accompanying consolidated balance sheets of Century Properties Fund XVI (a limited partnership) (the "Partnership") as of December 31, 1995 and 1994, and the related consolidated statements of operations, partners' equity and cash flows for the years then ended. Our audits also included the additional information supplied pursuant to Item 14(a)(2). These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Century Properties Fund XVI as of December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Imowitz Koenig & Co., LLP Certified Public Accountants New York, N.Y. January 22, 1996 INDEPENDENT AUDITORS' REPORT Century Properties Fund XVI: We have audited the accompanying statements of operations, partners' equity and cash flows of Century Properties Fund XVI (a limited partnership) (the "Partnership") for the year ended December 31, 1993. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the results of operations and cash flows of the Partnership for the year ended December 31, 1993 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP San Francisco, California March 18, 1994 CENTURY PROPERTIES FUND XVI (A Limited Partnership) CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ----------------------- 1995 1994 ---- ---- ASSETS Cash and cash equivalents $ 846,000 $ 932,000 Other assets 227,000 189,000 Real Estate: Real estate 14,497,000 14,439,000 Accumulated depreciation (6,414,000) (5,958,000) ------------ ------------- Real estate, net 8,083,000 8,481,000 Deferred financing costs, net 315,000 181,000 ------------ ------------- Total assets $ 9,471,000 $ 9,783,000 ============ ============= LIABILITIES AND PARTNERS' EQUITY Notes payable $ 7,550,000 $ 7,000,000 Accrued expenses and other liabilities (including $38,000 to a related party in 1995) 203,000 370,000 ------------ ------------- Total liabilities 7,753,000 7,370,000 ------------ ------------- Partners' Equity (Deficit): General partners (3,786,000) (3,738,000) Limited partners (130,000 units outstanding at December 31, 1995 and 1994) 5,504,000 6,151,000 ------------ ------------- Total partner's equity 1,718,000 2,413,000 ------------ ------------- Total liabilities and partners' equity $ 9,471,000 $ 9,783,000 ============ =============
See notes to consolidated financial statements. CENTURY PROPERTIES FUND XVI (A Limited Partnership) CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 ------ ------ ------ Revenues: Rental $2,636,000 $ 2,511,000 $ 2,369,000 Interest and other income 42,000 36,000 67,000 ---------- ------------- ------------ Total revenues 2,678,000 2,547,000 2,436,000 ---------- ------------- ------------ Expenses (including $369,000 and $250,000 paid to the general partners and affiliates in 1995 and 1994): Operating 1,646,000 1,808,000 1,466,000 Interest 795,000 734,000 730,000 Depreciation 456,000 459,000 459,000 General and administrative 256,000 301,000 206,000 ---------- ------------- ------------ Total expenses 3,153,000 3,302,000 2,861,000 ---------- ------------- ------------ Loss before extraordinary item (475,000) (755,000) (425,000) Extraordinary item: Loss on extinguishment of debt (220,000) - - ---------- ------------- ------------ Net loss $ (695,000) $ (755,000) $ (425,000) ========== ============= ============ Net loss per limited partnership assignee unit: Loss before extraordinary item $ (3.40) $ (5.41) $ (3.05) Extraordinary item (1.58) - - ---------- ------------- ------------ Net loss $ (4.98) $ (5.41) $ (3.05) ========== ============= ============
See notes to consolidated financial statements. CENTURY PROPERTIES FUND XVI (A Limited Partnership) CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
General Limited Total partners' partners' partners' (deficit) equity equity --------- ------ ------ Balance - January 1, 1993 $ (3,657,000) $ 7,250,000 $ 3,593,000 Net loss (29,000) (396,000) (425,000) ------------ ------------ -------------- Balance - December 31, 1993 (3,686,000) 6,854,000 3,168,000 Net loss (52,000) (703,000) (755,000) ------------ ------------ -------------- Balance - December 31, 1994 (3,738,000) 6,151,000 2,413,000 Net loss (48,000) (647,000) (695,000) ------------ ------------ -------------- Balance - December 31, 1995 $ (3,786,000) $ 5,504,000 $ 1,718,000 ============ ============ ==============
See notes to consolidated financial statements. CENTURY PROPERTIES FUND XVI (A Limited Partnership) CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 1994 1993 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $ (695,000) $ (755,000) $ (425,000) Adjustments to reconcile net (loss) to net cash (used in) provided by operating activities: Depreciation and amortization 529,000 531,000 531,000 Extraordinary item - extinguishment of debt 220,000 - - Changes in operating assets and liabilities: Other assets (38,000) (166,000) 3,000 Accrued expenses and other liabilities (292,000) 32,000 (6,000) ----------- ----------- ------------ Net cash (used in) provided by operating activities (276,000) (358,000) 103,000 ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from cash investments - 692,000 990,000 Purchase of cash investments - - (692,000) Additions to real estate (58,000) (64,000) (245,000) ----------- ----------- ------------ Net cash (used in) provided by investing activities (58,000) 628,000 53,000 ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Notes payable proceeds 7,550,000 - - Satisfaction of notes payable (7,000,000) - - Deferred financing costs paid (190,000) - - Costs paid to extinguish debt (112,000) - - ----------- ----------- ------------ Net cash provided by financing activities 248,000 - - ----------- ----------- ------------ (Decrease) Increase in Cash and Cash Equivalents (86,000) 270,000 156,000 Cash and Cash Equivalents at Beginning of Year 932,000 662,000 506,000 ----------- ----------- ------------ Cash and Cash Equivalents at End of Year $ 846,000 $ 932,000 $ 662,000 =========== =========== ============ Supplemental Disclosure of Cash Flow Information: Interest paid in cash during the year $ 748,000 $ 634,000 $ 630,000 ========= =========== ============ Refinancing of notes payable (see Note 4)
See notes to consolidated financial statements. CENTURY PROPERTIES FUND XVI (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Century Properties Fund XVI (the "Partnership") is a limited partnership organized under the laws of the State of California to acquire, hold for investment, and ultimately sell income-producing real estate. The Partnership currently owns two residential apartment complexes located in Texas and Florida. The general partners are Fox Realty Investors ("FRI"), a California general partnership, and Fox Capital Management Corporation ("FCMC"), a California corporation. The capital contributions of $65,000,000 ($500 per unit) were made by the limited partners, including 200 Limited Partnership Units purchased by FCMC. On December 6, 1993, the shareholders of FCMC entered into a Voting Trust Agreement with NPI Equity Investments II, Inc. ("NPI Equity" or the "Managing General Partner") pursuant to which NPI Equity was granted the right to vote 100 percent of the outstanding stock of FCMC and NPI Equity became the managing general partner of FRI. As a result, NPI Equity became responsible for the operation and management of the business and affairs of the Partnership and the other investment partnerships originally sponsored by FCMC and/or FRI. NPI Equity is a wholly-owned subsidiary of National Property Investors, Inc. ("NPI, Inc."). The shareholders of FCMC and the partners of FRI retain indirect economic interests in the Partnership and such other investment limited partnerships, but have ceased to be responsible for the operation and management of the Partnership and such other partnerships. In October 1994 DeForest Ventures I L.P. ("DeForest I") made a tender offer for limited partnership interests in the partnership, as well as eleven affiliated limited partnerships. DeForest Ventures II, L.P. ("DeForest II") made tender offers for limited partnership interests in seven affiliated limited partnerships. Shareholders who controlled DeForest Capital I Corporation, the sole general partner of DeForest I, also controlled NPI, Inc. As of December 31, 1995, DeForest I had acquired approximately 36% of the total limited partnership units of the Partnership (see Note 6). On January 19, 1996, the stockholders of NPI, Inc. sold all of the issued and outstanding stock of NPI, Inc. to an affiliate of Insignia Financial Group, Inc. ("Insignia"). In addition, an affiliate of Insignia acquired the limited partnership interests of the Partnership held by DeForest I and certain of its affiliates (see Note 6). Consolidation The 1995 consolidated financial statements include the accounts of the Partnership and its wholly-owned subsidiaries formed in December 1995. All significant intercompany transactions and balances have been eliminated. CENTURY PROPERTIES FUND XVI (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Fair Value of Financial Instruments In 1995, the Partnership implemented Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments," as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments," which requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt approximates its carrying balance, since the debt was refinanced in 1995. Real Estate Real estate is stated at cost. Acquisition fees are capitalized as a cost of real estate. In 1995, the Partnership adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ", which requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the asset's carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The adoption of the SFAS had no effect on the Partnership's financial statements. Cash and Cash Equivalents The Partnership considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. CENTURY PROPERTIES FUND XVI (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentration of Credit Risk The Partnership maintains cash balances at institutions insured up to $100,000 by the Federal Deposit Insurance Corporation. Balances in excess of $100,000 are usually invested in money market accounts and repurchase agreements, which are collateralized by United States Treasury obligations. Cash balances exceeded these insured levels during the year. Depreciation Depreciation is computed by the straight-line method over estimated useful lives ranging from 27.5 to 30 years for buildings and improvements and from six to seven years for furnishings. Deferred Financing Costs Deferred financing costs are amortized as interest expense over the lives of the related loans, or expensed, if financing is not obtained. At December 31, 1994, accumulated amortization of deferred financing costs totaled $180,000. There was no accumulated amortization at December 31, 1995. Net (Loss) Per Limited Partnership Unit The net (loss) per limited partnership unit is computed by dividing net (loss) allocated to the limited partners by 130,000 units outstanding. Income Taxes Taxable income or loss of the Partnership is reported in the income tax returns of its partners. Accordingly, no provision for income taxes is made in the financial statements of the Partnership. CENTURY PROPERTIES FUND XVI (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 2. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES In accordance with the partnership agreement, the Partnership may be charged by the general partners and affiliates for services provided to the Partnership. From March 1988 to December 1992 such rights were assigned pursuant to a services agreement by the general partners and affiliates to Metric Realty Services, L.P., ("MRS") which performed partnership management and other services for the Partnership. On January 1, 1993, Metric Management, Inc., ("MMI"), successor to MRS, a company which is not affiliated with the general partners, commenced providing certain property and portfolio management services to the Partnership under a new services agreement. As provided in the new services agreement, effective January 1, 1993, no reimbursements were made to the general partners and affiliates after December 31, 1992. Subsequent to December 31, 1992, reimbursements were made to MMI. On December 16, 1993, the services agreement with MMI was modified and, as a result thereof, NPI Equity began directly providing cash management and other Partnership services on various dates commencing December 23, 1993. On March 1, 1994, an affiliate of NPI Equity commenced providing certain property management services (See notes 1 and 6). Related party fees and expenses for the years ended December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993 ---- ---- ---- Financing fees $ 38,000 $ - $ - Property management fees 132,000 103,000 - Reimbursement of expenses: Partnership accounting and investor services 144,000 129,000 - Professional services - 18,000 - --------- -------- ---------- Total $ 314,000 $250,000 $ - ========= ======== ==========
Property management fees are included in operating expenses. Reimbursed expenses are primarily included in general and administrative expenses. Financing fees have been capitalized and are being amortized over the life of the loans. Approximately $93,000 of insurance premiums, which were paid to an affiliate of NPI Inc. under a master insurance policy arranged by such affiliate, are included in operating expenses for the year ended December 31, 1995. In accordance with the partnership agreement, the general partners received a partnership management incentive allocation equal to five percent of net and taxable loss. The general partners were also allocated their two percent continuing interest in the Partnership's net and taxable loss after the preceding allocation. Upon sale of all properties and termination of the Partnership, the general partners may be required to contribute certain funds to the Partnership in accordance with the partnership agreement. CENTURY PROPERTIES FUND XVI (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 3. REAL ESTATE Real estate, at December 31, 1995 and 1994, is summarized as follows: 1995 1994 ---- ---- Land $ 1,409,000 $ 1,409,000 Buildings and improvements 11,798,000 11,759,000 Furnishings 1,290,000 1,271,000 ------------- ------------- Total 14,497,000 14,439,000 Accumulated depreciation (6,414,000) (5,958,000) -------------- ------------- Real estate, net $ 8,083,000 $ 8,481,000 ============ ============ The real estate is pledged to collateralize the non-recourse mortgages set forth in Note 4. 4. NOTES PAYABLE On December 29, 1995, the Partnership refinanced its existing indebtedness on its Woods of Inverness ("Woods") and The Landings Apartments ("Landings") properties. The existing loans aggregating $7,000,000, maturing in June 1997, were refinanced with two new loans aggregating $7,550,000 with interest at 7.88 percent per annum, monthly payments of approximately $55,000 and maturing in January 2006, with balloon payments of approximately $6,737,000. The loans may not be prepaid without penalty. In connection with the refinancings, the Partnership was required to transfer the assets and liabilities of Woods and Landings to Woods of Inverness CPF 16, L.P. and Landings CPF 16, L.P., respectively, both newly formed, wholly-owned subsidiaries. In connection with the refinancings, the Partnership incurred financings costs and fees of $315,000, of which $190,000 was paid in 1995. The Partnership recognized an extraordinary loss of $220,000 on the refinancings which consists of prepayment premiums, loan termination fees and the write-off of deferred financing costs. Principal payments at December 31, 1995 are required as follows: 1996 $ 51,000 1997 60,000 1998 65,000 1999 71,000 2000 77,000 Thereafter 7,226,000 ------------ $ 7,550,000 ============ CENTURY PROPERTIES FUND XVI (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 5. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING The differences between the accrual method of accounting for income tax reporting and the accrual method of accounting used in the financial statements are as follows:
1995 1994 1993 ---- ---- ---- Net (loss) - financial statements $ (695,000) $ (755,000) $ (425,000) Differences resulted from: Depreciation (32,000) (37,000) (38,000) Interest expense - 1,000 8,000 ----------- ------------ ------------ Net loss - income tax method $ (727,000) $ (791,000) $ (455,000) ============ ============= ============ Taxable loss per limited partnership unit after giving effect to the allocation to the general partners $ (5) $ (6) $ ( 3) ============ ============= ============ Partners' equity - financial statements $ 1,718,000 $ 2,413,000 $ 3,168,000 Differences resulted from: Depreciation (6,194,000) (6,162,000) (6,125,000) Sales commissions and organization expenses 8,275,000 8,275,000 8,275,000 Interest expense 1,183,000 1,183,000 1,182,000 Other (391,000) (391,000) (391,000) ------------ ------------ ----------- Partners' equity - income tax method $ 4,591,000 $ 5,318,000 $ 6,109,000 =========== ============ ===========
6. SUBSEQUENT EVENT On January 19, 1996, the stockholders of NPI, Inc. sold all of the issued and outstanding stock of NPI, Inc. to an affiliate of Insignia. In addition, an affiliate of Insignia acquired the limited partnership interests of the Partnership held by DeForest I and certain of its affiliates (see Note 1). As a result of the transaction, the Managing General Partner of the Partnership is controlled by Insignia. Insignia affiliates now provide property and asset management services to the Partnership, maintain its books and records and oversee its operations. SCHEDULE III CENTURY PROPERTIES FUND XVI (A Limited Partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN A B C D E F G H I Cost Capitalized Gross Amount at Initial Cost Subsequent Which Carried at Close to Partnership to Acquisition of Period(1) -------------- -------------- ----------------------------- Life on which Deprecia- Accumu- Year tion is Buildings Buildings lated of Date computed and and Deprecia- Con- of in latest Encum- Improve- Improve- Carrying Improve- Total tion struc- Acqui- statement of Description brances Land ments ments Costs Land ments (2) (3) tion sition operations - ----------- ------- ---- ----- ----- ----- ---- ----- --- --- ---- ------ ---------- (Amounts in thousands) The Landings Apartments Tampa, Florida $2,300 $ 504 $ 4,702 $ 472 $ - $ 504 $ 5,174 $ 5,678 $2,530 6/79 6/82 6 - 30 Yrs. Woods of Inverness Apartments Houston, Texas 5,250 1,292 10,305 698 (3,476) 905 7,914 8,819 3,884 7/81 7/82 6 - 30 Yrs. ------ ------ ------- ------ ------- ------ ------- ------- ------ TOTAL $7,550 $1,796 $15,007 $1,170 $(3,476) $1,409 $13,088 $14,497 $6,414 ====== ====== ======= ====== ======= ====== ======= ======= ======
See accompanying notes. SCHEDULE III CENTURY PROPERTIES FUND XVI (A Limited Partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 NOTES: (1) The aggregate cost for Federal income tax purposes is $15,306,000. (2) Balance, January 1, 1993 $ 14,130,000 Improvements capitalized subsequent to acquisition 245,000 ------------ Balance, December 31, 1993 14,375,000 Improvements capitalized subsequent to acquisition 64,000 ------------ Balance, December 31, 1994 14,439,000 Improvements capitalized subsequent to acquisition 58,000 ------------ Balance, December 31, 1995 $ 14,497,000 ============ (3) Balance, January 1, 1993 $ 5,040,000 Additions charged to expense 459,000 ------------ Balance, December 31, 1993 5,499,000 Additions charged to expense 459,000 ------------ Balance, December 31, 1994 5,958,000 Additions charged to expense 456,000 ------------ Balance, December 31, 1995 $ 6,414,000 ============
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Effective April 22, 1994, the Registrant dismissed its prior Independent Auditors, Deloitte & Touche, LLP ("Deloitte") and retained as its new Independent Auditors, Imowitz Koenig & Company, LLP. Deloitte's Independent Auditors' Report on the Registrant's financial statements for the calendar year ended December 31, 1993 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. The decision to change Independent Auditors was approved by the Managing General Partner's Directors. During the calendar year ended 1993 and through April 22, 1994 there were no disagreements between the Registrant and Deloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure which disagreements if not resolved to the satisfaction of Deloitte, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. Effective April 22, 1994, the Registrant engaged Imowitz Koenig & Company, LLP as its Independent Auditors. The Registrant did not consult Imowitz Koenig & Company, LLP regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K prior to April 22, 1994. PART III Item 10. Directors and Executive Officers of the Registrant. The Registrant does not have any officers or directors. The general partner of the Registrant, Fox Capital Management Corporation (the "Managing General Partner"), manages and controls substantially all of the Registrant's affairs and has general responsibility and ultimate authority in all matters affecting its business. NPI Equity Investments II, Inc., which controls the Managing General Partner, is a wholly-owned affiliate of National Property Investors, Inc., which in turn is owned by an affiliate of Insignia (See "Item 1, Business - Change in Control"). Insignia is a full service real estate service organization performing property management, commercial and retail leasing, investor services, partnership administration, mortgage banking, and real estate investment banking services for various entities. Insignia commenced operations in December 1990 and is the largest manager of multifamily residential properties in the United States and is a significant manager of commercial property. It currently provides property and/or asset management services for over 2,000 properties. Insignia's properties consist of approximately 300,000 units of multifamily residential housing and approximately 64 million square feet of commercial space. As of March 1, 1996, the names and positions held by the officers and directors of the Managing General Partner are as follows: Has served as a Director and/or Officer of the Managing Name Positions Held General Partner since - ---- -------------- ---------------------- William H. Jarrard, Jr. President and Director January 1996 Ronald Uretta Vice President and January 1996 Treasurer John K. Lines, Esquire Vice President, January 1996 Secretary and Director Thomas R. Shuler Director January 1996 Kelley M. Buechler Assistant Secretary January 1996 William H. Jarrard, Jr., age 49, has been President and a Director of the Managing General Partner since January 1996. Mr. Jarrard has been a Managing Director - Partnership Administration of Insignia since January 1991. Ronald Uretta, age 40, has been Insignia's Chief Financial Officer and Treasurer since January 1992. Since September 1990, Mr. Uretta has also served as the Chief Financial Officer and Controller of Metropolitan Asset Group. John K. Lines, Esquire, age 36, has been a Director and Vice President and Secretary of the Managing General Partner since January 1996, Insignia's General Counsel since June 1994, and General Counsel and Secretary since July 1994. From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel and Vice President of Ocwen Financial Corporation, West Palm Beach, Florida. From October 1991 until May 1993, Mr. Lines was a Senior Attorney with Banc One Corporation, Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was an attorney with Squire Sanders & Dempsey, Columbus, Ohio. Thomas R. Shuler, age 50, has been Managing Director - Residential Property Management of Insignia since March 1991 and Executive Managing Director of Insignia and President of Insignia Management Services since July 1994. Kelley M. Buechler, age 38, has been Assistant Secretary of the Managing General Partner since January 1996 and Assistant Secretary of Insignia since 1991. No family relationships exist among any of the officers or directors of the Managing General Partner. Each director and officer of the Managing General Partner will hold office until the next annual meeting of stockholders of the Managing General Partner and until his successor is elected and qualified. Item 11. Executive Compensation. The Registrant is not required to and did not pay any compensation to the officers or directors of the Managing General Partner. The Managing General Partner does not presently pay any compensation to any of its officers or directors. (See "Item 13, Certain Relationships and Related Transactions.") Item 12. Security Ownership of Certain Beneficial Owners and Management. The Registrant is a limited partnership and has no officers or directors. The Managing General Partner has discretionary control over most of the decisions made by or for the Registrant in accordance with the terms of the Partnership Agreement. The Managing General Partner directly owns 200 limited partnership units in the Registrant. The following table sets forth certain information regarding limited partnership units of the Registrant owned by each person who is known by the Registrant to own beneficially or exercise voting or dispositive control over more than 5% of the Registrant's limited partnership units, by each of the Managing General Partner's directors and by all directors and executive officers of the Managing General Partner as a group as of March 1, 1996. Name and address of Amount and nature of Beneficial Owner Beneficial Ownership % of Class Insignia NPI, L.L.C. (1) 47,336.68(2) 36.4 All directors and executive officers as a group (5 persons) - - - -------------------- (1) The business address for Insignia NPI, L.L.C. is One Insignia Financial Plaza, Greenville, South Carolina 29602. (2) Based upon information supplied to the Registrant by Insignia NPI, L.L.C. There are no arrangements known to the Registrant, the operation of which may, at a subsequent date, result in a change in control of the Registrant. Item 13. Certain Relationships and Related Transactions. In accordance with the partnership agreement, the Registrant may be charged by the general partners and affiliates for services provided to the Registrant. On January 1, 1993, Metric Management, Inc., ("MMI"), a company which is not affiliated with the general partners, commenced providing certain property and portfolio management services to the Registrant under a new services agreement. As provided in the new services agreement, effective January 1, 1993, no reimbursements were made to the general partners and affiliates after December 31, 1992. Subsequent to December 31, 1992, reimbursements were made to MMI. On December 16, 1993, the services agreement with MMI was modified and, as a result thereof, the Managing General Partner began directly providing cash management and other Partnership services on various dates commencing December 23, 1993. On March 1, 1994, NPI Property Management Corporation, an affiliate of the general partner, commenced providing certain property management services. Related party expenses for the years ended December 31, 1995, 1994 and 1993 were as follows: 1995 1994 1993 ----------------------------- Financing Fees $ 38,000 $ - $ - Property management fees 132,000 103,000 - Reimbursement of expenses: Partnership accounting and investor services 144,000 129,000 - Professional services - 18,000 - -------- -------- -------- Total $324,000 $250,000 $ - ======== ======== ======== Property management fees are included in operating expenses. Reimbursed expenses are primarily included in general and administrative expenses. Approximately $93,000 of insurance premiums, which were paid to an affiliate of NPI under a master insurance policy arranged by such affiliate are included in operating expenses for the year ended December 31, 1995. In accordance with the partnership agreement, the general partners received a partnership management incentive allocation equal to five percent of net and taxable loss. The general partners were also allocated their two percent continuing interest in the Partnership's net and taxable loss after the preceding allocation. As a result of its ownership of 47,336.68 limited partnership units, Insignia NPI L.L.C. ("Insignia LLC") could be in a position to significantly influence all voting decisions with respect to the Registrant. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, Insignia LLC would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. However, Insignia LLC has agreed for the benefit of non-tendering unitholders, that it will vote its Units: (i) against any proposal to increase the fees and other compensation payable by the Registrant to the Managing General Partner and any of its affiliates; and (ii) with respect to any proposal made by the Managing General Partner or any of its affiliates, in proportion to votes cast by other unitholders. Except for the foregoing, no other limitations are imposed on Insignia LLC's right to vote each Unit acquired. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)(1)(2) Financial Statements and Financial Statement Schedules: See Item 8 for Financial Statements of the Registrant, Notes thereto, and Financial Statement Schedules. (A Table of Contents to Financial Statements and Financial Statement Schedules is included in Item 8 and incorporated herein by reference.) (a)(3) Exhibits 2.1 NPI, Inc. Stock Purchase Agreement, dated as of August 17, 1995, incorporated by reference to the Registrant's Current Report on Form 8-K dated August 17, 1995. 2.2 Partnership Units Purchase Agreement dated as of August 17, 1995 incorporated by reference to Exhibit 2.1 to Form 8-K filed by Insignia Financial Group, Inc. ("Insignia) with the Securities and Exchange Commission on September 1, 1995. 2.3 Management Purchase Agreement dated as of August 17, 1995 incorporated by reference to Exhibit 2.2 to Form 8-K filed by Insignia with the Securities and Exchange Commission on September 1, 1995. 2.4 Limited Liability Company Agreement of Riverside Drive L.L.C., dated as of August 17, 1995 incorporated by reference to Exhibit 2.4 to Form 8-K filed by Insignia with the Securities and Exchange Commission on September 1, 1995. 2.5 Master Indemnity Agreement dated as of August 17, 1995 incorporated by reference to Exhibit 2.5 to Form 8-K filed by Insignia with the Securities and Exchange Commission on September 1, 1995. 3.4. Agreement of Limited Partnership, incorporated by reference to Exhibit A to the Prospectus of the Registrant dated August 17, s1981 and thereafter supplemented June 25, 1979 and thereafter supplemented, included in the Registrant's Registration Statement on Form S-11 (Reg. No. 2-71473). 10(a) Form of First Mortgage Note dated as of December 29, 1995 from the Registrant to Secore Financial Corporation ("Secore") relating to the refinancing of the Landings and Woods of Inverness. 10(b) Form of First Mortgage and Security Agreement dated as of December 29, 1995 from the Registrant to Secore relating to the refinancing of the Landings and Woods of Inverness. 16. Letter from the Registrant's former Independent Auditor dated April 27, 1994, incorporated by reference to exhibit 10 to the Registrant's Current Report on Form 8-K dated April 22, 1994. (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized this 25th day of March, 1996. CENTURY PROPERTIES FUND XVI By: FOX CAPITAL MANAGEMENT CORPORATION A General Partner By: /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature/Name Title Date /s/ William H. Jarrard, Jr. President and March 25, 1996 William H. Jarrard, Jr. Director /s/ Ronald Uretta Principal Financial March 25, 1996 Ronald Uretta Officer and Principal Accounting Officer /s/ John K. Lines Director March 25, 1996 John K. Lines Exhibit Index Exhibit Page 2.1 NPI, Inc. Stock Purchase Agreement (1) 2.2 Partnership Units Purchase Agreement (2) 2.3 Management Purchase Agreement (3) 2.4 Limited Liability Company Agreement of (4) Riverside Drive L.L.C. 2.5 Master Indemnity Agreement (5) 3.4. Agreement of Limited Partnership (6) 10.1 Form of First Mortgage Note dated as of December 29, 1995 from the Registrant to Secore Financial Corporation ("Secore") relating to the refinancing of the Landings and Woods of Inverness. 10.2 Form of First Mortgage and Security Agreement dated as of December 29, 1995 from the Registrant to Secore relating to the refinancing of the Landings and Woods of Inverness. 16 Letter from the Registrant's former Independent Auditor (7) dated April 27, 1994 - --------------- (1) Incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K dated August 17, 1995. (2) Incorporated by reference to Exhibit 2.1 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995. (3) Incorporated by reference to Exhibit 2.2 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995. (4) Incorporated by reference to Exhibit 2.4 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995. (5) Incorporated by reference to Exhibit 2.5 to Form 8-K filed by Insignia Financial Group, Inc. with the Securities and Exchange Commission on September 1, 1995. (6) Incorporated by reference to Exhibit A to the Prospectus of the Registrant dated August 17, 1981 and thereafter supplemented June 25, 1979 and thereafter supplemented, included in the Registrant's Registration Statement on Form S-11 (Reg. No. 2-71473). (7) Incorporated by reference to exhibit 10 to the Registrant's Current Report on Form 8-K dated April 22, 1994. EX-10.1 2 FORM OF FIRST MORTGAGE NOTE DATED AS OF DECEMBER 29, 1995 Exhibit 10.1 FIRST MORTGAGE NOTE New York, New York FOR VALUE RECEIVED _______________________________ ________________, a _______ limited partnership, having its principal place of business at _____________________________ ______________________________________ (hereinafter referred to as "Maker"), promises to pay to the order of [ORIGINATOR], a ________ corporation, at its principal place of business at _____________________________________________________________ (hereinafter referred to as "Payee"), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of ________________________ ________ AND 00/100 DOLLARS ($_______________) 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 (hereinafter defined), and to be paid as hereinafter provided. A. PAYMENT TERMS Maker shall pay to Payee: (i) a payment of interest only on the date hereof for the period commencing on the date hereof and ending December 31, 1995; (ii) a constant payment of $_________ (the "Monthly Payment") on February 1, 1996 and on the first day of each calendar month (the "Monthly Payment Date") thereafter to and including the first day of December, 2005; and (iii) the balance of the principal sum then outstanding and all interest thereon shall be due and payable on the first day of January, 2006 (the "Maturity Date"). Each of such payments shall be applied as follows: (i) First to the payment of interest computed at the Applicable Interest Rate; and (ii) The balance applied toward the reduction of the principal sum. B. INTEREST The term "Applicable Interest Rate" as used in this Note shall mean _____% per annum. Interest on the principal sum of this Note will be due and payable monthly, in level payments, on the first day of each calendar month, based on a year of twelve months of thirty days each. C. DEFAULT AND ACCELERATION The whole of the principal sum of this Note, together with all interest accrued and unpaid thereon and all other sums due under the Mortgage (hereinafter defined) and this Note (all such sums hereinafter collectively referred to as the "Debt") shall without notice become immediately due and payable at the option of Payee if any payment required in this Note is not paid within ten (10) days after written notice from the Payee notifying Maker that the same is 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 Mortgage (hereinafter collectively an "Event of Default"). All of the terms, covenants and conditions contained in the Mortgage and the Other Security Documents (hereinafter defined) are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event that it should become necessary to employ counsel to collect the Debt or to protect, sell or foreclose the security hereof, Maker also agrees to pay reasonable attorney's fees for the services of such counsel whether or not suit be brought. D. PREPAYMENT The principal balance of this Note may not be prepaid, in whole or in part, prior to January 1, 2000. Commencing on January 1, 2000 and at any time thereafter, provided no default exists under the Mortgage or under this Note, the principal balance of the Note may be prepaid in whole, but not in part, on the first day of any calendar month, upon not less than thirty (30) days or more than forty five (45) days prior written notice (the "Prepayment Notice") by certified mail to Payee specifying the date (the "Prepayment Date") on which prepayment is to be made. Upon any prepayment of this Note, whether voluntary or involuntary, including, without limitation, any prepayment as a result of acceleration or prepayment by court order or trustee sale, Maker shall pay to Payee (a) all interest accrued and unpaid on the principal balance of this Note to and including the Prepayment Date, (b) all other sums due under the Mortgage, this Note or the Other Security Documents and (c) a prepayment premium (the "Premium") in an amount equal to the greater of (i) one percent (1%) of the principal balance of this Note outstanding after the application of the Monthly Payment, if any, due on such Prepayment Date or (ii) the product of (A) a fraction whose numerator is an amount equal to the portion of the principal balance of the Debt being prepaid and whose denominator is the entire outstanding principal balance of the Debt on the date of such prepayment, multiplied by (B) an amount equal to the remainder obtained by subtracting (x) an amount equal to the entire outstanding principal balance of the Debt as of the date of such prepayment from (y) the present value as of the date of such prepayment of the remaining scheduled payments of principal and interest on the entire Debt (including any ballon payment) determined by discounting such payments at the Discount Rate (hereinafter defined). The calculation of the Premium shall be made by Payee (or the then holder of the Debt, as applicable), and shall, absent manifest error, be final, conclusive and binding upon all parties. "Discount Rate" shall mean the rate which, when compounded monthly, is equivalent to the Treasury Rate (hereinafter defined) when compounded semi-annually. "Treasury Rate" shall mean the yield calculated by the linear interpolation of the yield, as reported in Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading "U.S. government securities/Treasury constant maturities" for the week ending prior to the date of the relevant prepayment of the Debt, of U.S. Treasury constant maturities with a maturity date (one longer and one shorter) most nearly approximating the maturity date of the Debt. In the event Release H.15 is no longer published, Payee (or the then holder of the Debt, as applicable) shall select a comparable publication to determine the Treasury Rate. In no event shall Payee be required to (i) accept any prepayment hereunder without the payment of the Premium then due or (ii) reinvest any prepayment proceeds in U.S. Treasury obligations or otherwise. The Premium shall not be due and payable for any prepayment (unless such prepayment occurs after an acceleration of the Debt by Payee) made during the six (6) month period immediately prior to the Maturity Date. Notwithstanding the foregoing: if following the occurrence of any Event of Default, Maker shall tender payment of an amount sufficient to satisfy the Debt at any time prior to a foreclosure sale of the Mortgaged Property (as defined in the Mortgage), and if at the time of such tender prepayment of the Debt is not permitted, Maker shall, in addition to the entire Debt, also pay to Payee a sum equal to (a) all interest which would have accrued on the outstanding principal balance of this Note at the Applicable Interest Rate from the date of such tender to January 1, 2000 and (b) the Premium which would have been payable as of January 1, 2000. E. DEFAULT INTEREST Maker does hereby agree that upon the occurrence of an Event of Default or upon the failure of Maker to pay the Debt in full on the Maturity Date, Payee shall be entitled to receive and Maker shall pay interest ("Default Interest") on the entire unpaid principal sum at the rate of (i) four percent (4%) over the Applicable Interest Rate then in effect or (ii) the maximum rate of interest which Maker may by law pay, whichever is lower, to be computed from the occurrence of the Event of Default until the actual receipt and collection of the Debt (the "Default Interest Rate"). This charge shall be added to the Debt, and shall be deemed secured by the Mortgage. 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 Payee by reason of the occurrence of any Event of Default. F. SECURITY This Note is secured by the Mortgage and the Other Security Documents. The term "Mortgage" as used in this Note shall mean the First Mortgage and Security Agreement dated as of the date hereof in the principal sum of $_____________ given by Maker to Payee encumbering the fee estate of Maker in certain premises located in _______ County, State of _______, and other property, as more particularly described therein 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 Mortgage now or hereafter executed by Maker and/or others and by or in favor of Payee, which wholly or partially secure or guarantee payment of this Note. Whenever used, the singular number shall include the plural, the plural the singular, and the words "Payee" and "Maker" shall include their respective successors, assigns, heirs, executors and administrators. G. SAVINGS CLAUSE This Note is subject to the express condition that at no time shall Maker be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject Payee to either civil or criminal liability as a result of being in excess of the maximum interest rate which Maker is permitted by applicable law to contract or agree to pay. If by the terms of this Note, Maker 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 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. H. LATE CHARGE If any sum payable under this Note is not paid on or before the date on which it is due, without taking into account any applicable notice or grace period, Maker shall pay to Payee upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by applicable law to defray the expenses incurred by Payee in handling and processing such delinquent payment and to compensate Payee for the loss of the use of such delinquent payment and such amount shall be secured by the Mortgage and the Other Security Documents. Nothing contained herein is intended to affect the rights of Payee in and to any Default Interest due to Payee pursuant to the provisions of paragraph E hereof entitled "Default Interest." I. MISCELLANEOUS This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Maker or Payee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. If Maker consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several. The foregoing sentence, however, is not intended to affect the limited liability of any limited partner or stockholder of Maker afforded by applicable partnership or corporate law. Maker and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, protest and notice of protest and non-payment. 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 Mortgage or the Other Security Documents made by agreement between Payee and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Maker, and any other who may become liable for the payment of all or any part of the Debt, under this Note, the Mortgage or the Other Security Documents. Maker (and the undersigned representative of Maker, if any) represents that Maker has full power, authority and legal right to execute and deliver this Note, the Mortgage and the Other Security Documents and that this Note, the Mortgage and the Other Security Documents constitute valid and binding obligations of Maker. This Note shall be governed and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America. J. EXCULPATION Payee shall not enforce the liability and obligation of Maker to perform and observe the obligations contained in this Note or the Mortgage by any action or proceeding wherein a money judgment shall be sought against Maker or any general or limited partner of Maker (hereinafter collectively referred to as the "Exculpated Parties"), except that Payee may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Payee to enforce and realize upon this Note, the Mortgage, the Other Security Documents, and the interest in the Mortgaged Property, the Rents (as defined in the Mortgage) and any other collateral given to Payee created by this Note, the Mortgage and the Other Security Documents; provided, however, that any judgment in any such action or proceeding shall be enforceable against the Exculpated Parties only to the extent of Maker's interest in the Mortgaged Property, in the Rents and in any other collateral given to Payee. Payee, by accepting this Note and the Mortgage, agrees that it shall not sue for, seek or demand any deficiency judgment against the Exculpated Parties in any such action or proceeding, under or by reason of or under or in connection with the Mortgage, the Other Security Documents or this Note. The provisions of this paragraph shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by the Mortgage, the Other Security Documents or this Note; (ii) impair the right of Payee to name Maker as a party defendant in any action or suit for judicial foreclosure and sale under the Mortgage; (iii) affect the validity or enforceability of any guaranty made in connection with the Mortgage, this Note, or the Other Security Documents; (iv) impair the right of Payee to obtain the appointment of a receiver; (v) impair the enforcement of the First Assignment of Leases and Rents dated the date hereof given by Maker to Payee executed in connection herewith; (vi) impair the right of Payee to bring suit with respect to fraud or intentional misrepresentation by Maker, the Exculpated Parties or any other person or entity in connection with the Mortgage, this Note or the Other Security Documents; (vii) impair the right of Payee to obtain the Rents received by any of the Exculpated Parties after the occurrence of an Event of Default; (viii) impair the right of Payee to bring suit with respect to the Exculpated Parties' misappropriation of tenant security deposits or Rents collected in advance; (ix) impair the right of Payee to obtain insurance proceeds or condemnation awards due to Payee under the Mortgage; (x) impair the right of Payee to enforce the provisions of sub-paragraphs 36(g) through 36(j), inclusive and paragraphs 34 and 35 of the Mortgage against the Maker (excluding the general and limited partners of Maker); or (xi) impair the right of Payee to recover any part of the Debt from the Maker (excluding the general and limited partners of Maker) following the breach of any covenant contained in paragraphs 9 or 56 of the Mortgage. K. [LOCAL LAW PROVISIONS] 1. In the event of any inconsistencies between this paragraph K and any other provisions of this Note, the terms and conditions of this paragraph K shall control and be binding. [ADD LOCAL PROVISIONS, IF ANY] [NO FURTHER TEXT ON THIS PAGE] IN WITNESS WHEREOF, Maker has duly executed this Note the day and year first above written. Witnesses: _______________________________ ________________, a _______ limited partnership ______________________ By: ___________________________, Name: ___________________________ a ___________ corporation, its general partner ______________________ By:_______________________, Name: Name: Title: This instrument prepared by: Jeffrey J. Temple, Esq. White & Case 1155 Avenue of the Americas New York, New York 10036 EX-10.2 3 FORM OF FIRST MORTGAGE AND SECURITY AGREEMENT DATED AS OF DECEMBER 29, 1995 ______________________________________, a ________ limited partnership (Mortgagor) to SECORE FINANCIAL CORPORATION, a ____________ corporation (Mortgagee) ______________________ FIRST MORTGAGE AND SECURITY AGREEMENT ______________________ Dated: As of December __, 1995 Location: County: PREPARED BY AND UPON RECORDATION RETURN TO: White & Case 1155 Avenue of the Americas New York, New York 10036 Attention: Jeffrey J. Temple, Esq. THIS FIRST MORTGAGE AND SECURITY AGREEMENT (the "Mortgage"), is made as of the ____ day of December, 1995, by ______________________________________________________, a _______ limited partnership having its principal place of business at ________________________________________________ _________________________________________________, as mortgagor ("Mortgagor"), and SECORE FINANCIAL CORPORATION, a ________ corporation, having its principal place of business at ____ __________________________________________________, as mortgagee ("Mortgagee"). W I T N E S S E T H: To secure the payment of an indebtedness in the principal sum of _________________________________ AND 00/100 DOLLARS ($_____________), lawful money of the United States of America, to be paid with interest according to a certain note dated the date hereof made by Mortgagor to Mortgagee (the note, together with all extensions, renewals or modifications thereof being hereinafter collectively called the "Note") (said indebtedness, interest and all other amounts evidenced and/or secured by the Note, this Mortgage and the Other Security Documents being collectively called the "Debt"), Mortgagor has mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged, assigned, set over and hypothecated and by these presents does mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign, set over and hypothecate unto Mortgagee, its successors and assigns, the real property described in Exhibit A attached hereto (the "Premises") and the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located thereon (the "Improvements"); TOGETHER WITH: all right, title, interest and estate of Mortgagor now owned, or hereafter acquired, in and to the following property, rights, interests and estates (the Premises, the Improvements together with the following property, rights, interests and estates being hereinafter collectively referred to as the "Mortgaged Property"): (a) all easements, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, and rights and development rights, and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises and the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises, to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both at law and in equity, of Mortgagor of, in and to the Premises and the Improvements and every part and parcel thereof, with the appurtenances thereto; (b) 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 Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, and usable in connection with the present or future management, maintenance, operation and occupancy of the Premises and the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises and the Improvements, or appurtenant thereto, or usable in connection with the present or future management, maintenance, operation and occupancy of the Premises and the Improvements (hereinafter collectively called the "Equipment"), and the right, title and interest of Mortgagor in and to any of the Equipment 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 Mortgaged Property is located (the "Uniform Commercial Code"), superior in lien to the lien of this Mortgage; (c) all awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Mortgaged 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 said right), or for a change of grade, or for any other injury to or decrease in the value of the Mortgaged Property; (d) all written leases and other rental agreements (collectively, the "Written Leases"), affecting the use, enjoyment or occupancy of the Premises and the Improvements heretofore or hereafter entered into (the Written Leases and all other similar agreements hereinafter collectively referred to as the "Leases") and all rents, revenues, issues and profits (including all oil and gas or other mineral royalties and bonuses) from the Premises and the Improvements (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; (e) all proceeds of and any unearned premiums on any insurance policies covering the Mortgaged Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Mortgaged Property; (f) the right, in the name and on behalf of Mortgagor, to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to commence any action or proceeding to protect the interest of Mortgagee in the Mortgaged Property; (g) all right, title and interest of Mortgagor arising from the operation of the Property in and to all payments for goods or property sold or leased or for services rendered, whether or not yet earned by performance, and not evidenced by an instrument or chattel paper (hereinafter referred to as "Accounts Receivable"), including, without limiting the generality of the foregoing, all rights to payment from any consumer credit/charge card organization or entity (such as, or similar to, the organizations or entities which sponsor and administer the American Express Card, the Visa Card, the Mastercard, the Carte Blanche Card, or the Discover Card). Accounts Receivable shall include those now existing or hereafter created, substitutions therefor, proceeds (whether cash or noncash, movable or immovable, tangible or intangible) received upon the sale, exchange, transfer, collection or other disposition or substitution thereof and any and all of the foregoing and proceeds therefrom; (h) all contract rights, with respect to, or which may in any way pertain to, the Premises or the business of the Mortgagor, including, without limitation, all refunds, rebates, security deposits, or other expectancy under or from any such account or contract right; (i) all general intangibles with respect to, or which may in any way pertain to, the Premises or the business of the Mortgagor, including, without limitation, any trade names, or other names under or by which the Premises may at any time be operated or known, the good will of the Mortgagor in connection therewith and the right of the Mortgagor to carry on business under any or all such name or names and any variant or variants thereof, insofar as the same may be transferable by the Mortgagor without breach of any agreement pursuant to which the Mortgagor may have obtained its right to use such name or names, and any and all trademarks, prints, labels, advertising concepts and literature; TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto and to the use and benefit of Mortgagee, and the successors and assigns of Mortgagee, forever; PROVIDED, HOWEVER, these presents are upon the express condition that, if Mortgagor shall well and truly pay to Mortgagee the Debt at the time and in the manner provided in the Note and this Mortgage and shall well and truly abide by and comply with each and every covenant and condition set forth herein and in the Note, these presents and the estate hereby granted shall cease, terminate and be void; AND Mortgagor represents and warrants to and covenants and agrees with Mortgagee as follows: PART I PROVISIONS OF GENERAL APPLICATION 1. Payment of Debt and Incorporation of Covenants, Conditions and Agreements. Mortgagor will pay the Debt at the time and in the manner provided in the Note and in this Mortgage. All the covenants, conditions and agreements contained in (a) the Note and (b) all and any of the documents other than the Note or this Mortgage now or hereafter executed by Mortgagor and/or others and by or in favor of Mortgagee, which wholly or partially secure or guaranty payment of the Note including but not limited to the First Assignment of Leases and Rents (the "Assignment of Rents") between Mortgagor, as assignor and Mortgagee, as assignee (collectively, the "Other Security Documents"), are hereby made a part of this Mortgage to the same extent and with the same force as if fully set forth herein. 2. Warranty of Title. Mortgagor warrants that Mortgagor has good title to the Mortgaged Property and has the right to mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign and hypothecate and grant a security interest in the same and that Mortgagor possesses an unencumbered fee estate in the Premises and the Improvements and that it owns the Mortgaged Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of this Mortgage. Mortgagor shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Mortgage and shall forever warrant and defend the same to Mortgagee against the claims of all persons whomsoever. 3. Insurance. (a) Mortgagor will keep the Mortgaged Property insured against loss or damage by fire, flood and such other hazards, risks and matters, as Mortgagee may from time to time require, including, without limitation, rental value insurance against the abatement in rent or business interruption insurance for at least twelve (12) months, general public liability in an amount not less than $1,000,000.00, including excess liability coverage and umbrella liability insurance, boiler and machinery insurance, and earthquake and/or hurricane insurance. Mortgagor shall pay the premiums for such insurance (the "Insurance Premiums") as the same become due and payable. All policies of insurance (the "Policies") shall (i) be issued under forms acceptable to Mortgagee (containing the standard New York mortgagee non-contribution clause naming the Mortgagee as the insured mortgagee and the person to which all payments made by the Qualified Insurer (hereinafter defined) shall be paid); (ii) provide for at least thirty (30) days prior written notice to the Mortgagee of any cancellation, reduction in an amount or change in insurance coverage; (iii) contain a replacement cost endorsement for 100% of all replacement costs relating to the Improvements (without deduction for depreciation); (iv) contain an "enforcement" or "Law and Ordinance" endorsement in form and substance satisfactory to Mortgagee; and (v) be issued by insurers qualified under the laws of the State in which the Mortgaged Property is located, duly authorized and licensed to transact insurance business in such State and reflecting a claims- paying ability of A or better as determined by Standard & Poors' Corporation ("S&P"), Duff and Phelps Credit Rating Co. ("Duff"), if rated by Duff, Fitch Investors Service, Inc. ("Fitch"), if rated by Fitch, and a claims paying ability of A2 as determined by Moody's Investors Service, Inc. ("Moody's"), if rated by Moody's (each such insurer hereinafter referred to as a "Qualified Insurer", collectively "Qualified Insurers"). Such insurance shall not be invalidated due to the use or occupancy of the Property for purposes more hazardous than are permitted by the policy. The maximum amount deductible permitted under each insurance policy shall be such as is customarily carried by owners or managing agents operating first class multi-family residences of similar type and size of the Mortgaged Property. Mortgagor shall deliver the Policies, or duplicate originals of the same, to Mortgagee. Not later than sixty (60) days prior to the expiration date of each of the Policies, Mortgagor will deliver evidence satisfactory to Mortgagee of the renewal of each of the Policies. The Mortgagor shall not insure the Mortgaged Property under any insurance policy other than as expressly set forth herein. (a) If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other casualty, Mortgagor shall give prompt notice thereof to Mortgagee. The net amount of all insurance proceeds received by Mortgagee with respect to such damage or destruction, shall be held in a segregated account (the "Net Proceeds Account") and invested in an Eligible Investment (hereinafter defined). Mortgagee shall be entitled to deduct from such insurance proceeds all of its administrative costs and expenses reasonably incurred in connection with the investing and collection of such insurance proceeds, and the balance if any (the "Net Proceeds") shall be disbursed by Mortgagee in accordance with the terms and conditions set forth herein to pay for the costs and expenses of the Restoration (hereinafter defined) provided (i) no Event of Default has occurred and remains uncured under this Mortgage, the Note or any of the Other Security Documents, (ii) Mortgagor proceeds promptly after the insurance claims are settled with the restoration, replacement, rebuilding or repair of the Mortgaged Property as nearly as possible to the condition the Mortgaged Property was in immediately prior to such fire or other casualty (the "Restoration"), (iii) the Restoration shall be done in compliance with all applicable laws, rules and regulations, and, following the Restoration, the Mortgaged Property shall be permitted under all applicable zoning laws to be used for, and shall continue to be used for, all purposes associated with multi-family residences, (iv) a set of the plans and specifications in connection with the Restoration shall be submitted to Mortgagee and shall be acceptable to Mortgagee in all respects, (v) all costs and expenses incurred by Mortgagee in connection with making the Net Proceeds available for the Restoration of the Mortgaged Property including, without limitation, counsel fees and inspecting engineer fees incurred by Mortgagee, shall be paid by Mortgagor, (vi) rental loss insurance is available to offset fully any abatement of rent to which any tenant of the Mortgaged Property may be entitled or any rent loss arising out of the cancellation of any Lease as a result of the casualty, throughout the Restoration and a reasonable-lease- up period following the Restoration, and (vii) in Mortgagee's judgment, the Restoration must be able to be completed within one (1) year after the loss and at least one (1) year prior to the Maturity Date of the Note. The term "Eligible Investment" shall mean any investment approved by Mortgagee in its sole discretion. (b) The Net Proceeds shall be held in trust in the Net Proceeds Account. The Net Proceeds shall be paid by Mortgagee (or by a disbursing agent ("Depository") selected by Mortgagee), to, or as directed by, Mortgagor from time to time during the course of the Restoration, upon receipt of evidence, and certification from Mortgagor, satisfactory to Mortgagee, that (i) all materials installed and work and labor performed (except to the extent they are to be paid for out of the requested payment) in connection with the Restoration have been paid for in full, (ii) no notices of intention, mechanics' or other liens or encumbrances on the Mortgaged Property arising out of the Restoration exist, and (iii) the balance of the Net Proceeds plus the balance of any deficiency deposits given by Mortgagor to Mortgagee or Depository pursuant to the provisions of this paragraph hereinafter set forth shall be sufficient to pay in full the balance of the cost of the Restoration. Mortgagor shall pay all fees and expenses of the Depository in connection with the above. (c) Notwithstanding anything to the contrary contained herein, if the Net Proceeds shall be less than $50,000.00, only one disbursement shall be required upon the completion of the Restoration to the satisfaction of Mortgagee. If the Net Proceeds shall be $50,000.00 or more, Mortgagee shall disburse the Net Proceeds as provided above, however, in no event shall Mortgagee be required to disburse such Net Proceeds, or any portion thereof, more often than once every thirty (30) days. If at any time the Net Proceeds, or the undisbursed balance thereof, shall not be sufficient to pay in full the balance of the cost of the Restoration, Mortgagor shall deposit the deficiency with Mortgagee or Depositary before any further disbursement of the Net Proceeds shall be made. (d) Any amount of the Net Proceeds received by Mortgagee and not required to be disbursed for the Restoration pursuant to the provisions of this paragraph hereinabove set forth shall be retained and applied by Mortgagee toward the payment of the Debt whether or not then due and payable in such priority and proportions as Mortgagee in its discretion shall deem proper. Upon the receipt and retention by Mortgagee of such insurance proceeds, the lien of this Mortgage shall be reduced only by the amount thereof received and retained by Mortgagee and actually applied by Mortgagee in reduction of the Debt. (e) Notwithstanding anything to the contrary contained herein, Mortgagee shall not be obligated to make the Net Proceeds available for Restoration of the Mortgaged Property unless the principal balance of the Note following the completion of the Restoration (assuming the amount of Net Proceeds received by Mortgagee in excess of the cost of the Restoration (as estimated by Mortgagee) is applied to the prepayment of the Note) will be in an amount sufficient to cause (i) the Debt Service Coverage Ratio (hereinafter defined) applicable to the Mortgaged Property immediately following the Restoration to be not less than 1.3 to 1.0 and (ii) in the event of any Restoration involving Net Proceeds of more than $250,000.00, the ratio of (a) the appraised value of the Mortgaged Property after completion of the Restoration (as determined by an independent third-party appraiser holding an MAI designation and having a national practice and at least ten (10) years real estate experience appraising properties of a similar nature and type as the Mortgaged Property) to (b) the then outstanding principal balance of the Note to be equal to or greater than the Minimum Loan to Value Ratio (hereinafter defined). The term "Minimum Loan to Value Ratio" means a ratio equal to the lesser of (i) 1.33 to 1.0 or (ii) the ratio of (a) the appraised value of the Mortgaged Property on the date hereof to (b) the then outstanding principal balance of the Note. The fee for such appraisal shall be paid for by the Mortgagor. 4. Payment of Taxes, etc. Mortgagor shall pay all taxes, assessments, water rates and sewer rents, now or hereafter levied or assessed or imposed against the Mortgaged Property or any part thereof (the "Taxes") and all ground rents, maintenance charges, other governmental impositions, and other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Premises, now or hereafter levied or assessed or imposed against the Mortgaged Property or any part thereof (the "Other Charges") as same become due and payable. Upon written request from Mortgagee, Mortgagor will deliver to Mortgagee evidence satisfactory to Mortgagee that the Taxes and Other Charges have been so paid or are not then delinquent. Mortgagor shall not suffer and shall promptly cause to be paid and discharged any lien or charge whatsoever which may be or become a lien or charge against the Mortgaged Property, and shall promptly pay for all utility services provided to the Mortgaged Property. Mortgagor shall furnish to Mortgagee receipts for the payment of the Taxes, Other Charges and said utility services prior to the date the same shall become delinquent. Notwithstanding the above, after prior written notice to Mortgagee, Mortgagor, 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 under the Note or this Mortgage shall have occurred and be continuing, (ii) such proceeding shall suspend the collection of the Taxes from Mortgagor and from the Mortgaged Property, (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Mortgagor is subject and shall not constitute a default thereunder, (iv) neither the Mortgaged Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, (v) Mortgagor shall have set aside adequate reserves for the payment of the Taxes, together with all interest and penalties thereon, and (vi) Mortgagor shall have furnished such security as may be reasonably required in the proceeding, or as may be requested by Mortgagee to insure the payment of any such Taxes, together with all interest and penalties thereon. 1. Escrow Fund. Mortgagor will comply with any requirement imposed by any Rating Agency (as hereinafter defined) as a condition of its initial rating, the Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"), with respect to the establishment of an escrow for Taxes and Insurance. 2. Condemnation. (a) Mortgagor shall give Mortgagee prompt notice of the actual or threatened commencement of any condemnation or eminent domain proceeding and shall deliver to Mortgagee copies of any and all papers served in connection with such proceedings. If less than 25% of the land constituting the Mortgaged Property is taken, then the net amount of all awards and payments received by Mortgagee with respect to such taking shall be held in a segregated account (the "Net Awards Account") and invested in an Eligible Investment. Mortgagee shall be entitled to deduct from the condemnation award all of its administrative costs and expenses incurred in connection with investing and collecting such condemnation award and the balance, if any (hereinafter referred to as the "Net Award"), will be disbursed by Mortgagee to pay for the costs and expenses of the Condemnation Restoration (hereinafter defined), provided (i) Mortgagor is not in default under this Mortgage, the Note or any of the Other Security Documents, (ii) Mortgagor proceeds promptly after the making of any award of payment for such taking with the restoration, replacement, rebuilding or repair of the Mortgaged Property as nearly as possible to the condition the Mortgaged Property was in immediately prior to such taking (the "Condemnation Restoration"), (iii) the Condemnation Restoration shall be done in compliance with all applicable laws, rules and regulations, and, following the Condemnation Restoration, the Mortgaged Property shall be permitted under all applicable zoning laws to be used for, and shall continue to be used for, all purposes associated with multi-family residences, (iv) a set of plans and specifications in connection with the Condemnation Restoration shall be submitted to Mortgagee and shall be satisfactory to Mortgagee in all respects, (v) Mortgagor shall have reimbursed Mortgagee for all costs and expenses incurred by Mortgagee in connection with making the Net Award available for the Condemnation Restoration of the Mortgaged Property, including, without limitation, counsel fees, inspecting engineer fees and appraisal fees incurred by Mortgagee, (vi) rental loss proceeds are available to offset in full any loss in rents throughout the Condemnation Restoration and a reasonable lease-up period following the completion of the Condemnation Restoration and (vii) in the opinion of Mortgagee the Condemnation Restoration of the Mortgaged Property can be completed within one (1) year after the taking and at least one (1) year prior to the maturity date of the Note. (a) The Net Award shall be held in trust by Mortgagee in the Net Awards Account and shall be paid by Mortgagee or a Depository designated by Mortgagee to, or as directed by, Mortgagor from time to time during the course of the Condemnation Restoration, upon receipt of evidence satisfactory to Mortgagee, that (i) all materials installed and work and labor performed (except to the extent they are to be paid for out of the requested payment) in connection with the Condemnation Restoration have been paid for in full, (ii) there exist no notices of intention, mechanics' or other liens or encumbrances on the Mortgaged Property arising out of the Condemnation Restoration, and (iii) the balance of the Net Award plus the balance of any deficiency deposits given by Mortgagor to Mortgagee or Depositary pursuant to the provisions of this paragraph hereinafter set forth shall be sufficient to pay in full the balance of the cost of the Condemnation Restoration. (b) Notwithstanding anything to the contrary contained herein, Mortgagee shall not be obligated to make the Net Award available for the Condemnation Restoration of the Mortgaged Property unless the principal balance of the Note after the completion of the Condemnation Restoration (assuming the amount of the Net Award received by Mortgagee in excess of the cost of the Condemnation Restoration as estimated by Mortgagee is applied to the prepayment of the Note) will be sufficient to cause (i) the Debt Service Coverage Ratio applicable to the Mortgaged Property immediately following the Condemnation Restoration to be not less than 1.3 to 1.0 and (ii) in the event of any Condemnation Restoration involving Net Award of more than $250,000.00, the ratio of (a) the appraised value of the Mortgaged Property after completion of the Condemnation Restoration (as determined by an independent third-party appraiser holding an MAI designation and having a national practice and at least ten (10) years real estate experience appraising properties of a similar nature and type as the Mortgaged Property) to (b) the then outstanding principal balance of the Note to be equal to or greater than the Minimum Loan to Value Ratio. (c) Notwithstanding anything to the contrary contained herein, if the Net Award shall be less than $50,000.00, only one such disbursement shall be required upon the completion of the Condemnation Restoration to the satisfaction of Mortgagee. If the Net Award shall be $50,000.00 or more, Mortgagee shall disburse the Net Award as provided above, however, in no event shall Mortgagee be required to disburse such Net Award, or any portion thereof, more often than once every thirty (30) days. If at any time the Net Award, or the undisbursed balance thereof, shall not in the opinion of Mortgagee be sufficient to pay in full the balance of the cost of Condemnation Restoration, Mortgagor shall deposit such deficiency with Mortgagee or Depository before any further disbursement of the Net Award shall be made. (d) Notwithstanding anything to the contrary contained herein, and 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), Mortgagor shall continue to pay the Debt at the time and in the manner provided for in the Note and in this Mortgage and the Debt shall not be reduced until any award or payment therefor shall have been actually received and applied in accordance with this paragraph 6. Mortgagee 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 and in the Note. (e) Any amount of the Net Award received by Mortgagee and not required to be disbursed for the Condemnation Restoration pursuant to the provisions of this paragraph hereinabove set forth may be retained and applied by Mortgagee to the discharge of the Debt, whether or not then due and payable, in such priority and proportions as Mortgagee in its discretion shall deem proper. If the Mortgaged Property is sold through foreclosure or otherwise prior to the receipt by Mortgagee of such award or payment, Mortgagee shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive such award or payment or a portion thereof sufficient to pay the Debt, whichever is less. Mortgagor shall file and prosecute its claim or claims for any such award or payment in good faith and with due diligence and cause the same to be collected and paid over to Mortgagee, and Mortgagor hereby irrevocably authorizes and empowers Mortgagee, in the name of Mortgagor or otherwise, to collect and receipt for any such award or payment and to file and prosecute such claim or claims, and although it is hereby expressly agreed that the same shall not be necessary in any event, Mortgagor shall upon demand of Mortgagee make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or payment to Mortgagee, free and clear of any encumbrances of any kind or nature whatsoever. 3. Leases and Rents. (a) Mortgagee is hereby granted and assigned by Mortgagor the right to enter the Mortgaged Property for the purpose of enforcing its interest in the Leases and the Rents, this Mortgage constituting a present, absolute assignment of the Leases and the Rents. Nevertheless, subject to the terms of this paragraph 7, Mortgagee grants to Mortgagor a revocable license to operate and manage the Mortgaged Property and to collect the Rents. Mortgagor shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums. Upon or at any time after an Event of Default, the license granted to Mortgagor herein may be revoked by Mortgagee, and Mortgagee may enter upon the Mortgaged Property, and collect, retain and apply the Rents toward payment of the Debt in such priority and proportions as Mortgagee in its discretion shall deem proper. (a) All Written Leases shall be written on the standard form of lease which has been approved by Mortgagee. Upon written request from Mortgagee, Mortgagor shall furnish Mortgagee with executed copies of all Leases and all modifications thereto as soon as may be practicable. No material changes may be made to the Mortgagee-approved standard forms except as may be required by applicable law. In addition, all renewals of Leases and all proposed leases shall provide for rental rates comparable to existing local market rates and shall be arms-length transactions. Mortgagor shall not enter into any lease having a term of more than three (3) years. All Leases must be Written Leases unless such Leases create periodic tenancies on a month to month basis or for a shorter period and are terminable upon not more than thirty (30) days' notice. [All Leases shall provide that they are subordinate to this Mortgage and that the lessee agrees to attorn to Mortgagee.] Mortgagor (i) shall observe and perform all the obligations imposed upon the lessor under the Leases and shall not do or permit to be done anything to impair the value of the Leases as security for the Debt; (ii) shall enforce all of the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed; (iii) shall not collect any of the Rents more than one (1) month in advance; (iv) shall not execute any other assignment of lessor's interest in the Leases or the Rents; (v) shall not materially alter, modify or change the terms of the Leases, or cancel or terminate the Leases or accept a surrender thereof or convey or transfer or suffer or permit a conveyance or transfer of the Premises or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder, except that Mortgagor may terminate any Lease in exercising its rights as landlord thereunder upon a default by the tenant under said Lease; (vi) shall not alter, modify or change the terms of any guaranty of the Leases or cancel or terminate such guaranty; (vii) shall not consent to any assignment of or subletting under the Leases not in accordance with their terms; and (viii) shall execute and deliver all such further assurances, confirmations and assignments in connection with the Mortgaged Property as Mortgagee shall from time to time require. 4. Maintenance of Mortgaged Property. (a) Mortgagor shall cause the Mortgaged Property to be maintained in a good and safe condition and repair. The Improvements and the Equipment shall not be removed, demolished or materially altered (except for normal replacement of the Equipment). Mortgagor shall promptly comply with all laws, orders and ordinances affecting the Mortgaged Property, or the use thereof. Mortgagor shall promptly repair, replace or rebuild any part of the Mortgaged Property 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 paragraph 6 hereof and shall complete and pay for any structure at any time in the process of construction or repair on the Premises. Mortgagor shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or otherwise changing the uses which may be made of the Mortgaged Property or any part thereof. If under applicable zoning provisions the use of all or any portion of the Mortgaged Property is or shall become a nonconforming use, Mortgagor will not cause or permit such nonconforming use to be discontinued or abandoned without the express written consent of Mortgagee. (a) Mortgagor hereby represents that all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and with respect to the use and occupancy of the same, including but not limited to, certificates of occupancy and fire underwriter certificates, have been made by or obtained from the appropriate governmental authorities. Mortgagor hereby represents, warrants and covenants that it has obtained and will maintain all permits and licenses required to operate the Mortgaged Property as a multi-family residential development. Mortgagor has and shall continue to comply in all material respects with and make all payments required under all laws, ordinances, regulations, covenants, conditions and restrictions now or hereafter affecting the Mortgaged Property or any part thereof or the business or the activity conducted thereon. Mortgagor will not commit, suffer, permit or allow any act to be done in or upon the Mortgaged Property in violation of any law, ordinance or regulation. Mortgagor is in material compliance and shall continue to comply in all material respects with all existing and future requirements of all governmental authorities having jurisdiction over the Mortgaged Property. 5. Transfer or Encumbrance of the Mortgaged Property. (a) Mortgagor acknowledges that Mortgagee has examined and relied on the creditworthiness of Mortgagor and the experience of Mortgagor in owning properties such as the Mortgaged Property in agreeing to make the loan secured hereby, and that Mortgagee will continue to rely on Mortgagor's ownership of the Mortgaged Property as a means of maintaining the value of the Mortgaged Property as security for repayment of the Debt. Mortgagor acknowledges that Mortgagee has a valid interest in maintaining the value of the Mortgaged Property so as to ensure that, should Mortgagor default in the repayment of the Debt, Mortgagee can recover the Debt by a sale of the Mortgaged Property. Except as otherwise provided in subparagraph 9(c) hereof, Mortgagor shall not sell, convey, alien, mortgage, encumber, pledge or otherwise transfer the Mortgaged Property or any part thereof, or permit the Mortgaged Property or any part thereof to be sold, conveyed, aliened, mortgaged, encumbered, pledged or otherwise transferred. (a) A sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer within the meaning of this paragraph 9 shall be deemed to include (i) an installment sales agreement wherein Mortgagor agrees to sell the Mortgaged Property or any part thereof for a price to be paid in installments; (ii) an agreement by Mortgagor leasing all or a substantial part of the Mortgaged Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Mortgagor's right, title and interest in and to any Leases or any Rents; (iii) if Mortgagor or any general partner of Mortgagor is a corporation, the voluntary or involuntary sale, conveyance or transfer of such corporation's stock or the creation or issuance of new stock by which an aggregate of more than 49% of such corporation's stock shall be vested in a party or parties who are not now stockholders, except for any sale, conveyance or transfer of such corporation's stock to an Affiliate provided Mortgagee shall have received prior written notice of such transfer; (iv) if Mortgagor or any general partner of Mortgagor is a limited or general partnership or joint venture, the change, removal or resignation of a general partner or managing partner or the transfer of the partnership interest of any general partner or managing partner, except for any transfer of such partnership interest to an Affiliate, and excluding the removal or resignation of any non-Affiliate or non- managing general partner where the managing general partner shall remain following such removal or resignation, provided, in either case, Mortgagee shall have received prior written notice of such transfer resignation or removal; (v) any transfer of any interest by the Manager (hereinafter defined) other than as permitted under paragraph 54; and (vi) any transfer of the beneficial interest of any Mortgagor in any trust holding legal title to the Mortgaged Property. (b) Notwithstanding anything to the contrary contained herein: (i) Upon sixty (60) days prior written notice to Mortgagee, Mortgagor shall have the limited right to transfer legal title to the Mortgaged Property to a Single Purpose Entity Transferee (hereinafter defined) provided (a) such Single Purpose Entity Transferee assumes all of the obligations of the Mortgagor under this Mortgage, the Note and the Other Security Documents in a manner satisfactory to Mortgagee in all respects, including, without limitation, by entering into an assumption agreement with Mortgagor and Mortgagee in form and substance reasonably satisfactory to Mortgagee (an "Assumption Agreement"), (b) the Single Purpose Entity Transferee shall have been newly formed exclusively and solely for the purpose of owning and operating the Mortgaged Property and shall have been engaged in no other business activities prior to the transfer of title to such Single Purpose Entity Transferee and must be a "United States person" as defined by Section 7701(a)(30) of the United States Internal Revenue Code of 1986, as amended, (c) the Single Purpose Entity Transferee or the management agent it employs to manage the Mortgaged Property shall have Adequate Real Estate Experience (hereinafter defined), (d) the Single Purpose Entity Transferee shall deliver to Mortgagee evidence of the fulfillment of the requirements of subsection (b) above, (e) the Single Purpose Entity Transferee shall deliver any and all organizational documentation requested by Mortgagee, which documentation shall be reasonably satisfactory to Mortgagee in all respects, and shall deliver an opinion of counsel of the Single Purpose Entity Transferee covering the Assumption Agreement in form and substance similar to the due execution, delivery and enforcement opinions delivered by counsel to Mortgagor in connection with the execution of this Mortgage, (f) the Single Purpose Entity Transferee shall deliver any certificates and opinions of counsel, enter into agreements and covenants, or cause each of its general partners (or any other principal thereof) to deliver certificates, enter into agreements and covenants, which certificates, agreements, opinions of counsel and covenants shall be similar in nature to those delivered, executed and made by Mortgagor or any general partner of Mortgagor in connection with the execution of this Mortgage or the Securitization (hereinafter defined) relating to the single purpose nature of the Single Purpose Entity Transferee or otherwise, and (g) Mortgagor shall deliver, at its sole cost and expense, an endorsement to the existing title policy insuring the Mortgage as modified by the Assumption Agreement as a valid first lien on the Mortgaged Property, naming the Single Purpose Entity Transferee as owner of the fee estate of the Mortgaged Property, which endorsement shall insure that, as of the date of the recording of the Assumption Agreement, the Mortgaged Property shall not be subject to any additional exceptions or liens other than those contained in the original title policy insuring the lien of this Mortgage and delivered in connection with the execution of this Mortgage. Any and all costs incurred in connection with the above (including Mortgagee's counsel's fees and disbursements and expenses and all recording fees, mortgage or intangible taxes, and title insurance premiums), shall be paid by Mortgagor. Mortgagee shall respond to Mortgagor's request to transfer legal title to the Mortgaged Property within forty-five (45) days of delivery of all of the information required by subsections (a)-(g) above. The failure of Mortgagee to respond to such request shall not be deemed consent to the transfer. For purposes of this Mortgage, the term "Adequate Real Estate Experience" shall mean an entity which manages first class multi-family residential complexes of a type and size similar to the Mortgaged Property, and which manages in the aggregate no less than 1,000 residential units at the time of such transfer. For purposes of this Mortgage, the term "Single Purpose Entity Transferee" shall mean an entity that: A. shall not own any asset other than the Mortgaged Property; B. shall not engage in any business other than those necessary for the ownership, management or operation of the Mortgaged Property and any such business transactions with any general partner, principal or Affiliate of the Single Purpose Entity Transferee or any affiliate of the general partner of the Single Purpose Entity Transferee shall be entered into 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 an Affiliate of the Single Purpose Entity Transferee or the general partner or an Affiliate of the general partner of the Single Purpose Entity Transferee; C. shall not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Debt; D. shall not make any loans or advances to any third party (including any Affiliates of such Single Purpose Entity Transferee or the general partner or an Affiliate of the general partner of such Single Purpose Entity Transferee); E. shall be solvent and pay its debts from its assets as the same become due; F. shall do or cause to be done all things necessary to preserve its existence, and shall not amend, modify or otherwise change its partnership certificate, partnership agreement, articles of incorporation or by- laws in a manner which adversely affects such Single Purpose Entity Transferee's existence as a single purpose entity; G. shall maintain books and records and bank accounts separate from those of its Affiliates, including its general partners; H. shall be, and at all times shall hold itself out to the public as, a legal entity separate and distinct from any other entity (including any affiliate thereof, including the general partner or any affiliate of the general partner of such Single Purpose Entity Transferee); I. shall file its own tax returns; J. shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations; K. shall not seek the dissolution or winding up, in whole or in part, of the Single Purpose Entity Transferee or voluntarily file, or consent to the filing of, a petition for bankruptcy, reorganization, assignment for the benefit of creditors or similar proceeding; L. shall not commingle its funds or other assets with any other person or entity, and M. shall have at least one member of its board of directors (if a corporation) that is not affiliated with or employed by National Property Investors, Inc. or any of its Affiliates. For purposes of this Mortgage, the term "Affiliate" shall mean a corporation or other entity which shall (i) control, (ii) be controlled by, or (iii) be under common control with either Mortgagor, any general partner of Mortgagor, or National Property Investors, Inc. (ii) The consummation of the transactions contemplated pursuant to that certain Partnership Units Purchase Agreement, dated August 17, 1995, among National Property Investors, Inc. and related entities and Insignia Financial Group, Inc. and related entities, and certain other agreements relating thereto shall not be deemed to be a transfer in violation of the provisions of this paragraph 9 (iii) Mortgagor may sell, convey or transfer stock or partnership interest as described in subsections 9(b)(iii) and (iv) hereof by Mortgagor or the general partner of Mortgagor, provided that: 1. No Event of Default shall have occurred and be continuing; 2. The transferee shall be a person, firm or corporation whose character, financial strength, stability and experience shall be similar to the existing Mortgagor and any general partner of Mortgagor as of the date hereof and otherwise reasonably satisfactory to Mortgagee; 3. The transferee shall deliver such organizational documentation and other material necessary to establish the transfer; and 4. The transferee shall pay the costs and expenses of Mortgagee and Mortgagee's counsel incurred in connection with the review and approval of such stock or partnership transfer. (a) Mortgagee shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Mortgagor's sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property without Mortgagee's consent. This provision shall apply to every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property regardless of whether voluntary or not, or whether or not Mortgagee has consented to any previous sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the Mortgaged Property. 1. Estoppel Certificates. (a) After request by Mortgagee, Mortgagor, within ten (10) days, shall furnish Mortgagee with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi) that the Note and this Mortgage are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification. 2. Changes in the Laws Regarding Taxation. If any law is enacted or adopted or amended after the date of this Mortgage which deducts the Debt from the value of the Mortgaged Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Mortgagee's interest in the Mortgaged Property, Mortgagor will pay such tax, with interest and penalties thereon, if any. In the event Mortgagee is advised by counsel chosen by it that the payment of such tax or interest and penalties by Mortgagor would be unlawful or taxable to Mortgagee or unenforceable or provide the basis for a defense of usury, then in any such event, Mortgagee shall have the option, by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable. 3. No Credits on Account of the Debt. Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Mortgaged Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Mortgaged Property, or any part thereof, for real estate tax purposes by reason of this Mortgage or the Debt. In the event such claim, credit or deduction shall be required by law, Mortgagee shall have the option, by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable. 4. Documentary Stamps. If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note or this Mortgage, or impose any other tax or charge on the same, Mortgagor will pay for the same, with interest and penalties thereon, if any. 5. Usury Laws. This Mortgage and the Note are subject to the express condition that at no time shall Mortgagor be obligated or required to pay interest on the Debt at a rate which could subject the holder of the Note to either civil or criminal liability as a result of being in excess of the maximum interest rate which Mortgagor is permitted by applicable law to contract or agree to pay. If by the terms of this Mortgage or the Note, Mortgagor is at any time required or obligated to pay interest on the Debt at a rate in excess of such maximum rate, the rate of interest under the same shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of the Note. 6. Books and Records. Mortgagor shall keep adequate books and records of account which accurately reflect the operations of, and income and expenses attributable to, the Mortgaged Property and furnish to Mortgagee the following statements, all of which shall be in form and substance acceptable to Mortgagee: (i) monthly and an annual occupancy statement listing each and every Lease, identifying the leased premises, names of all tenants, monthly rental and all other charges payable under the Lease, date to which paid, date of occupancy, date of expiration, any and every special provision, concession or inducement granted to tenants and such other information as is reasonably requested by Mortgagee, signed, dated and certified as true and accurate by the general partner of Mortgagor and Mortgagor; (ii) monthly and an annual operating statement of the operation of the Mortgaged Property in a form pre- approved by Mortgagee and otherwise satisfactory to Mortgagee, showing in reasonable detail total revenues received and total expenses, prepared and certified by the general partner of Mortgagor and Mortgagor; (iii) an annual balance sheet and profit and loss statement of Mortgagor, prepared and certified by the general partner of Mortgagor and Mortgagor within ninety (90) days after the close of each fiscal year; and (iv) such annual and monthly balance sheets and profit and loss statements and other financial statements as may, from time to time, be required by Mortgagee. 7. Performance of Other Agreements. Mortgagor shall observe and perform each and every term to be observed or performed by Mortgagor pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Mortgaged Property. 8. Further Acts, etc. Mortgagor will, at the cost of Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignments, transfers and assurances as Mortgagee shall, from time to time, require, for the better assuring, conveying, assigning, transferring, and confirming unto Mortgagee the property and rights hereby mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended now or hereafter so to be, or which Mortgagor may be or may hereafter become bound to convey or assign to Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage or for filing, registering or recording this Mortgage. Mortgagor on demand, will execute and deliver and hereby authorizes Mortgagee to execute in the name of Mortgagor or without the signature of Mortgagor to the extent Mortgagee may lawfully do so, one or more financing statements, chattel mortgages or other instruments, to evidence more effectively the security interest of Mortgagee in the Mortgaged Property. Mortgagor grants to Mortgagee an irrevocable power of attorney coupled with an interest for the purpose of perfecting any and all rights and remedies available to Mortgagee at law and in equity pursuant to the terms of the Note, this Mortgage or the Other Security Documents, including without limitation such rights and remedies available to Mortgagee pursuant to this paragraph 17. 9. Recording of Mortgage, etc. Mortgagor forthwith upon the execution and delivery of this Mortgage and thereafter, from time to time, will cause this Mortgage, and any security instrument creating a lien or security interest or evidencing the lien hereof upon the Mortgaged Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien or security interest hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Mortgaged Property and any instrument of further assurance, and all federal, state, county and municipal, taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Mortgaged Property or any instrument of further assurance, except where prohibited by law so to do. Mortgagor shall hold harmless and indemnify Mortgagee, its successors and assigns, against any liability incurred by reason of the imposition of any tax on the making and recording of this Mortgage. 10. Prepayment. If permitted by the Note, the Debt may be prepaid in accordance with the terms thereof. 11. Events of Default. The Mortgagee may declare the Debt immediately due and payable upon any one or more of the following events ("Event of Default"): (a) if any portion of the Debt is not paid within ten (10) days after written notice is delivered by the Mortgagee notifying Mortgagor that the same is overdue; (b) except as otherwise provided in paragraph 4 hereof, if any of the Taxes or Other Charges is not paid when the same is due and payable; (c) if the Policies are not kept in full force and effect, or if the Policies (or duplicate originals thereof) are not delivered to Mortgagee upon request; (d) if Mortgagor violates or does not comply with any of the provisions of paragraphs 7, 9, 34, 35 or 56 hereof; (e) if any representation or warranty of Mortgagor made herein or in any certificate, report, financial statement or other instrument or document furnished to Mortgagee shall have been false or misleading in any material respect when made; (f) if Mortgagor shall make an assignment for the benefit of creditors or if Mortgagor shall generally not be paying its debts as they become due; (g) if a receiver, liquidator or trustee of Mortgagor shall be appointed or if Mortgagor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Mortgagor or if any proceeding for the dissolution or liquidation of Mortgagor shall be instituted; however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Mortgagor, upon the same not being discharged, stayed or dismissed within ninety (90) days; (h) if Mortgagor shall be in default under any other mortgage or security agreement covering any part of the Mortgaged Property whether it be superior or junior in lien to this Mortgage; (i) the Mortgaged 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 such lien shall remain undischarged of record (by payment, bonding or otherwise) on the earlier of (i) thirty (30) days after Mortgagor shall have notice (written or oral) of such lien or (ii) following a judgment in favor of the holder of such lien, one week prior to the date on which such lien may be foreclosed; (j) if Mortgagor fails to cure promptly any violations of laws or ordinances affecting or which may be interpreted to affect the Mortgaged Property; provided, however, after prior written notice to Mortgagee, Mortgagor, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the validity or application of any building, fire or zoning law or ordinance affecting the Mortgaged Property provided that (i) no other Event of Default exists under the Note, this Mortgage, or the Other Security Documents, (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Mortgagor is subject and shall not constitute a default thereunder, (iii) neither the Mortgaged Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, and (iv) if by the terms of such law or ordinance, compliance therewith pending the prosecution of any such proceeding may legally be delayed without incurring any lien, charge or liability of any kind against the Mortgaged Property, or any part thereof, and without subjecting the Mortgagor or the Mortgagee to any liability, civil or criminal, for failure to comply therewith; or (k) if Mortgagor shall continue to be in default under any of the other terms, covenants or conditions of the Note, this Mortgage or the Other Security Documents for five (5) days after notice from Mortgagee in the case of any default which can be cured by the payment of a sum of money or for thirty (30) days after notice from Mortgagee in the case of any other default, provided that if such default cannot reasonably be cured within such thirty (30) day period and Mortgagor 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 Mortgagor 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 ninety (90) days. 12. Remedies of Mortgagee. Upon the occurrence of an Event of Default, (a) Mortgagor will pay, from the date of that Event of Default, interest on the unpaid principal balance of the Note at the rate of (i) four percent (4%) over the Applicable Interest Rate (as defined in the Note) due under the Note or (ii) the maximum interest rate which Mortgagor may by law pay, whichever is lower (the "Default Rate"), and (b) Mortgagee shall have the right to exercise any and all rights and remedies available at law and in equity. 13. Sale of Mortgaged Property. If this Mortgage is foreclosed or if the Mortgaged Property is sold pursuant to the exercise of a power of sale, the Mortgaged Property, or any interest therein, may at the discretion of Mortgagee, be sold in one or more parcels or in several interests or portions and in any order or manner. 14. Right to Cure Defaults. Upon the occurrence of any Event of Default, if Mortgagor fails to make any payment or perform any act as herein provided Mortgagee may, but without any obligation to do so and without notice to or demand on Mortgagor and without releasing Mortgagor from any obligation hereunder, make or do the same in such manner and to such extent as Mortgagee may deem necessary to protect the security hereof. Mortgagee is authorized to enter upon the Mortgaged Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Mortgaged Property or to foreclose this Mortgage or collect the Debt, and the cost and expense thereof (including reasonable attorneys' fees to the extent permitted by law), with interest as provided in this paragraph 23, shall constitute a portion of the Debt and shall be due and payable to Mortgagee upon demand. All such costs and expenses incurred by Mortgagee in remedying such Event of Default or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate, for the period after notice from Mortgagee that such cost or expense was incurred to the date of payment to Mortgagee. All such costs and expenses incurred by Mortgagee together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by this Mortgage and the Other Security Documents and shall be immediately due and payable upon demand by Mortgagee therefor. 15. Late Payment Charge. If any portion of the Debt is not paid on or before the date on which it is due without taking into account any applicable notice or grace period, Mortgagor shall pay to Mortgagee upon demand an amount equal to the lesser of five percent (5%) of such unpaid portion of the Debt or the maximum amount permitted by applicable law, to defray the expense incurred by Mortgagee in handling and processing such delinquent payment and to compensate Mortgagee for the loss of the use of such delinquent payment, and such amount shall be secured by this Mortgage and the Other Security Documents. 16. Prepayment After Event of Default. If following the occurrence of any Event of Default, Mortgagor shall tender payment of an amount sufficient to satisfy the Debt in whole or in part at any time prior to a foreclosure sale of the Mortgaged Property, or a sale of the Mortgaged Property pursuant to the exercise of a power of sale, such tender shall be deemed to be a voluntary prepayment of the principal balance of the Note and Mortgagor shall, in addition to the entire Debt, also pay to Mortgagee a sum equal to the interest which would have accrued on the principal balance of the Note at the Applicable Interest Rate as defined in the Note from the date of such tender to the earlier of (i) the Maturity Date as defined in the Note or to (ii) the first day of the period during which prepayment of the principal balance of the Note would have been permitted together with a Premium (as defined in the Note) equal to the prepayment consideration which would have been payable as of the first day of the period during which prepayment would have been permitted. If at the time of such tender prepayment of the principal balance of the Note is permitted, such tender by Mortgagor shall be deemed to be a voluntary prepayment of the principal balance of the Note, and Mortgagor shall, in addition to the entire Debt, also pay to Mortgagee the applicable Premium specified in the Note and this Mortgage, if any. 17. Right of Entry. Mortgagee and its agents shall have the right to enter and inspect the Mortgaged Property at all reasonable times. 18. Appointment of Receiver. The holder of this Mortgage, upon the occurrence of an Event of Default or in any action to foreclose this Mortgage or upon the actual or threatened waste to any part of the Mortgaged Property, shall be entitled to the appointment of a receiver without notice and without regard to the value of the Mortgaged Property as security for the Debt, or the solvency or insolvency of any person liable for the payment of the Debt. 19. Reasonable Use and Occupancy. In addition to the rights which Mortgagee may have herein, upon the occurrence of any Event of Default, Mortgagee, at its option, may require Mortgagor to pay monthly in advance to Mortgagee, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Mortgaged Property as may be occupied by Mortgagor or may require Mortgagor to vacate and surrender possession of the Mortgaged Property to Mortgagee or to such receiver and, in default thereof, Mortgagor may be evicted by summary proceedings or otherwise. 20. Security Agreement. This Mortgage is both a real property mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Mortgaged Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor by executing and delivering this Mortgage has granted and hereby grants to Mortgagee, as security for the Debt, a security interest in the Mortgaged Property to the full extent that the Mortgaged Property may be subject to the Uniform Commercial Code (said portion of the Mortgaged Property so subject to the Uniform Commercial Code being called in this paragraph 29 the "Collateral"). If an Event of Default shall occur, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Mortgagee may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Mortgagee, Mortgagor shall at its expense assemble the Collateral and make it available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall pay to Mortgagee on demand any and all reasonable expenses, including legal expenses and attorneys' fees, incurred or paid by Mortgagee in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Collateral. Any notice of sale, disposition or other intended action by Mortgagee with respect to the Collateral sent to Mortgagor in accordance with the provisions hereof at least five (5) days prior to such action, shall constitute commercially reasonable notice to Mortgagor unless otherwise required by law. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Mortgagee to the payment of the Debt in such priority and proportions as Mortgagee in its discretion shall deem proper. 21. Actions and Proceedings. Mortgagee has the right to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to bring any action or proceeding, in the name and on behalf of Mortgagor, which Mortgagee, in its discretion, decides should be brought to protect its interest in the Mortgaged Property. Mortgagee shall, at its option, be subrogated to the lien of any mortgage or other security instrument discharged in whole or in part by the Debt, and any such subrogation rights shall constitute additional security for the payment of the Debt. 22. Waiver of Counterclaim. Mortgagor hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Mortgagee, and waives trial by jury in any action or proceeding brought by either party hereto against the other or in any counterclaim asserted by Mortgagee against Mortgagor, or in any matters whatsoever arising out of or in any way connected with this Mortgage, the Note, any of the Other Security Documents or the Debt. 23. Recovery of Sums Required To Be Paid. Mortgagee shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Mortgagee thereafter to bring an action of foreclosure, or to sell the Mortgaged Property pursuant to the exercise of a power of sale, or to bring any other action, for a default or defaults by Mortgagor existing at the time such earlier action was commenced. 24. Marshalling and Other Matters. Mortgagor hereby waives, to the extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Mortgaged Property or any part thereof or any interest therein. Further, Mortgagor hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date of this Mortgage and on behalf of all persons to the extent permitted by applicable law. 25. Hazardous Materials. Mortgagor represents and warrants that, except as otherwise disclosed in that certain environmental report delivered by Mortgagor to Mortgagee in connection with the origination of this Mortgage, to the best of Mortgagor's knowledge, after due inquiry and investigation, (a) there are no Hazardous Materials (hereinafter defined) on the Mortgaged Property, except those in compliance with all applicable federal, state and local laws, ordinances, rules and regulations, and (b) no owner or occupant nor, to the best of Mortgagor's knowledge, any prior owner or occupant of the Mortgaged Property has received any notice or advice from any governmental agency or any source whatsoever with respect to Hazardous Materials on, from or affecting the Mortgaged Property. Mortgagor covenants that the Mortgaged Property shall be kept free of Hazardous Materials, and neither Mortgagor nor any occupant of the Mortgaged Property shall use, transport, store, dispose of or in any manner deal with Hazardous Materials on the Mortgaged Property, except in compliance with all applicable federal, state and local laws, ordinances, rules and regulations. Mortgagor shall comply with, and ensure compliance by all occupants of the Mortgaged Property with, all applicable federal, state and local laws, ordinances, rules and regulations, and shall keep the Mortgaged Property free and clear of any liens imposed pursuant to such laws, ordinances, rules or regulations. At any time after the occurrence of an Event of Default and the continuance thereof, Mortgagee may enter upon the Mortgaged Property and conduct such environmental tests and studies as Mortgagee shall require. The cost and expense of such tests and studies shall be borne by Mortgagor and such amounts shall be secured by this Mortgage. In the event that Mortgagor receives any notice or advice from any governmental agency or any source whatsoever with respect to Hazardous Materials on, from or affecting the Mortgaged Property, Mortgagor shall immediately notify Mortgagee. Mortgagor shall conduct and complete all investigations, studies, sampling, and testing, and all remedial actions necessary to clean up and remove all Hazardous Materials from the Mortgaged Property in accordance with all applicable federal, state, and local laws, ordinances, rules and regulations. The term "Hazardous Materials" as used in this Mortgage shall include, without limitation, gasoline, petroleum products, explosives, radioactive materials, polychlorinated biphenyls or related or similar materials, or any other substance or material defined as a hazardous or toxic substance or material by any federal, state or local law, ordinance, rule, or regulation, but excluding Asbestos, as defined in paragraph 35 hereof. The obligations and liabilities of Mortgagor under this paragraph 34 shall survive any entry of a judgment of foreclosure, the sale of the Mortgaged Property pursuant to the exercise of a power of sale, or the delivery of a deed in lieu of foreclosure of this Mortgage. 26. Asbestos. Mortgagor represents and warrants that, except as otherwise disclosed in that certain asbestos survey (the "Asbestos Survey") delivered by Mortgagor to Mortgagee in connection with the origination of this Mortgage, to the best of Mortgagor's knowledge, after due inquiry and investigation, there is no asbestos or material containing asbestos ("Asbestos") on the Mortgaged Property, and that no owner or occupant nor to the best of Mortgagor's knowledge, any prior owner or occupant of the Mortgaged Property has received any notice or advice from any governmental agency or any source whatsoever with respect to Asbestos on, affecting or installed on the Mortgaged Property. Mortgagor covenants that, except as otherwise disclosed in the Asbestos Survey, the Mortgaged Property shall be kept free of Asbestos, and neither Mortgagor nor any occupant of the Mortgaged Property shall install, or permit to be installed, Asbestos on the Mortgaged Property. Mortgagor shall comply with, and ensure compliance by all occupants of the Mortgaged Property with, all applicable federal, state and local laws, ordinances, rules and regulations with respect to Asbestos, and shall keep the Mortgaged Property free and clear of any liens imposed pursuant to such laws, ordinances, rules or regulations. In the event that Mortgagor receives any notice or advice from any governmental agency or any source whatsoever with respect to Asbestos on, affecting or installed on the Mortgaged Property, Mortgagor shall immediately notify Mortgagee. Mortgagor shall conduct and complete all investigations, studies, sampling, and testing, and all remedial actions necessary to manage and remove all Asbestos from the Mortgaged Property in accordance with all applicable federal, state and local laws, ordinances, rules and regulations. The obligations and liabilities of Mortgagor under this paragraph 35 shall survive any entry of a judgment of foreclosure, the sale of the Mortgaged Property pursuant to the exercise of a power of sale, or delivery of a deed in lieu of foreclosure of this Mortgage. 27. Indemnification. Mortgagor shall protect, defend, indemnify and save harmless Mortgagee from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including without limitation reasonable attorneys' fees and expenses), imposed upon or incurred by or asserted against Mortgagee (except any liability, obligation, claim, damage, penalty, cause of action, cost or expense imposed upon or incurred by Mortgagee by reason of the gross negligence or willful misconduct of Mortgagee) by reason of (a) ownership of this Mortgage, the Mortgaged Property or any interest therein arising pursuant to the terms of this Mortgage or receipt of any Rents; (b) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) any use, nonuse or condition in, on or about the Mortgaged Property or any part thereof or on the adjoining sidewalks,curbs, adjacent property or adjacent parking areas, streets or ways; (d) any failure on the part of Mortgagor to perform or comply with any of the terms of this Mortgage; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or any part thereof; (f) the failure of any person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Mortgage, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Mortgage is made; (g) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release, or threatened release of any Hazardous Materials on, from, or affecting the Mortgaged Property or any other property or the presence of Asbestos on the Mortgaged Property; (h) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials or Asbestos; (i) any lawsuit brought or threatened, settlement reached, or government order relating to such Hazardous Materials or Asbestos; or (j) any violation of laws, orders, regulations, requirements, or demands of government authorities, which are based upon or in any way related to such Hazardous Materials or Asbestos including, without limitation, the costs and expenses of any remedial action required by such governmental authorities, attorney and consultant fees, investigation and laboratory fees, court costs, and litigation expenses. Any amounts payable to Mortgagee by reason of the application of this paragraph 36 shall be secured by this Mortgage and shall become immediately due and payable upon demand and shall bear interest at the Default Rate commencing on the fifth (5th) day following such demand until paid. The obligations and liabilities of Mortgagor under this paragraph 36 shall survive any termination, satisfaction, assignment, entry of a judgment of foreclosure or delivery of a deed in lieu of foreclosure of this Mortgage. 28. Notices. Any notice, demand, statement, request or consent made hereunder shall be effective and valid only if in writing and delivered personally or by a reputable overnight courier service and shall be deemed given when received at the address, as set forth above, of the party to whom such notice is to be given, or to such other address as Mortgagor or Mortgagee, as the case may be, shall in like manner designate in writing. In the event delivery is not accepted, notice shall be deemed given on the date such delivery is refused. 29. Authority. (a) Mortgagor (and the undersigned representative of Mortgagor, if any) has full power, authority and legal right to execute this Mortgage, and to mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, hypothecate, assign and grant a security interest in the Mortgaged Property pursuant to the terms hereof and to keep and observe all of the terms of this Mortgage on Mortgagor's part to be performed. (a) Mortgagor represents and warrants that Mortgagor is not a "foreign person" within the meaning of 1445(f)(3) of the Internal Revenue Code of 1986, as amended and the related Treasury Department regulations, including temporary regulations. 30. Waiver of Notice. Mortgagor shall not be entitled to any notices of any nature whatsoever from Mortgagee except with respect to matters for which this Mortgage specifically and expressly provides for the giving of notice by Mortgagee to Mortgagor and except with respect to matters for which Mortgagee is required by applicable law to give notice, and Mortgagor hereby expressly waives the right to receive any notice from Mortgagee with respect to any matter for which this Mortgage does not specifically and expressly provide for the giving of notice by Mortgagee to Mortgagor. 31. Remedies of Mortgagor. In the event that a claim or adjudication is made that Mortgagee has acted unreasonably or unreasonably delayed acting in any case where by law or under the Note, this Mortgage or the Other Security Documents, it has an obligation to act reasonably or promptly, Mortgagee shall not be liable for any monetary damages, and Mortgagor's remedies shall be limited to injunctive relief or declaratory judgment. 32. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage, Mortgagee exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Mortgagee, the decision of Mortgagee to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Mortgagee, except as may be otherwise expressly and specifically provided herein. 33. Non-Waiver. The failure of Mortgagee to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations hereunder by reason of (a) the failure of Mortgagee to comply with any request of Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any of the provisions hereof or of the Note or the Other Security Documents, (b) the release, regardless of consideration, of the whole or any part of the Mortgaged Property, or of any person liable for the Debt or any portion thereof, or (c) any agreement or stipulation by Mortgagee extending the time of payment or otherwise modifying or supplementing the terms of the Note, this Mortgage or the Other Security Documents. Mortgagee may resort for the payment of the Debt to any other security held by Mortgagee in such order and manner as Mortgagee, in its discretion, may elect. Mortgagee may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Mortgagee thereafter to foreclose this Mortgage. The rights of Mortgagee under this Mortgage shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Mortgagee shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. 34. No Oral Change. This Mortgage, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Mortgagor or Mortgagee, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 35. Liability. If Mortgagor consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several. The foregoing sentence, however, is not intended to affect the limited liability of any limited partner or stockholder of Mortgagor afforded by applicable partnership or corporate law. This Mortgage shall be binding upon and inure to the benefit of Mortgagor and Mortgagee and their respective successors and assigns forever. 36. Inapplicable Provisions. If any term, covenant or condition of the Note or this Mortgage is held to be invalid, illegal or unenforceable in any respect, the Note and this Mortgage shall be construed without such provision. 37. Headings. etc. The headings and captions of various paragraphs of this Mortgage 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. 38. Duplicate Originals. This Mortgage may be executed in any number of duplicate originals and each such duplicate original shall be deemed to be an original. 39. Definitions. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Mortgage may be used interchangeably in singular or plural form and the word "Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of the Mortgaged Property or any part thereof or any interest therein," the word "Mortgagee" shall mean "Mortgagee and any subsequent holder of the Note," the word "Note" shall mean "the Note and any other evidence of indebtedness secured by this Mortgage," the word "person" shall include an individual, corporation, partnership, trust, unincorporated association, government, governmental authority, and any other entity, and the words "Mortgaged Property" shall include any portion of the Mortgaged Property and any interest therein. 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. 40. CHOICE OF LAW. THIS MORTGAGE 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, ATTACHMENT, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST OF THIS MORTGAGE, THE LAWS OF THE STATE WHERE THE MORTGAGED PROPERTY IS LOCATED SHALL APPLY. 41. Exculpation. Mortgagee shall not enforce the liability and obligation of Mortgagor to perform and observe the obligations contained in the Note or this Mortgage by any action or proceeding wherein a money judgment shall be sought against Mortgagor or any general or limited partner of Mortgagor (hereafter collectively referred to as the "Exculpated Parties"), except that Mortgagee may bring a foreclosure action, action for specific performance or other appropriate action or proceeding to enable Mortgagee to enforce and realize upon this Mortgage, the Other Security Documents, and the interest in the Mortgaged Property, the Rents and any other collateral given to Mortgagee created by this Mortgage and the Other Security Documents; provided, however, that any judgment in any such action or proceeding shall be enforceable against the Exculpated Parties only to the extent of Mortgagor's interest in the Mortgaged Property, in the Rents and in any other collateral given to Mortgagee. Mortgagee, by accepting the Note and this Mortgage, agrees that it shall not sue for, seek or demand any deficiency judgment against the Exculpated Parties in any such action or proceeding, under or by reason of or in connection with the Note, the Other Security Documents or this Mortgage. The provisions of this paragraph shall not, however, (i) constitute a waiver, release or impairment of any obligation evidenced or secured by the Note, the Other Security Documents or this Mortgage; (ii) impair the right of Mortgagee to name Mortgagor as a party defendant in any action or suit for judicial foreclosure and sale under this Mortgage; (iii) affect the validity or enforceability of any guaranty made in connection with the Note, this Mortgage, or the Other Security Documents; (iv) impair the right of Mortgagee 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 Mortgagee to bring suit with respect to fraud or intentional misrepresentation by the Exculpated Parties or any other person or entity in connection with the Note, this Mortgage or the Other Security Documents; (vii) impair the right of Mortgagee to obtain the Rents received by any of the Exculpated Parties after the occurrence of an Event of Default; (viii) impair the right of Mortgagee to bring suit with respect to the Exculpated Parties' misappropriation of tenant security deposits or Rents collected in advance; (ix) impair the right of Mortgagee to obtain insurance proceeds or condemnation awards due to Mortgagee under this Mortgage; (x) impair the right of Mortgagee to enforce the provisions of sub-paragraphs 36(g) through 36(j), inclusive and paragraphs 34 and 35 of this Mortgage against the Mortgagor (excluding any general or limited partner thereof); or (xi) impair the right of Mortgagee to recover any part of the Debt from the Mortgagor (excluding the general and limited partners of Mortgagor), following the breach of any covenant contained in paragraph 9 or 56 hereof. 42. [TO BE LIMITED TO CERTAIN PROPERTIES] Capital Improvements Account. Mortgagor shall establish and maintain for the benefit of Mortgagee a reserve account (the "Capital Improvements Account") for the purpose of creating a reserve for certain capital improvements in connection with the Mortgaged Property which are described on a schedule (the "Capital Improvements Schedule") in the engineering report for the Mortgaged Property delivered to, and approved by, Mortgagee (collectively, the "Capital Improvements"). Mortgagor shall deposit the amount set forth on the Capital Improvements Schedule into the Capital Improvements Account on the date hereof. Mortgagor, on a periodic basis (but not more often than once every thirty (30) days), may request disbursements ("Disbursements") from the Capital Improvements Account provided: (i) Mortgagor shall have delivered a written request for the Disbursement to Mortgagee, which request shall (a) specify which "line item" set forth on the Capital Improvements Schedule Mortgagor has incurred expenses for, (b) set forth the amount of the requested Disbursement, (c) contain a certification from the managing general partner of Mortgagor and Mortgagor that the work for which the Disbursement is requested has been completed and is then due and payable and (d) if requested by Mortgagee, such other evidence of completion of work, including but not limited to any and all invoices or other work orders, (ii) the Disbursement does not exceed the amount allocated to the line item as such amount is set forth on the Capital Improvements Schedule, and (iii) no Event of Default shall have occurred. Disbursements shall be made by Mortgagee to Mortgagor by wire transfer or as otherwise directed by Mortgagor within ten (10) days after receipt by Mortgagee of Mortgagor's written request in the form required above. The Capital Improvements Account shall be held by Mortgagee as additional and collateral security for the Debt and Mortgagor hereby grants Mortgagee a security interest in, and pledges to Mortgagee the Capital Improvements Account. The Capital Improvements Account shall be held by Mortgagee as additional security for the Debt and if Mortgagor breaches any term, covenant or provision of the Note, this Mortgage or any Other Security Document, Mortgagee may apply the proceeds of the Capital Improvements Account to cure such default, and following the acceleration of the maturity of the Note, in the reduction of the Debt. The Capital Improvements Account shall be an interest bearing account maintained at a bank satisfactory to Mortgagee in its sole discretion, and Mortgagee shall have no liability for its selection of the bank, type of account, fluctuations in interest rate or for the amount of interest earned on the account. Interest earned on the Capital Improvements Account shall remain in the Capital Improvements Account until such time as the account is released to the Mortgagor or the proceeds are applied by Mortgagee to the payment of the Debt as provided herein. Upon the completion of all of the Capital Improvements, Mortgagee shall release the sums remaining in the Capital Improvements Account, if any, to Mortgagor. 43. Reserve Account. Mortgagor will comply with any requirements of any Rating Agency as a condition of its initial rating, or if required by either FNMA or Freddie Mac, with respect to the establishment of a reserve account for necessary repairs and replacements of existing improvements on the Mortgaged Property. 44. Operations and Maintenance Plan. [LIMIT TO LANDINGS] Mortgagor shall, within forty-five (45) days from the date hereof deliver to Mortgagee an operation and maintenance plan (the "O&M Plan") with respect to the maintenance or removal of any asbestos, hazardous and toxic wastes and substances, PCB's and storage tanks on the Mortgaged Property, which O&M Plan appoints an "Asbestos Program Manager" in charge of managing all asbestos-related activities on the Mortgaged Property. Mortgagor shall (i) diligently perform and observe all of the terms, covenants and conditions of the O&M Plan on the part of Mortgagor to be performed and observed to the end that all things shall be done which are necessary to keep unimpaired the rights of Mortgagor under the O&M Plan and (ii) promptly notify Mortgagee of the giving of any notice to Mortgagor of any default by the Asbestos Program Manager in the performance or observance of any of the terms, covenants or conditions of the O&M Plan on the part of the Asbestos Program Manager to be performed and observed and deliver to Mortgagee a true copy of each such notice. Mortgagee shall have the right to approve any O&M Plan which may affect the Mortgaged Property. 45. Management Agreements. The Improvements have been operated under the terms and conditions of that certain management agreement entered into between Mortgagor and the manager (the "Manager") set forth therein delivered to, and approved by, Mortgagee (hereinafter, together with any renewals or replacements thereof, being referred to as the "Management Agreement"). Mortgagor acknowledges that Mortgagee has examined and relied on the Manager's experience in operating properties such as the Mortgaged Property in agreeing to make the loan secured hereby, and that Mortgagee will continue to rely on the Manager's management of the Mortgaged Property as a means of maintaining the value of the Mortgaged Property as security for repayment of the Debt. Mortgagor shall (i) diligently perform and observe all of the terms, covenants and conditions of the Management Agreement on the part of Mortgagor to be performed and observed to the end that all things shall be done which are necessary to keep unimpaired the rights of Mortgagor under the Management Agreement and (ii) promptly notify Mortgagee of the giving of any notice to Mortgagor of any default by Mortgagor in the performance or observance of any of the terms, covenants or conditions of the Management Agreement on the part of Mortgagor to be performed and observed and deliver to Mortgagee a true copy of each such notice. Mortgagor shall not surrender the Management Agreement, consent to the assignment by the Manager of its interest under the Management Agreement, or terminate or cancel the Management Agreement or modify, change, supplement, alter or amend the Management Agreement, in any respect, either orally or in writing, and Mortgagor hereby assigns to Mortgagee as further security for the payment of the Debt and for the performance and observance of the terms, covenants and conditions of this Mortgage, all the rights, privileges and prerogatives of Mortgagor to surrender the Management Agreement or to terminate, cancel, modify, change, supplement, alter or amend the Management Agreement in any respect, and any such surrender of the Management Agreement or termination, cancellation, modification, change, supplement, alteration or amendment of the Management Agreement without the prior consent of Mortgagee shall be void and of no force and effect. If Mortgagor shall default in the performance or observance of any material term, covenant or condition of the Management Agreement on the part of Mortgagor to be performed or observed, then, without limiting the generality of the other provisions of this Mortgage, and without waiving or releasing Mortgagor from any of its obligations hereunder, Mortgagee shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of the Management Agreement on the part of Mortgagor to be performed or observed to be promptly performed or observed on behalf of Mortgagor, to the end that the rights of Mortgagor in, to and under the Management Agreement shall be kept unimpaired and free from default. Mortgagee and any person designated by Mortgagee shall have, and are hereby granted, the right to enter upon the Mortgaged Property at any time and from time to time for the purpose of taking any such action. If the Manager under the Management Agreement shall deliver to Mortgagee a copy of any notice sent to Mortgagor of default under the Management Agreement, such notice shall constitute full protection to Mortgagee for any action taken or omitted to be taken by Mortgagee in good faith, in reliance thereon. Mortgagor shall, from time to time, use its best efforts to obtain from the Manager under the Management Agreement such certificates of estoppel with respect to compliance by Mortgagor with the terms of the Management Agreement as may be requested by Mortgagee. Mortgagor shall exercise each individual option, if any, to extend or renew the term of the Management Agreement upon demand by Mortgagee made at any time within one (1) year of the last day upon which any such option may be exercised, and Mortgagor hereby expressly authorizes and appoints Mortgagee its attorney-in-fact to exercise any such option in the name of and upon behalf of Mortgagor, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest. Notwithstanding anything to the contrary contained herein, Mortgagor may replace the Manager or accept the resignation of the Manager or consent to a transfer by the Manager, provided: (1) No Event of Default shall have occurred and be continuing; (2) the new manager or holder of the stock or partnership interest shall be a person, firm or corporation whose character, financial strength, stability and experience shall be similar to the existing Manager and otherwise have Adequate Real Estate Experience (it being understood that Insigna Financial Group, Inc. or any Affiliate thereof shall be deemed an acceptable replacement); (3) the new manager shall deliver all organizational documentation and other materials evidencing its Adequate Real Estate Experience and otherwise be acceptable to Mortgagee; (4) the Mortgagor shall pay the reasonable costs and expenses of Mortgagee and Mortgagee's counsel incurred in connection with the review and approval of such new manager; and (5) the terms of any new management agreement affecting the Mortgaged Property must be acceptable to Mortgagee in all respects, provided, however, if the terms and conditions of the new management agreement shall be substantially similar to the Management Agreement and the management fee due thereunder is no greater than the fee provided in the Management Agreement, such new management agreement shall be deemed acceptable to Mortgagee. 1. Rating Agencies. The terms "Rating Agency" or "Rating Agencies" shall mean any nationally recognized rating agency(s) sought by Mortgagee to obtain ratings with respect to this Mortgage or the Securitization (hereinafter defined). Mortgagee intends to, but is not required to, either (i) deposit this Mortgage, the Note and the Other Security Documents in a trust in exchange for the issuance, to or at the direction of the Mortgagee, of multiple classes of mortgage pass-through certificates evidencing the entire beneficial ownership interest in such trust or (ii) issue multiple classes of bonds (also, "Securities") representing non-recourse obligations secured by this Mortgage, the Note and the Other Security Documents (the "Securities"). An election will be made under the federal tax code to treat this Mortgage, the Note and the Other Security Documents and the related assets as one or more real estate mortgage investment conduits. The Securities may be sold either in a public offering or a private placement. The foregoing events and all matters incidental thereto are herein referred to as the "Securitization". Anything in paragraphs 5, 52 or 58 of this Mortgage contained to the contrary notwithstanding: (i) the provisions of paragraphs 5, 52 and 58 of this Mortgage which require a Mortgagor to comply with certain requirements ("Requirements") which may be imposed by any Rating Agency, FNMA or Freddie Mac shall be of no force or effect unless Mortgagee notifies Mortgagor prior to the 270th day (the "Deadline") following the Date hereof that it will be required to comply with any such Requirements; and (ii) in the event that Mortgagee so notifies Mortgagor prior to the Deadline, (a) Mortgagee shall not prevent Mortgagor from contacting the entity imposing such Requirements to discuss the necessity of and/or details relating to such Requirements, and (b) Mortgagor will not pursue such discussion in a manner which materially delays the completion of any related Securitization, and in any event Mortgagor will either comply with the Requirements in question or cause the Debt to be prepaid in full at par on or prior to the Deadline. 2. Single Purpose Entity. Mortgagor hereby represents and warrants to, and covenants with, Mortgagee that, as of the date hereof and until such time as the Debt shall be paid in full, Mortgagor: (a) does not own and shall not own any encumbered asset other than (i) the Mortgaged Property, (ii) and (ii) such incidental personal property necessary for the operation of the Mortgaged Property; (b) is not engaged and shall not engage in any business other than those necessary for the ownership, management or operation of the Mortgaged Property and any business transactions with any general partner, principal or affiliate of Mortgagor or any affiliate of the general partner of Mortgagor shall be entered into 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 an Affiliate; (c) has not incurred and shall not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the Debt and the type of indebtedness permitted pursuant to Paragraph 57 hereof; (d) has not made and shall not make any loans or advances to any third party (including any Affiliate); (e) is and shall be solvent and pay its debt from its assets as the same shall become due; (f) has done or caused to be done and shall do all things necessary to preserve its existence, and shall not, nor shall any partner, limited or general, or shareholder thereof, amend, modify or otherwise change its partnership certificate, partnership agreement, articles of incorporation or by-laws in a manner which adversely affects Mortgagor's existence as a single purpose entity; (g) shall conduct and operate its business as presently conducted and operated; (h) shall maintain books and records and bank accounts separate from those of its affiliates, including its general partners; (i) shall be, and at all times shall hold itself out to the public as, a legal entity separate and distinct from any other entity (including any affiliate thereof, including the general partner or any affiliate of the general partner of the Mortgagor); (j) shall file its own tax returns; (k) shall 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; (l) shall not seek the dissolution or winding up, in whole or in part, of the Mortgagor or voluntarily file, or consent to the filing of, a petition for bankruptcy, reorganization, assignment for the benefit of creditors or similar proceeding; (m) shall not commingle the funds and other assets of the Mortgagor with those of any general partner, any Affiliate or any other person; and (n) shall have at least one member of its board of directors that is not affiliated with or employed by National Property Investors, Inc. or any of its Affiliates. 3. No Other Indebtedness. During the term of the Note and prior to the satisfaction or discharge of this Mortgage, Mortgagor shall not create, incur, assume, or suffer to exist any Indebtedness (hereinafter defined). For purposes of the foregoing, the term "Indebtedness" shall mean with respect to Mortgagor on a particular date (a) all indebtedness of Mortgagor for borrowed money or for the deferred purchase price of property or which is evidenced by a note, bond, debenture, trust deed, bankers' acceptance or similar instrument, (b) all obligations of Mortgagor under any lease of real property (excluding Leases under which Mortgagor is the landlord), (c) all obligations of Mortgagor in respect of letters of credit, acceptances, or similar obligations issued or created for the account of Mortgagor, and (d) all liabilities secured by any lien or any property owned by Mortgagor even though Mortgagor has not assumed or otherwise become liable for the payment thereof. Notwithstanding the foregoing, Indebtedness shall not include (x) account payables to trade creditors of up to [$__________] (which may include Affiliates of Mortgagor and its partners and their employees) for goods and services which are not aged more than sixty (60) days from the billing date and current operating liabilities (other than for borrowed monies) not more than sixty (60) days past due in each case incurred in the ordinary course of business as presently conducted and paid within the specified times, unless contested in good faith and by appropriate proceeds and (y) the indebtedness evidenced by the Note and secured by this Mortgage. 4. Lockbox. Mortgagor will comply with any requirement imposed by any Rating Agency as a condition of its initial rating, FNMA or Freddie Mac with respect to the establishment of lockbox arrangements with respect to the operation of the Mortgaged Property. PART II [LOCAL LAW PROVISIONS] 1. In the event of any inconsistencies between the terms and conditions of PART I of this Mortgage and PART II, the terms and conditions of PART II shall control and be binding. [ADD LOCAL PROVISIONS, IF ANY] IN WITNESS WHEREOF, this Mortgage has been executed by Mortgagor the day and year first above written. Witnesses: ___________________________________ ________________, a _______ limited partnership _______________________ By: ____________________________, Name: a ________ corporation, its general partner _______________________ By: ____________________________ Name: Name: Title: This instrument prepared by: Jeffrey J. Temple, Esq. White & Case 1155 Avenue of the Americas New York, New York 10036 ACKNOWLEDGEMENT [TO BE PROVIDED] [Sketch of Subject Property (This is not a survey)] EX-27 4 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from Century Properties Fund XVI and is qualified in its entirety by reference to such financial statements. 1 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 846,000 0 0 0 0 0 14,497,000 (6,414,000) 9,471,000 0 7,550,000 0 0 0 1,718,000 9,471,000 0 2,636,000 0 2,102,000 0 0 795,000 (475,000) 0 (475,000) 0 (220,000) 0 (695,000) (4.98) (4.98)
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