-----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, Rwt9KNeG/0PTHJ40u1MjntbgqNCExQJKpNKjeYLgN1yucEoiUi8bKuBcTVfhsYER P1TbFVmOzPHoSZvzykoh7w== 0000889812-96-000297.txt : 19960401 0000889812-96-000297.hdr.sgml : 19960401 ACCESSION NUMBER: 0000889812-96-000297 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY PROPERTIES FUND XIX CENTRAL INDEX KEY: 0000705752 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942887133 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-11935 FILM NUMBER: 96541213 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: PO BOX 1089 C/O INSIGNIA FINANICAL GROUP CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: 5665 NORTHSIDE DRIVE NW STREET 2: SUITE 370 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 0-11935 CENTURY PROPERTIES FUND XIX (Exact name of Registrant as specified in its charter) CALIFORNIA 94-2887133 (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 readily determined. DOCUMENTS INCORPORATED HEREIN BY REFERENCE: Prospectus of Registrant dated September 20, 1983, as amended on June 13, 1984, and thereafter supplemented incorporated in Parts I and IV. CENTURY PROPERTIES FUND XIX (a limited partnership) PART I Item 1. Business. Century Properties Fund XIX (the "Registrant") was organized in August 1982 as a California limited partnership under the Uniform Limited Partnership Act of the California Corporations Code. Fox Partners II, a California general partnership, is the general partner of the Registrant. The general partners of Fox Partners II are Fox Capital Management Corporation (the "Managing General Partner"), a California corporation, Fox Realty Investors ("FRI"), a California general partnership, and Fox Partners 83, a California general partnership. The Registrant's Registration Statement, filed pursuant to the Securities Act of 1933 (No. 2-79007), was declared effective by the Securities and Exchange Commission on September 20, 1983. The Registrant marketed its securities pursuant to its Prospectus dated September 20, 1983, which was amended on June 13, 1984, and thereafter supplemented (hereinafter the "Prospectus"). The Prospectus was filed with the Securities and Exchange 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 multi-family residential properties. The Registrant is a "closed" limited partnership real estate syndicate formed to acquire multi-family residential properties. Beginning in September 1983 through October 1984, the Registrant offered $90,000,000 in Limited Partnership Units and sold units having an initial cost of $89,292,000. The net proceeds of this offering were used to acquire thirteen income-producing real properties. The Registrant's original property portfolio was geographically diversified with properties acquired in seven states. The Registrant's acquisition activities were completed in June 1985 and since then the principal activity of the Registrant has been managing its portfolio. One property was sold in each of the years, 1988, 1992 and 1993 and in February 1994. In addition one property was foreclosed on in 1993. 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 business of the Registrant is not seasonal. 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 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 and miscellaneous management expenses, 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 property. Even under the most favorable market conditions, there is no guarantee that any property owned by the Registrant can be sold by it 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 the properties and believes such coverage to be adequate. At this time, it appears that the investment objective of capital growth will not be attained and that a significant portion of invested capital will not be returned to investors. 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, it is anticipated that some of the remaining properties will be held longer than originally expected. The ability to hold and operate these properties is dependent on the Registrant's ability to obtain additional financing, refinancing, or debt restructuring as required. Property Matters Misty Woods - As of June 1, 1994, the lender holding the mortgage at Misty Woods Apartments was permitted to draw on the two letters of credit, each in the amount of $300,000, which were held in connection with the note payable encumbering this property. In accordance with the loan agreement, the Registrant applied the $594,000 net proceeds of the draw to the note, reducing the mortgage balance to $5,183,000. Commencing July 1, 1994, the monthly debt service payment was reduced to approximately $46,000. See, "Item 8, Consolidated Financial Statements and Supplementary Data - Note 5." On December 29, 1995, the first mortgage encumbering Misty Woods Apartments was refinanced. The principal amount of the refinanced mortgage was $5,450,000. 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 5" for additional information with respect to this loan. In connection with this refinancing, the lender required the Registrant to transfer Misty Woods into a single asset entity. As a result, title to Misty Woods is held in a limited partnership in which the Registrant holds a 99% limited partnership interest. The general partner of the partnership is a corporation in which the Registrant is the sole stockholder. Wood Lake, Wood Ridge and Plantation Crossing - On December 15, 1995, the Partnership refinanced the mortgage loan encumbering each of Wood Lake Apartments located in Atlanta, Georgia, Wood Ridge Apartments located in Atlanta, Georgia and Plantation Crossing located in Marietta, Georgia. In connection with this refinancing, each of these properties was conveyed from the sub-partnership which held these properties to the Registrant. The aggregate amount of the loan was $22,000,000, which was allocated $7,750,000 to Wood Lake, $9,000,000 to Wood Ridge and $5,250,000 to Plantation Crossing. The loan bears interest at a rate of 7.5% per annum, matures January 1, 2003 and has monthly payments of principal and interest of 163,000. In addition, the Registrant is required to make monthly tax escrow payments to the lender. Net proceeds from this refinancing to the Registrant were approximately $750,000. [Were net proceeds distributed?] See "Item 8, Consolidated Financial Statements and Supplementary Data, Note 5" for additional information with respect to this loan. Greenspoint Apartments - On June 29, 1995, the Registrant replaced its maturing mortgage encumbering Greenspoint Apartments with a new first mortgage in the amount of $9,000,000. The loan bears interest at 8.33% per annum, is being amortized over 30 years and matures on May 15, 2005 with a balloon payment of approximately $7,974,00. As specified in the loan agreement, the Registrant was obligated to undertake additional improvements at the property in the amount of approximately $30,000 prior to December 31, 1995. See "Item 8, Consolidated Financial Statements and Supplementary Data, Note 5" for additional information with respect to this loan. Sandspoint Apartments - On June 29, 1995, the Registrant replaced its maturing mortgage encumbering Sandspoint Apartments with a new first mortgage in the amount of $10,000,000. The loan bears interest at 8.33% per annum, is being amortized over 30 years and matures on May 15, 2005 with a balloon payment of approximately $8,859,00. As specified in the loan agreement, the Registrant was obligated to undertake additional improvements at the property in the amount of approximately $74,000 prior to March 31, 1996. See "Item 8, Consolidated Financial Statements and Supplementary Data, Note 5" for additional information with respect to this loan. Plantation Forest Apartments - On February 8, 1994, the Registrant sold this property for $2,450,000 to an unaffiliated third party. After payment of the existing loan of $1,965,000 and expenses of the sale, the proceeds to the Registrant were approximately $482,000. The tax loss on the sale was $149,000. Net proceeds realized from the sale were in part used to fully repay $370,000 of the demand notes, plus accrued interest, held by NPI Realty. The balance was added to working capital. See, "Item 8, Consolidated Financial Statements and Supplementary Data - Note 8." McMillan Place Apartments - On September 1, 1994, the Registrant obtained a modification of the existing mortgage encumbering McMillan Place Apartments in the amount of $12,939,000 (including accrued interest of $2,139,000). The loan was split into a first mortgage note of $10,800,000 and a second mortgage note of $2,139,000. The first mortgage requires monthly payments of approximately $89,000, bears interest at 8.25% per annum and is being amortized over a twenty-two year period. Under the terms of the second mortgage, interest accrues at 8.25% (with monthly compounding) per annum. Monthly payments of interest or principal are not required on the second mortgage. However, quarterly payments of all excess cash flow, as defined in the cash management agreement, are required to be made to the lender to reduce the second mortgage. In addition, pursuant to the terms of the loan documents the Registrant is prohibited from making any distributions from operations to its partners. Both loans mature on August 31, 1999 with a balloon payment of approximately $9,767,000 on the first mortgage plus the outstanding balance on the second mortgage note. As specified in the modification, the Registrant was required to deposit $80,000 in a reserve account for future capital improvements and is required to make monthly payments of $10,000 to the reserve account for the term of the loan. See, "Item 8, Consolidated Financial Statements and Supplementary Data - Note 5." 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 an affiliate of Insignia 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 eleven 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 24,811.66 limited partnership units or approximately 28% 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 economic conditions in these markets. In addition, each of the Registrant's properties competes in an area which normally contains numerous other multi-family residential properties which may be considered competitive. Item 2. Properties. A description of the multi-family residential properties in which the Registrant has or has had an ownership interest is as follows. All of the Registrant's properties are owned in fee. Date of Name and Location Purchase Size - ----------------- -------- ---- Wood Lake Apartments 12/83 220 units 100 Pinhurst Drive Atlanta, Georgia Greenspoint Apartments 02/84 336 units NE Corner, 42nd Street Phoenix, Arizona Sandspoint Apartments 02/84 432 units SW Corner, Butler Drive and 19th Avenue Phoenix, Arizona Wood Ridge Apartments 04/84 280 units 100 Wood Ridge Drive Atlanta, Georgia Plantation Crossing Apartments 06/84 180 units 2703 Delk Road Atlanta, Georgia Sunrunner Apartments 07/84 200 units 11400 4th Street North St. Petersburg, Florida McMillan Place Apartments 06/85 402 units 12610 Jupiter Place Dallas, Texas Misty Woods Apartments 06/85 228 units 4642 Central Avenue Charlotte, North Carolina See, "Item 8, Consolidated 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 ---- ---- ---- ---- ---- Wood Lake Apartments 97 96 91 92 89 Greenspoint Apartments 96 98 97 94 93 Sandspoint Apartments 96 95 90 91 91 Wood Ridge Apartments 95 97 94 92 90 Plantation Crossing Apartments 96 96 97 97 96 Sunrunner Apartments 95 97 91 92 92 McMillan Place Apartments 97 96 93 93 93 Misty Woods Apartments 97 95 93 95 93 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 in and 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. No market for Limited Partnership Units exists, nor is expected to develop. As of March 1, 1996, distributions from operations to date to unitholders have been approximately $25 for each $1,000 of original investment. 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 6,710. 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 consolidated 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 $14,731 $13,768 $14,690 $17,795 $ 18,799 ======= ======= ======= ======= ======== Loss before extraordinary item $(2,047) $(3,105) $(2,686) $(8,310) $ (5,257) Extraordinary item - gain (loss) on extinguishment of debt $(1,636) - - $ 7,022 - -------- ------- ------- ------- -------- Net loss $(3,683) $(3,105) $(2,686) $(1,288) $ (5,257) ======= ======= ======= ======= ======== Net loss per limited partnership unit (1) Loss before extraordinary item $(20.23) $(30.67) $(26.53) $(82.08) $ (51.93) Extraordinary Item $(16.16) - - $ 69.36 $ - -------- ------- ------- ------- ------- Net loss $(36.39) $(30.67) $(26.53) $(12.72) $ (51.93) ======== ======== ======== ======= ======== Total assets $64,379 $64,604 $70,799 $99,401 $111,211 ======= ======= ======= ======= ======== Long-term obligations: Notes payable $62,342 $59,063 $59,869 $82,007 $ 94,509 ======= ======= ======= ======= ========
- ---------------- (1) $1,000 original contribution per unit, based on units outstanding during the year, after giving effect to the allocation of net loss to the general partner. 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 eight apartment complexes. The properties are located in Georgia, Arizona, Florida, Texas, and North Carolina. The Registrant receives rental income from its properties and is responsible for operating expenses, administrative expenses, capital improvements and debt service payments. As of March 1, 1996, five of the thirteen properties originally purchased by the Registrant were sold or otherwise disposed. All of the Registrant's remaining properties, except for McMillan Place and Sunrunner Apartments, generated positive cash flow from operations during the year ended December 31, 1995. The Registrant's Sunrunner Apartments generated negative cash flow from operations due to significant capital improvements incurred during the year ended December 31, 1995. The Registrant uses working capital reserves provided from any undistributed cash flow from operations, sales and refinancing proceeds as its primary sources of liquidity. For the long term, cash from operations will be the Registrant's primary source of liquidity. There have been no distributions since 1987. The Registrant is prohibited from making any distributions from operations until the mortgages encumbering McMillan Place Apartments are satisfied. Future distributions from sales or refinancings are permitted and will be evaluated at such time. The level of liquidity based upon cash and cash equivalents experienced a $2,650,000 increase at December 31, 1995, as compared to 1994. The Registrant had an increase in cash of $1,159,000 from financing activities and $465,000 from investing activities and $1,026,000 from operating activities. The Registrant's cash provided by financing activities consists of $46,450,000 of proceeds received from the refinancing, at lower interest rates, of the mortgages encumbering the Registrant's Misty Woods, Plantation Crossing, Wood Lake, Wood Ridge, Greenspoint and Sandspoint Apartments properties, which was significantly offset by $42,807,000 of cash used for the repayment of the prior first mortgages and $364,000 of cash used for notes payable principal payments. The Registrant's net cash provided by investing activities consists of $787,000 of cash from the release of restricted cash, which was slightly offset by $322,000 of improvements to real estate. Cash from operating activities declined primarily due to significant refinancing fees, prepayment premiums and exit fees totaling $1,391,000. The Managing General Partner is currently evaluating the Registrant's capital improvement requirements. 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 repurchase agreements secured by United States Treasury obligations. 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. The Registrant has substantial balloon payments on Sunrunner and McMillan Place Apartments due in January 1997 and August 1999 in the amounts of $3,169,000 and $12,971,000, respectively. Although management anticipates that these mortgages can be replaced, if the mortgages are not extended or refinanced, or the properties are not sold, the properties could be lost through foreclosure. If the Registrant's Sunrunner Apartments were lost through foreclosure, the Registrant would recognize a loss of approximately $600,000. If the Registrant's McMillan Place Apartments were lost through foreclosure, the Registrant would not recognize a loss for financial reporting purposes. On December 29, 1995, the Registrant refinanced the mortgage that encumbered its Misty Woods Apartments property with a new first mortgage in the amount of $5,450,000. The loan requires monthly payments of approximately $40,000 at 7.88% interest and matures on January 1, 2006, with a balloon payment of approximately $4,863,000. The loan may not be prepaid without penalty. On December 15, 1995, the Registrant refinanced the mortgages that encumbered their Wood Ridge, Wood Lake and Plantation Crossing Apartments properties. The new $22,000,000 loan (allocated $9,000,000, $7,750,000 and $5,250,000, respectively) requires total monthly payments of approximately $163,000 at 7.5% interest and is being amortized over 25 years. The loan matures on January 1, 2003 with a balloon payment of approximately $19,283,000. The loan may not be prepaid without penalty. On June 29, 1995, the Registrant replaced its maturing mortgage encumbering Greenspoint Apartments with a new first mortgage in the amount of $9,000,000. The loan requires monthly payments of approximately $68,000 at 8.33% interest and is being amortized over 30 years. The loan matures on May 15, 2005 with a balloon payment of approximately $7,974,000. The loan may not be prepaid without penalty. On June 29, 1995, the Registrant replaced its maturing mortgage encumbering Sandspoint Apartment with a new first mortgage in the amount of $10,000,000. The loan requires monthly payments of approximately $76,000 at 8.33% interest and is being amortized over 30 years. The loan matures on May 15, 2005 with a balloon payment of approximately $8,859,000. The loan may not be prepaid without penalty. In connection with the above refinanced mortgages, the Registrant recognized an extraordinary loss on extinguishment of debt of $1,636,000, consisting of the write-off of unamortized deferred loan costs, prepayment premiums and exit fees. In connection with the refinancing of the Registrant's Misty Woods Apartments, the Registrant was required to transfer all the assets and liabilities of Misty Woods to a newly formed, wholly-owned subsidiary. In connection with the remaining refinancings that occurred in 1995, the Registrant was required to convey the properties from the respective wholly-owned subsidiaries back to the Partnership. As required by the terms of the settlement of the actions brought against, among others, DeForest Ventures I L.P. ("DeForest I") relating to the tender offer made by DeForest I in October 1994 (the "First Tender Offer") for units of limited partnership interest in the Registrant and certain affiliated partnerships, DeForest I 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 I acquired an additional 4,234 units of the Registrant which, when added to the units acquired during the First Tender Offer, represents approximately 28% of the total number of outstanding units of the Registrant. The Managing General Partner believes that the tender will not have a significant impact on future operations or liquidity of the 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, management 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, an affiliate of Insignia purchased the limited partnership units held by DeForest I 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 investment objective of capital growth 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 properties and the markets in which such properties are located and on the sales price of the remaining properties. In this regard, it is anticipated at this time that the remaining properties will be 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 loss on extinguishment of debt, improved by $1,058,000 for the year ended December 31, 1995, as compared to 1994, due to an increase in revenues of $963,000 and a decrease in expenses of $95,000. Operating results improved due to improved operations, the gain on sale of property of Plantation Forest Apartments and a provision for impairment of value on Sunrunner Apartments which were recorded in 1994. With respect to the remaining properties, rental revenues increased by $977,000 primarily due to an increase in rental rates at all of the Registrant's properties. Occupancy remained relatively constant at all of the Registrant's properties. In addition, interest income increased by $42,000 due to an increase in average working capital reserves available for investment, coupled with an increase in interest rates. With respect to the remaining properties, expenses increased due to increases in operating expenses of $596,000 and interest expense of $73,000, which was partially offset by decreases in depreciation expense of $11,000 and the provision for impairment of value of $500,000 which was recorded during 1994. Operating expenses increased primarily due to an increase in repairs and maintenance expenses at all of the Registrant's properties except for Sandspoint Apartments. The increase in interest expense is attributable to an increase in the variable interest rates on mortgages that had encumbered the the Registrant's Wood Lake, Wood Ridge, Plantation Crossing, Greenspoint and Sandspoint Apartments. Depreciation expense remained relatively constant. In addition, general and administrative expenses decreased by $32,000 due to a decrease in asset management costs, effective July 1, 1994. 1994 Compared to 1993 Operating results declined by $419,000 for the year ended December 31, 1994, as compared to 1993, due to the provision for impairment of value of $500,000 on the Sunrunner Apartments and the loss on the sale of Plantation Apartments of $149,000. Parkside Village Apartments and Plantation Forest Apartments were sold in May 1993 and February 1994, respectively, and the Cove Apartments was foreclosed in July 1993. With respect to the remaining properties, operating results improved by $194,000 due to increases in revenues of $826,000 and in expenses of $632,000. Revenues declined by $922,000 for the year ended December 31, 1994, as compared to 1993, due to the disposition of the Registrant's Parkside Village Apartments (May 1993), The Cove Apartments (July 1993) and Plantation Forest Apartments (February 1994). With respect to the remaining properties, rental revenues increased by $829,000 primarily due to increased rates and occupancy at all of the the Registrant's properties, except for Plantation Crossing, where rates and occupancy remained relatively constant. Reduced concessions at McMillan and Misty Woods Apartments also contributed to the increase in rental revenues. In addition, interest income decreased by $3,000. Costs and expenses declined by $503,000 for the year ended December 31, 1994, as compared to 1993, due to the disposition of the Registrant's Parkside Village, The Cove and Plantation Forest Apartments. With respect to the remaining properties, expenses increased due to increases in operating expenses of $892,000, depreciation expense of $15,000 and provision for impairment of $500,000, which were only partially offset by a decrease in interest expense of $396,000. Operating expenses increased primarily due to increased spending on deferred maintenance at the Registrant's Sandspoint, Greenspoint, Sunrunner and Wood Lake Apartments. Depreciation expense increased due to the effect of fixed asset additions. Interest expense declined partially due to a $594,000 reduction of the principal balance on the mortgage encumbering the Registrant's Misty Woods property. This was only partially offset by an increase in interest expense on the Registrant's Greenspoint and Sandspoint properties due to an increase in interest rates on the variable rate mortgages. In addition, general and administrative expenses declined by $454,000 due to a decrease in asset management costs. Item 8. Consolidated Financial Statements and Supplementary Data. CENTURY PROPERTIES FUND XIX CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 1995 INDEX 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 - 18 Consolidated 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 the consolidated financial statements. To the Partners Century Properties Fund XIX Greenville, South Carolina Independent Auditors' Report We have audited the accompanying consolidated balance sheets of Century Properties Fund XIX (a limited partnership) (the "Partnership") and its subsidiaries 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 XIX and its subsidiaries as of December 31, 1995 and 1994, and the 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. February 20, 1996 INDEPENDENT AUDITORS' REPORT Century Properties Fund XIX: We have audited the accompanying consolidated statements of operations, partners' equity and cash flows of Century Properties Fund XIX (a limited partnership) (the "Partnership") and its wholly-owned subsidiaries 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 consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Partnership and its wholly-owned subsidiaries for the year ended December 31, 1993 in conformity with generally accepted accounting principles. The accompanying 1993 consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in the first paragraph of Note 10 to the financial statements, the Partnership has balloon payments totaling $10,800,000 due in December 1994, which raises substantial doubt about the Partnership's ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 10. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. DELOITTE & TOUCHE LLP San Francisco, California March 18, 1994 CENTURY PROPERTIES FUND XIX (A Limited Partnership) CONSOLIDATED BALANCE SHEETS DECEMBER 31, --------------------------- 1995 1994 ------------ ------------ ASSETS Cash and cash equivalents $ 2,868,000 $ 218,000 Restricted cash -- 787,000 Other assets and deferred costs 1,977,000 1,643,000 Real Estate: Real estate 94,428,000 94,106,000 Accumulated depreciation (34,394,000 (31,650,000) Allowance for impairment of value (500,000) (500,000) ------------ ------------ Real estate, net 59,534,000 61,956,000 ------------ ------------ Total assets $ 64,379,000 $ 64,604,000 ============ ============ LIABILITIES AND PARTNERS' EQUITY Accrued expenses and other liabilities (including $ 1,374,000 $ 1,195,000 $27,000 to a related party in 1995) Notes payable 62,342,000 59,063,000 ------------ ------------ Total liabilities 63,716,000 60,258,000 ------------ ------------ Partners' Equity (Deficit): General partner (8,992,000) (8,558,000) Limited partners (89,292 units outstanding at December 31, 1995 and 1994) 9,655,000 12,904,000 ------------ ------------ Total partners' equity 663,000 4,346,000 ------------ ------------ Total liabilities and partners' equity $ 64,379,000 $ 64,604,000 ============ ============ See notes to consolidated financial statements. CENTURY PROPERTIES FUND XIX (A Limited Partnership) CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, ------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- Revenues: Rental $14,630,000 $13,709,000 $14,052,000 Interest income 101,000 59,000 62,000 Gain on sale of property - - 576,000 ----------- ----------- ----------- Total revenues 14,731,000 13,768,000 14,690,000 ----------- ----------- ----------- Expenses (including $1,401,000, $690,000 and $57,000 paid to the general partner and affiliates in 1995,1994 and 1993): Interest 6,001,000 5,959,000 6,807,000 Operating 7,826,000 7,260,000 6,992,000 Depreciation 2,744,000 2,766,000 2,840,000 General and administrative 207,000 239,000 693,000 Loss on sale of property - 149,000 44,000 Provision for impairment of value - 500,000 - ----------- ----------- ----------- Total expenses 16,778,000 16,873,000 17,376,000 ----------- ----------- ----------- Loss before extraordinary item (2,047,000) (3,105,000) (2,686,000) Extraordinary item: Loss on extinguishment of debt (1,636,000) - - ----------- ----------- ----------- Net loss $(3,683,000) $(3,105,000) $(2,686,000) =========== =========== =========== Net loss per limited partnership unit: Loss before extraordinary item $ (20.23) $ (30.67) $ (26.53) Extraordinary item (16.16) - - ----------- ----------- ----------- Net loss $ (36.39) $ (30.67) $ (26.53) =========== =========== =========== See notes to consolidated financial statements. CENTURY PROPERTIES FUND XIX (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 $(7,875,000) $18,012,000 $10,137,000 Net loss (317,000) (2,369,000) (2,686,000) ----------- ----------- ----------- Balance - December 31, 1993 (8,192,000) 15,643,000 7,451,000 Net loss (366,000) (2,739,000) (3,105,000) ----------- ----------- ----------- Balance - December 31, 1994 (8,558,000) 12,904,000 4,346,000 Loss before extraordinary item (241,000) (1,806,000) (2,047,000) Extraordinary item (193,000) (1,443,000) (1,636,000) ----------- ----------- ----------- Balance - December 31, 1995 $(8,992,000) $ 9,655,000 $ 663,000 =========== =========== =========== See notes to consolidated financial statements. CENTURY PROPERTIES FUND XIX (A Limited Partnership) CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, -------------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,683,000) $ (3,105,000) $ (2,686,000) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 3,048,000 3,172,000 3,199,000 Extraordinary item - extinguishment of debt 1,636,000 - - Accrued interest added to note payable principal - 29,000 - Costs expensed on attempted property refinancing - - 64,000 Provision for impairment of value - 500,000 - Gain on sale of property - - (576,000) Loss on sale of property - 149,000 44,000 Deferred costs refunded - - 523,000 Changes in operating assets and liabilities: Other assets and deferred costs (72,000) (374,000) (166,000) Accrued expenses and other liabilities 97,000 196,000 (1,905,000) ------------ ------------ ------------ Net cash (used in) provided by operating activities 1,026,000 567,000 (1,503,000) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Restricted cash decrease (increase) 787,000 729,000 (691,000) Additions to real estate (322,000) (240,000) (658,000) Net proceeds from sale of rental property - 485,000 11,259,000 Cost of sale of rental property - (3,000) (772,000) ------------ ------------ ------------ Net cash provided by investing activities 465,000 971,000 9,138,000 ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable to affiliate of the general partner - - 291,000 Repayment of notes payable to affilliate of general partner - (370,000) (1,309,000) Notes payable proceeds 46,450,000 - 20,375,000 Repayment of notes payable (42,807,000) - (25,249,000) Financing costs paid (729,000) (90,000) (497,000) Notes payable principal payments (364,000) (979,000) (1,274,000) Costs paid to extinguish debt (1,391,000) - - ------------ ------------ ------------ Net cash provided by (used in) financing activities 1,159,000 (1,439,000) (7,663,000) ------------ ------------ ------------ Increase (Decrease) in Cash and Cash Equivalents 2,650,000 99,000 (28,000) Cash and Cash Equivalents at Beginning of Year 218,000 119,000 147,000 ------------ ------------ ------------ Cash and Cash Equivalents at End of Year $ 2,868,000 $ 218,000 $ 119,000 ============ ============ ============ Supplemental Disclosure of Cash Flow Information: Interest paid in cash during the year $ 5,662,000 $ 5,449,000 $ 7,826,000 ============ ============ ============ Supplemental Disclosure of Non-cash Investing and Financing Activities: Accrued interest added to note payable principal $ - $ 2,139,000 $ - ============ ============ ============ Refinancing of notes payable (see Note 5) Disposition of rental property in 1994 and 1993 - (see Note 8). See notes to consolidated financial statements.
CENTURY PROPERTIES FUND XIX (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 XIX (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 three residential apartment complexes in Atlanta, Georgia, two residential apartment complexes in Phoenix, Arizona and one residential apartment complex in St. Petersburg, Florida, Dallas, Texas and Charlotte, North Carolina. The general partner of the Partnership is Fox Partners II, a California general partnership. The general partners of Fox Partners II are Fox Capital Management Corporation ("FCMC"), a California corporation, Fox Realty Investors ("FRI"), a California general partnership, and Fox Partners 83, a California general partnership. The capital contributions of $89,292,000 ($1,000 per unit) were made by the limited partners, including 100 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 in 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 28% of total limited partnership units of the Partnership (see Note 11). 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 11). CENTURY PROPERTIES FUND XIX (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) Consolidation The consolidated financial statements include the statements of the Partnership and its wholly-owned subsidiaries, one of which was formed in May 1993 into which Sunrunner Apartments was transferred and another which was formed in December 1995 into which Misty Woods Apartments was transferred. During 1995, two wholly-owned subsidiaries of the Partnership were terminated and the properties were conveyed back to the Partnership (see Note 5). All significant intercompany transactions and balances have been eliminated. 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. Distributions Cash distributions have been suspended since 1987. As specified in the modification of the existing mortgage encumbering McMillan Place Apartments, the Partnership is prohibited from making any distributions except from sales or refinancing of its properties, until the mortgage encumbering McMillan Place Apartments is satisfied. 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, after discounting the scheduled loan payments to maturity, approximates its carrying balance (see Note 5). Cash and Cash Equivalents The Partnership considers all highly liquid investments with an original maturity date of three months or less at the time of purchase to be cash equivalents. CENTURY PROPERTIES FUND XIX (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 repurchase agreements, which are collateralized by United States Treasury obligations. Cash balances exceeded these insured levels during the year. At December 31, 1995, the Partnership had approximately $1,900,000 invested in overnight repurchase agreements, secured by United States Treasury obligations, which are included in cash and cash equivalents. 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 adoption of the SFAS had no effect on the Partnership's financial statements. 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 five to seven years for furnishings. Deferred Financing Costs Financing costs are deferred and amortized over the lives of the related loans as interest expense or expensed if financing is not obtained. At December 31, 1995 and 1994, accumulated amortization of deferred financing costs totaled $114,000 and $974,000, respectively. Net deferred costs of $872,000 and $610,000 for the years ended December 31, 1995 and 1994, respectively, are included in other assets and deferred costs. Net Loss Per Limited Partnership Unit The net loss per limited partnership unit is computed by dividing the net loss allocated to the limited partners by 89,292 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 XIX (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) Reclassification Certain amounts from 1994 and 1993 have been reclassified to conform to the 1995 presentation. 2. TRANSACTIONS WITH THE GENERAL PARTNER 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 amounts were assigned pursuant to a services agreement by the general partner 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, the Managing General Partner 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 11). Related party fees and expenses for the years ended December 31, 1995, 1994 and 1993 were as follows:
1995 1994 1993 --------- --------- --------- Financing fees $ 27,000 $ - $ - Property management fees 738,000 557,000 - Real estate tax reduction fees 66,000 - - Reimbursement of operational expenses: Partnership accounting and investor services 148,000 100,000 - Professional services - 30,000 - --------- --------- --------- Total $ 979,000 $ 687,000 $ - ========= ========= ========= Interest expense $ - $ 3,000 $ 57,000 ========= ========= =========
Property management fees and real estate tax reduction 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 loan. Approximately $449,000 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. CENTURY PROPERTIES FUND XIX (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (Continued) In accordance with the partnership agreement, the general partner received a partnership management incentive allocation equal to ten percent of net and taxable income (loss) before gains on property dispositions. The general partner was also allocated its two percent continuing interest in the Partnership's net and taxable income (loss) after the preceding allocation. The general partner is also allocated gain on property dispositions to the extent it is entitled to receive distributions and then 12 percent of remaining gain. 3. RESTRICTED CASH Restricted cash at December 31, 1994, consists of required reserves maintained in accordance with financing arrangements on the Wood Lake, Wood Ridge, Plantation Crossing, Greenspoint and Sandspoint Apartments in order to meet future capital requirements. During 1995, these properties were refinanced and, as a result of these refinancings, restricted cash reserves were released. 4. REAL ESTATE Real estate, at December 31, 1995 and 1994, is summarized as follows: 1995 1994 ----------- ----------- Land $11,681,000 $11,681,000 Buildings and improvements 75,225,000 75,029,000 Furnishings 7,522,000 7,396,000 ----------- ----------- Total 94,428,000 94,106,000 Accumulated depreciation (34,394,000) (31,650,000) Allowance for impairment of value (500,000) (500,000) ----------- ----------- Real estate, net $59,534,000 $61,956,000 =========== =========== 5. NOTES PAYABLE The Partnership's properties are pledged as collateral for the related notes payable. The Partnership's Wood Lake, Wood Ridge and Plantation Crossing Apartments are cross-collateralized. The notes currently bear interest at rates ranging from 7.5% to 10.06%, and are payable monthly except for the second note on McMillan Apartments whose interest is compounded monthly and is payable at maturity, August 31, 1999. CENTURY PROPERTIES FUND XIX (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 5. NOTES PAYABLE (Continued) On December 29, 1995, the Partnership refinanced the mortgage that encumbered its Misty Woods Apartments property with a new first mortgage in the amount of $5,450,000. The loan requires monthly payments of approximately $40,000 at 7.88% interest and matures on January 1, 2006, with a balloon payment of approximately $4,863,000. The loan may not be prepaid without penalty. The Partnership incurred closing costs and fees of $177,000 in connection with the refinancing, of which $95,000 was paid in 1995. In connection with the refinancing, the Partnership was required to transfer all the assets and liabilities of Misty Woods Apartments to a newly formed, wholly-owned subsidiary, Misty Woods CPF 19, L.P. On December 15, 1995, the partnership refinanced the mortgages that encumbered their Wood Ridge, Wood Lake and Plantation Crossing Apartments properties. The new $22,000,000 loan (allocated $9,000,000, $7,750,000 and $5,250,000, respectively) requires total monthly payments of approximately $163,000 at 7.5% interest and is being amortized over 25 years. The loan matures on January 1, 2003 with a balloon payment of approximately $19,283,000. A premium is to be calculated under the terms of the mortgage if the loan is prepaid. In connection with the refinancings, each of these properties was conveyed from a wholly-owned subsidiary, Century Woods 19, L.P., back to the Partnership. The Partnership incurred closing costs and fees of $346,000 in connection with this refinancing. On June 29, 1995, the Partnership replaced its maturing mortgage encumbering Greenspoint Apartments with a new first mortgage in the amount of $9,000,000. The loan requires monthly payments of approximately $68,000 at 8.33% interest and is being amortized over 30 years. The loan matures on May 15, 2005 with a balloon payment of approximately $7,974,000. A premium is to be calculated under the terms of the mortgage if the loan is prepaid. In connection with the refinancing, the property was conveyed from a wholly-owned subsidiary, SGP Properties, L.P., back to the partnership. The partnership incurred closing costs of $138,000 in connection with the refinancing. On June 29, 1995, the Partnership replaced its maturing mortgage encumbering Sandspoint Apartment with a new first mortgage in the amount of $10,000,000. The loan requires monthly payments of approximately $76,000 at 8.33% interest and is being amortized over 30 years. The loan matures on May 15, 2005 with a balloon payment of approximately $8,859,000. A premium is to be calculated under the terms of the mortgage if the loan is prepaid. In connection with the refinancing, the property was conveyed from a wholly-owned subsidiary, SGP Properties, L.P., back to the partnership. The Partnership incurred closing costs of $150,000 in connection with the refinancing. CENTURY PROPERTIES FUND XIX (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 5. NOTES PAYABLE (Continued) In connection with the above refinancings, the Partnership recognized an extraordinary loss on extinguishment of debt of $1,636,000, consisting of the write-off of unamortized deferred financing costs, prepayment premiums and exit fees. On September 1, 1994, the Partnership obtained a modification of the existing mortgage encumbering McMillan Place Apartments in the amount of $12,939,000 (including accrued interest of $2,139,000). The loan was split into a first mortgage note of $10,800,000 and a second mortgage note of $2,139,000. The first mortgage requires monthly payments of approximately $89,000 at 8.25% interest and is being amortized over a twenty-two year period. Under the terms of the second mortgage, interest accrues at 8.25% (with monthly compounding). Quarterly payments, of all excess cash flow, as defined in the cash management agreement, are required to be made to the lender. No excess cash flow payments were made in 1995 or 1994. In addition, the Partnership is prohibited from making any distributions from operations to its partners. The notes mature on August 31, 1999, with a balloon payment of approximately $9,767,000 on the first mortgage plus the outstanding balance and accrued interest on the second mortgage note. As specified in the modification, the Partnership is required to make monthly payments of $10,000 to a reserve account for the term of the loan, which will be used to fund capital improvements. The mortgage encumbering the Partnership's Sunrunner Apartments property matures on January 1, 1997, with a balloon payment of approximately $3,169,000. Based upon the operations of the property, the Managing General Partner anticipates that the maturing mortgage can be replaced. Principal payments at December 31, 1995 are required as follows: 1996 $ 763,000 1997 3,933,000 1998 826,000 1999 12,691,000 2000 689,000 Thereafter 43,440,000 ------------- Total $ 62,342,000 ============= Amortization of deferred financing costs totaled $304,000, $416,000 and $349,000 for 1995, 1994 and 1993, respectively. 6. NOTES PAYABLE TO AFFILIATE OF THE GENERAL PARTNER The Partnership repaid $370,000 in principal and $3,000 in interest to an affiliate of the general partner in 1994. CENTURY PROPERTIES FUND XIX (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 7. ALLOWANCE FOR IMPAIRMENT OF VALUE In 1994, the Partnership determined that, based upon current economic conditions and projected future operational cash flow, the decline in value of Sunrunner Apartments located in St. Petersburg, Florida was other than temporary and that recovery of its carrying value was not likely. Accordingly, a provision for impairment of value of $500,000 was recognized by the Partnership to reduce the property's carrying value to its estimated fair value. 8. DISPOSITION OF RENTAL PROPERTIES In February 1994, the Partnership sold Plantation Forest Apartments, located in Atlanta, Georgia for $2,450,000. After assumption of the existing loan of $1,965,000 and costs of sale of $3,000, the proceeds to the Partnership were $482,000. The carrying value of the property at the time of the sale was $2,590,000 and $6,000 in unamortized financing costs. The net loss on the sale was $149,000. In May 1993, the Partnership sold Parkside Village Apartments, located in Aurora, Colorado for $11,259,000. After payment of the existing loan of $7,667,000 and costs of the sale of $728,000 (including $281,000 real estate commission paid to an outside broker and $400,000 prepayment premium on the existing loan), the net proceeds to the Partnership were $2,864,000. The carrying value of the property at the time of sale, net of the $1,895,000 provision for impairment of value recognized in 1992, was $9,955,000. The net gain on the sale was $576,000. CENTURY PROPERTIES FUND XIX (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 9. 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 consolidated financial statements are as follows:
1995 1994 1993 --------------- --------------- --------------- Net loss - financial statements $ (3,683,000) $ (3,105,000) $ (2,686,000) Differences resulted from: Amortization of notes payable discount - - 8,000 Depreciation (948,000) (980,000) (1,887,000) Amortization of deferred financing costs and organization expenses - - (114,000) Construction period interest and taxes 3,000 (331,000) (471,000) Provision for impairment of value - 500,000 - Operating - receivership - - 158,000 Interest expense - short-term borrowings - (66,000) (29,000) Prepayment penalty - - (400,000) Gain on property dispositions - net - 910,000 6,301,000 Other (27,000) 21,000 (12,000) --------------- --------------- --------------- Net (loss) income - income tax method $ (4,655,000) $ (3,051,000) $ 868,000 =============== =============== =============== Taxable (loss) income per limited partnership unit after giving effect to the allocation to the general partner $ (46) $ (30) $ 8 =============== =============== =============== Partners' equity - financial statements $ 663,000 $ 4,346,000 $ 7,451,000 Differences resulted from: Sales commissions and organization expenses 12,413,000 12,413,000 12,413,000 Payments credited to rental properties 215,000 215,000 215,000 Amortization of notes payable discount - - 448,000 Depreciation (23,081,000) (22,133,000) (22,059,000) Interest expense - - (1,347,000) Construction period interest and taxes (4,648,000) (4,651,000) (4,320,000) Provision for impairment of value 500,000 500,000 - Interest expense - short-term borrowings - - 66,000 Other (927,000) (900,000) (26,000) =============== =============== =============== Partners' deficit - income tax method $ (14,865,000) $ (10,210,000) $ (7,159,000) =============== =============== ===============
CENTURY PROPERTIES FUND XIX (A Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 10. BASIS OF PRESENTATION AND OPERATING STRATEGY FOR THE YEAR ENDED DECEMBER 31, 1993 The accompanying consolidated financial statements for the year ended December 31, 1993, have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Partnership, after taking into account accrued but unpaid interest on certain notes payable for which the Partnership had suspended debt service payments, has experienced cash flow deficiencies during recent years. At December 31, 1993, the Partnership had borrowed a total of $370,000 from affiliates of the general partner for working capital needs. The Partnership holds investments in and operates properties in real estate markets that are or were experiencing unfavorable economic conditions. Many of the Partnership's properties are or were located in oil industry related and other weakened markets and have experienced operating difficulties. In addition, markets in some areas remained depressed due in part to overbuilding which continued to depress residential rental rates. The level of sales of existing properties have been affected by the limited availability of financing in real estate markets. The Partnership had a balloon payment of $10,800,000 on McMillan Place Apartments due in December 1994. The Partnership's ability to hold and operate its remaining properties was dependent on obtaining refinancing or debt restructuring as required. If the Partnership was unable to obtain debt modification or refinancing, it was likely that dispositions of properties operating at a deficit or with significant balloon payments would have occurred through sale, foreclosure or transfer to the lenders. The Partnership sold Plantation Forest in February 1994 and with the proceeds from the sale paid off the remaining loans from an affiliate of the general partner. The Partnership believed this strategy, combined with cash generated from the Partnership's properties with positive operations would allow the Partnership to meet its capital and operating requirements. The outcome of these uncertainties could not be determined. The consolidated financial statements do not include any adjustments that might have resulted from the ultimate outcome of these uncertainties. The Partnership obtained a modification of the McMillan Place debt during 1994 and refinanced numerous properties during 1995, which resulted in significant net proceeds to the Partnership. Cash flow from operations improved in 1994 and 1995, as compared to 1993 (see Note 5). 11. 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. CENTURY PROPERTIES FUND XIX (A Limited Partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
COLUMN COLUMN COLUMN COLUMN COLUMN A B C D E Cost Capitalized Initial Cost Subsequent Gross Amount at Which to Partnership to Acquisition Carried at Close of Period(1) -------------- ---------------- ----------------------------- Buildings Buildings and and Encum- Improve- Improve- Carrying Improve- Description brances Land ments ments Costs Land ments Total (2) - ----------- ------- ---- -------- -------- -------- ---- --------- --------- (Amounts in thousands) PARTNERSHIP: Wood Lake Apartments Atlanta, Georgia $ 7,750 $ 1,206 $10,980 $ 499 $ - $ 1,206 $11,479 $12,685 Sandspoint Apartments Phoenix, Arizona 9,968 2,124 13,158 633 (44) 2,146 13,725 15,871 Greenspoint Apartments Phoenix, Arizona 8,972 2,165 11,199 324 (153) 2,140 11,395 13,535 Wood Ridge Apartments Atlanta, Georgia 9,000 1,632 12,321 592 - 1,632 12,913 14,545 Plantation Crossing Apartments Atlanta, Georgia 5,250 1,062 7,576 368 - 1,062 7,944 9,006 McMillan Place Apartments Dallas, Texas 12,710 2,399 10,826 509 (11) 2,427 11,296 13,723 Subsidiaries: Sunrunner Apartments St. Petersburg, Florida 3,242 634 6,485 497 - 634 6,982 7,616 Misty Woods Apartments Charlotte, North Carolina 5,450 429 6,846 179 (7) 434 7,013 7,447 ------- ------- ------- ----- ------- ------- ------- ------- Total $62,342 $11,651 $79,391 $3,601 $ (215) $11,681 $82,747 $94,428 ======= ======= ======= ====== ======= ======= ======= ======= COLUMN COLUMN COLUMN COLUMN COLUMN A F G H I Accumu- Life lated on which Deprecia- Deprecia- tion Year tion is and of Date computed Impairment Con- of in latest of value struc- Acqui- statement of Description (3) tion sition operations - ----------- ---------- ----- ------ ---------- PARTNERSHIP: Wood Lake Apartments Atlanta, Georgia $ 4,913 1983 12/83 5 - 30 yrs Sandspoint Apartments Phoenix, Arizona 5,603 1986 2/84 6 - 30 yrs Greenspoint Apartments Phoenix, Arizona 4,634 1986 2/84 6 - 30 yrs Wood Ridge Apartments Atlanta, Georgia 5,431 1982 4/84 6 - 30 yrs Plantation Crossing Apartments Atlanta, Georgia 3,334 1980 6/84 6 - 30 yrs McMillan Place Apartments Dallas, Texas 4,704 1985 6/85 6 - 30 yrs Subsidiaries: Sunrunner Apartments St. Petersburg, Florida 3,441 1981 7/84 6 - 30 yrs Misty Woods Apartments Charlotte, North Carolina 2,834 1986 6/85 6 - 30 yrs ------- Total $34,894 =======
See accompanying notes. SCHEDULE III CENTURY PROPERTIES FUND XIX (A Limited Partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 NOTES: (1) The aggregate cost for Federal income tax purposes is $89,059,000. (2) Balance, January 1, 1993 $ 137,828,000 Improvements capitalized subsequent to acquisition 658,000 Cost of rental property disposed of (41,050,000) ------------- Balance, December 31, 1994 97,436,000 Improvements capitalized subsequent to acquisition 240,000 Cost of rental property disposed of (3,570,000) ------------- Balance, December 31, 1994 94,106,000 Improvements capitalized subsequent to acquisition 322,000 ------------- Balance, December 31, 1995 $ 94,428,000 ============= (3) Balance, January 1, 1993 $ 41,635,000 Additions charged to expense 2,840,000 Accumulated depreciation on rental property disposed (11,012,000) Allowance for impairment of value on rental properties disposed of (3,589,000) ------------- Balance, December 31, 1993 29,874,000 Additions charged to expense 2,766,000 Allowance for impairment of value 500,000 Accumulated depreciation on rental property disposed (990,000) ------------- Balance, December 31, 1994 32,150,000 Additions charged to expense 2,744,000 ------------- Balance, December 31, 1995 $ 34,894,000 =============
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. 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 was not qualified or modified as to audit scope or accounting principles. However, Deloitte's Independent Auditors' Report for the calendar year December 31, 1993 was modified due to the uncertainty regarding the Registrant's ability to continue as a going concern since the Registrant had substantial balloon payments due on Notes in 1994; the financial statements did not include any adjustments that might result from the outcome of this uncertainty. The decision to change Independent Auditors was approved by the Managing General Partner's Directors. During 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. Neither the Registrant, nor Fox Partners II ("Fox"), the general partner of the Registrant, has any officers or directors. Fox Capital Management Corporation (the "Managing General Partner'), the managing general partner of Fox, 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 affiliated Insignia (See "Item 1, Business - Change in Control"). Insignia is a full service real estate service organization performing property management, commercial and retail leasing, 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. From January 1983 until March 1991, Mr. Shuler was President of the Management Division of Hall Financial Group, Inc., a property management organization located in Dallas, Texas. 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 100 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, LLC(1) 24,811.66(2) 27.8 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 Registrant's partnership agreement, the Partnership may be charged by the general partners and affiliates for services provided to 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 II 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 II commenced providing certain property management services (see Notes 1 and 11). Related party expenses for the years ended December 31, 1995, 1994 and 1993 were as follows: 1995 1994 1993 -------- -------- -------- Property management fees $738,000 $557,000 $ - Real estate tax reduction fees 66,000 - - Reimbursement of operational expenses: Partnership accounting and investor services 148,000 100,000 - Professional services - 30,000 - -------- -------- -------- Total $952,000 $687,000 $ - ======== ======== ======== Interest expense $ - $ 3,000 $ 57,000 ======== ======== ======== Property management fees and real estate tax reduction fees are included in operating expenses. Reimbursed expenses are primarily included in general and administrative expenses. Approximately $449,000 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 addition, a $27,000 fee was accrued to an affiliate of Insignia during 1995 in connection with the refinancing of the Partnership's Misty Woods Apartments property. In accordance with the Registrant's partnership agreement, the general partner received a partnership management incentive allocation equal to ten percent of net and taxable income (loss) before gains on property dispositions. The general partner was also allocated its two percent continuing interest in the Partnership's net and taxable income (loss) after the preceding allocation. The general partner is also allocated gain on property dispositions to the extent it is entitled to receive distributions and then 12 percent of remaining gain. As a result of its ownership of 24,811.66 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) Consolidated Financial Statements and Financial Statement Schedules: See "Item 8" of this Form 10-K for Consolidated Financial Statements of the Registrant, Notes thereto, and Financial Statement Schedules. (A Table of Contents to Consolidated 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 September 20, 1983, as amended or June 13, 1989, and as thereafter supplemented contained in the Registrant's Registration Statement on Form S-11 (Reg. No. 2-79007) 10(a) Amended and Restated Note A, made as of September 1, 1994, by the Registrant in favor of The Travelers Insurance Company ("Travelers") in the principal amount of $10,800,000, incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1994. (b) Amended and Restated Note B, made as of September 1, 1994, by the Registrant in favor of Travelers in the principal amount of $2,138,673.53, incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1994. (c) Amended and Restated Deed of Trust, dated as of September 1, 1994, between the Registrant and Travelers, incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1994. (d) Amended and Restated Note B, made as of September 1, 1994, between the Registrant and Travelers, incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1994. (e) Promissory Note made December 15, 1995, by the Registrant in favor of Connecticut General Life Insurance Company ("CIGNA") in the principal amount of $22,000,000 relating to the refinancing of Wood Lake, Wood Ridge and Plantation Crossing. (f) Form of Deed to Secure Debt and Security Agreement from the Registrant to CIGNA relating to the refinancing of Wood Lake, Wood Ridge and Plantation Crossing. (g) First Mortgage Note from the Registrant to Secore Financial Corporation ("Secore") relating to the refinancing of Misty Woods Apartments. (h) First Mortgage and Security Agreement dated as of December 29, 1995, from the Registrant to Secure relating to the refinancing of Misty Woods Apartments. 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 26th of March, 1996. CENTURY PROPERTIES FUND XIX By: FOX PARTNERS II Its General Partner 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 26, 1996 - --------------------------- Director William H. Jarrard, Jr. /s/ Ronald Uretta Principal Financial March 26, 1996 - --------------------------- Officer and Principal Ronald Uretta Accounting Officer /s/ John K. Lines Director March 26, 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 Amended and Restated Note A, made as of September 1, (7) September 1, 1994, by the Registrant in favor of The Travelers Insurance Company ("Travelers") in the principal amount of $10,800,000 10.2 Amended and Restated Note A, made as of September 1, (7) September 1, 1994, by the Registrant in favor of Travelers in the principal amount of $2,138,673.53 10.3 Amended and Restated Deed of Trust, dated as of September (7) 1, 1994, between the Registrant and Travelers 10.4 Amended and Restated Note B, made as of September 1, 1994 (7) between the Registrant and Travelers 10.5 Promissory Note made December 15, 1995, by the Registrant in favor of Connecticut General Life Insurance Company ("CIGNA") in the principal amount of $22,000,000 10.6 Deed to Secure Debt and Security Agreement from the Registrant to CIGNA 10.7 First Mortgage Note from the Registrant to Secore Financial Corporation ("Secore") 10.8 First Mortgage and Security Agreement dated as of December 29, 1995, from the Registrant to Secore 16 Letter from the Registrant's former Independent Auditor dated April 27, 1994 (8) - ------------------- (1) Incorporated by reference to the Registrant's Current Report on Form 8-K dated August 7, 1995 (2) Incorporated by reference to Exhibt 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 September 20, 1983, as amended or June 13, 1989 and as thereafter supplemented contained in the Registrant's Registration Statement on Form S-11 (Reg. No. 2-79007) (7) Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1994. (8) Incorporated by reference to exhibit 10 to the Registrant's Current Report on Form 8-K dated April 22, 1994. EX-10.5 2 PROMISSORY NOTE Atlanta, Georgia PROMISSORY NOTE $22,000,000 December 15, 1995 FOR VALUE RECEIVED, CENTURY PROPERTIES FUND XIX, a California limited partnership (the "Maker"), promises to pay to the order of CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation, having its principal office at 900 Cottage Grove Road, Bloomfield, Connecticut (the "Payee"), at Payee's principal address or such other place as the Holder hereof may designate in writing (the legal holder from time to time of this Note, including Payee as the initial holder, being hereinafter referred to as "Holder"), the principal sum of Twenty Two Million and NO/100 Dollars ($22,000,000) (the "Principal Indebtedness"), together with interest thereon at an annual rate of seven and one-half percent (7.5%) (the "Interest Rate"), in accordance with the provisions hereinafter set forth. 1. Terms of Payment. If the date on which the Principal Indebtedness is advanced to Maker (the "Advancement Date") is not the first day of a calendar month, then Maker shall pay to Holder on the Advancement Date, interest only on the Principal Indebtedness, at the Interest Rate, calculated on the basis of a 365-day year and the number of days from and including the Advancement Date to and including the last day of the calendar month in which the Advancement Date occurs. On the first day of the second calendar month following the Advancement Date (or on the first day of the first calendar month following the Advancement Date, if the Advancement Date is the first day of a calendar month), and on the first day of each calendar month thereafter (hereinafter called the "monthly payment dates") through and including December 1, 2002, Maker shall pay to Holder the sum of $162,578.07 (hereinafter referred to as "monthly payments"), to be applied first to interest on the Principal Indebtedness from time to time outstanding at the Interest Rate and the balance to be applied in reduction of the Principal Indebtedness. The interest component of the monthly payments shall be calculated and applied on the basis of a 360-day year consisting of twelve 30-day months. On January 1, 2003 (the "Maturity Date") Maker shall pay to Holder the entire Principal Indebtedness then remaining unpaid, together with accrued and unpaid interest thereon at the Interest Rate and any other charges due under this Note, the Security Deeds (hereinafter defined), and any other documents evidencing or securing or pertaining to the advancement or disbursement of the Principal Indebtedness (collectively, the "Loan Documents"). The period from and including the date hereof to the Maturity Date will be referred to hereinafter as the "Term". 2. Prepayment. Except as specifically provided herein or in the Security Deeds, no prepayment of the Principal Indebtedness shall be allowed during the first four (4) loan years (the "Closed Period"). Maker, whether or not a debtor in a proceeding under Title 11, United States Code, may prepay the Principal Indebtedness in full, but not in part (except as provided in the Security Deeds), on any monthly payment date after the Closed Period, provided Maker gives Holder sixty (60) days prior written notice and pays a prepayment fee equal to: (i) three percent (3.0%) of the then-existing balance of this Note, if prepayment is made during the fifth (5th) loan year; (ii) two percent (2.0%) of the then-existing balance of this Note, if prepayment is made during the sixth (6th) loan year; or (iii) one percent (1.0%) of the then-existing balance of this Note, if prepayment is made during the first nine (9) months of the seventh (7th) loan year. No prepayment fee shall be due if prepayment is made during the last three (3) months of the seventh (7th) loan year. The loan years shall be consecutive 12-month periods measured from the initial monthly payment date. The foregoing prepayment fee will be due when the loan is prepaid after the Closed Period and prior to the last three (3) months preceding the Maturity Date, whether such prepayment is voluntary or results from default, acceleration or any other cause. In the event of a prepayment during the Closed Period resulting from a default, acceleration or any other reason (other than a sale of collateral as permitted in the Security Deeds), Maker shall pay to Holder a default prepayment fee calculated as follows: (a) three percent (3.0%) of the then existing principal balance of this Note, plus (b) Yield Maintenance as defined below. Yield Maintenance: Yield Maintenance is defined as the Present Value on the date of prepayment of the Monthly Interest Shortfall for the remaining Term of the loan. The Monthly Interest Shortfall is the product of (i) the positive difference, if any, of the Semi-Annual Equivalent Rate less the Treasury Yield, divided by 12, times (ii) the outstanding principal balance of the loan on each monthly payment date for each full and partial month remaining in the Term. The Present Value is then determined by discounting each Monthly 12 Interest Shortfall at the Treasury Yield divided by twelve. The "Semi-Annual Equivalent Rate" for this loan is 7.62% The "Treasury Yield" will be determined by reference to the Federal Reserve Statistical Release H.15 (519) of Selected Interest Rates (or any similar successor publication of the Federal Reserve) for the first week ending not less than two full weeks prior to the prepayment date. If the remaining Term is less than one year, the Treasury Yield will equal the yield for 1-Year Treasury Constant Maturities. If the remaining Term is equal to one of the maturities of the Treasury Constant Maturities (e.g., 1-year, 2-year, etc.), then the Treasury Yield will equal the yield for the Treasury Constant Maturity with a maturity equalling the remaining Term. If the remaining Term is longer than one year, but does not equal one of the maturities of the Treasury Constant Maturities, then the Treasury Yield will equal the yield for the Treasury Constant Maturity closest to, but not exceeding, the remaining Term. Any other provision of this Note to the contrary notwithstanding, (i) prepayments will be permitted at par (i.e., no prepayment fee) for prepayments occasioned by the application of casualty insurance and/or condemnation proceeds to the Principal Indebtedness as provided in the Security Deeds and (ii) prepayments in connection with the sale of one or more of the three apartment projects securing this Note, during the Closed Period, made in conformity with the requirements of the Security Deeds, shall require a prepayment fee equal only to the greater of (x) one percent (1.0%) of the principal amount prepaid or (y) Yield Maintenance. The aforementioned prepayment fee does not constitute a penalty, but rather represents the reasonable estimate, agreed to between Maker and Payee, of a fair compensation for the loss that may be sustained by Holder due to prepayment of the Principal Indebtedness prior to the Maturity Date. Any prepayment fee required pursuant to the preceding paragraphs shall be paid without prejudice to the right of Holder to collect any of the amounts owing under this Note or the Security Deeds or otherwise, to enforce any of its rights or remedies arising out of an Event of Default hereunder. 3. Security. This Note is secured by, among other things, three Deeds to Secure Debt and Security Agreements (the "Security Deeds"), each given by Maker to Payee, of even date herewith, constituting a first lien or first security title on real estate and a first priority security interest in personal property and any leasehold on such personal property and assignment of rents and leases (hereinafter referred to as the "Security"), comprising three apartment projects known as "Wood Lake Apartments", "Wood Ridge Apartments" and "Plantation Crossing Apartments," respectively, located in the County of Cobb, State of Georgia. 4. Location and Medium of Payments. The sums payable under this Note or under the Security Deeds shall be paid to Holder at its principal address hereinabove set forth, or at such other place as Holder may from time to time hereafter designate to Maker in writing, in legal tender of the United States of America. 5. Acceleration of Maturity. At the option of Holder, which may be exercised at any time after one or more of the following events (each being an "Event of Default") shall have occurred, the whole of the Principal Indebtedness, together with all interest, applicable prepayment fees, and other charges due under any of the Loan Documents, shall immediately become due and payable ("Acceleration of Maturity"): (a) if any payment of any installment of the Principal Indebtedness, and/or interest or of any other sum due hereunder is not received by Holder within five business days following the date when such payment was due; or (b) if a default or an Event of Default shall occur under the Security Deeds or any other of the Loan Documents, which is not cured within any applicable grace period afforded therein, if any. 6. Late Charges; Interest Following Event of Default. If any payment due under this Note, the Security Deeds, or any other Loan Document, is not paid when due, without regard to any cure or grace period, Maker shall pay and Holder shall be entitled to collect a late payment charge for each month or fraction thereof during which such payment is not made when due and for each month thereafter that such sum remains unpaid, equal to the lesser of four percent (4%) of such late payment or the maximum amount permitted by law, for the purpose of defraying the expense incurred by Holder in handling and processing such delinquent payment, and such amount shall be secured by the Loan Documents securing this Note. In addition to any late payment charge which may be due under this Note, Maker shall pay interest on all sums due hereunder at a rate (the "Default Rate") equal to the lesser of (i) the Interest Rate plus four percent (4%) per annum, or (ii) the maximum rate permitted by law, from and after the first to occur of the following events: if Holder elects to cause the Acceleration of Maturity; if a petition under Title 11, United States Code, shall be filed by or against Maker or if Maker shall seek or consent to the appointment of a receiver or trustee for itself or for any of the Security, file a petition seeking relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, make a general assignment for the benefit of creditors, or be unable to pay its debts as they become due; if a court shall enter an order, judgment or decree appointing, with or without the consent of Maker, a receiver or trustee for it or for any of the Security or approving a petition filed against Maker which seeks relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, and any such order, judgment or decree shall remain in force, undischarged or unstayed, sixty days after it is entered; or if all sums due hereunder are not paid on the Maturity Date. 7. Collection and Enforcement Costs. Maker, upon demand, shall pay Holder for all costs and expenses, including without limitation attorneys' fees, paid or incurred by Holder in connection with the collection of any sum due hereunder, or in connection with enforcement of any of Holder's rights or Maker's obligations under this Note, the Security Deeds, or any of the other Loan Documents. 8. Continuing Liability. The obligation of Maker to pay the Principal Indebtedness, interest and all other sums due hereunder shall continue in full force and effect and in no ways be impaired, until the actual payment thereof to Holder, and in case of a sale or transfer of all or any part of the Security, or in case of any further agreement given to secure the payment of this Note, or in case of any agreement or stipulation extending the time or modifying the terms of payment above recited, Maker shall nevertheless continue to be liable on this Note, as extended or modified by any such agreement or stipulation, unless released and discharged in writing by Holder. 9. Joint and Several Liability. If more than one person, corporation, partnership or other entity shall execute this Note, then each person and entity shall be fully liable for all obligations of Maker hereunder, and such obligations shall be joint and several. 10. No Oral Changes; Waivers. This Note may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of a change is sought. The provisions of this Note shall extend and be applicable to all renewals, amendments, extensions, consolidations, and modifications of the other Loan Documents, and any and all references herein to the Loan Documents shall be deemed to include any such renewals, amendments, extensions, consolidations, or modifications thereof. Maker and any future indorsers, sureties, and guarantors hereof, jointly and severally, waive presentment for payment, demand, notice of nonpayment, notice of dishonor, protest of any dishonor, notice of protest, and protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default (except notice of default required by the Loan Documents, if any), or enforcement of the payment of this Note, and they agree that the liability of each of them shall be unconditional without regard to the liability of any other party and shall not be in any manner affected by an indulgence, extension of time, renewal, waiver, or modification granted or consented to by the Holder; and Maker and all future indorsers, sureties and guarantors hereof consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by the Holder hereof with respect to the payment or other provisions of this Note, and to the release of the collateral, or any part thereof, with or without substitution, and agree that additional makers, indorsers, guarantors, or sureties may become parties hereto without notice to them or affecting their liability hereunder. Holder shall not by any act of omission or commission be deemed to waive any of its rights or remedies hereunder unless such waiver be in writing and signed by Holder, and then only to the extent specifically set forth therein; a waiver on one event shall not be construed as continuing or as a bar to or waiver of such right or remedy on a subsequent event. The acceptance by Holder of payment hereunder that is less than payment in full of all amounts due at the time of such payment shall not without the express written consent of Holder: (i) constitute a waiver of the right to exercise any of Holder's remedies at that time or at any subsequent time, (ii) constitute an accord and satisfaction, or (iii) nullify any prior exercise of any remedy. No failure to cause an Acceleration of Maturity hereof by reason of an Event of Default hereunder, acceptance of a past due installment, or indulgences granted from time to time shall be construed (i) as a novation of this Note or as a reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration or of the right of Holder thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or by the laws of the State of Georgia; and, to the maximum extent permitted by law, Maker hereby expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing. To the maximum extent permitted by law, Maker hereby waives and renounces for itself, its heirs, successors and assigns, all rights to the benefits of any statute of limitations and any moratorium, reinstatement, marshalling, forbearance, valuation, stay, extension, redemption and appraisement now provided, or which may hereafter be provided, by the Constitution and laws of the United States of America and of any state thereof, both as to itself and in and to all of its property, real and personal, against the enforcement and collection of the obligations evidenced by this Note. 11. Bind and Inure. This Note shall bind and inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 12. Applicable Law. The provisions of this Note shall be construed and enforceable in accordance with the laws of the State of Georgia. If any provision of this Note or the application hereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, neither the remainder of this Note nor the application of such provision to any other person or circumstance shall be affected thereby, but rather the same shall be enforced to the greatest extent permitted by law, except that if such provision relates to the payment of a monetary sum, then the Holder may, at its option, declare the entire indebtedness evidenced hereby due and payable upon sixty (60) days prior written notice to Maker and, provided no Event of Default is then continuing, without prepayment fee or premium. 13. Usury. It is hereby expressly agreed that if from any circumstances whatsoever fulfillment of any provision of this Note, at the time performance of such provision shall be due, shall involve transcending the limit of validity presently prescribed by any applicable usury statute or any other law, with regard to obligations of like character and amount, then ipso facto the obligation to be fulfilled shall be reduced to the limit of such validity, so that in no event shall any exaction be possible under this Note that is in excess of the limit of such validity. In no event shall Maker be bound to pay for the use, forbearance or detention of the money loaned pursuant hereto, interest of more than the current legal limit; the right to demand any such excess being hereby expressly waived by Holder. 14. Notice. Any notice, request, demand, statement or consent made hereunder shall be in writing signed by the party giving such notice, request, demand, statement or consent, and shall be deemed to have been properly given when either delivered personally, delivered to a reputable overnight delivery service providing a receipt or deposited in the United States Mail, postage prepaid and registered or certified return receipt requested, at the address set forth below, or at such other address within the continental United States of America as may have theretofore been designated in writing. The effective date of any notice given as aforesaid shall be the date of personal service, one (1) business day after delivery to such overnight delivery service, or three (3) business days after being deposited in the United States Mail, whichever is applicable. For purposes hereof, the addresses are as follows: If to Holder: CIGNA Corporation c/o CIGNA Investments, Inc. 900 Cottage Grove Road Hartford, CT 06152-2319 Attn: Investment Services, S-319 With a copy to: CIGNA Corporation Investment Law Department 900 Cottage Grove Road Hartford, CT 06152-2215 Attn: Real Estate Division, S-215A If to Maker: Century Properties Fund XIX 5665 Northside Drive,N.W. Suite 370 Atlanta, Georgia 30328 With a courtesy copy to: Post & Heymann, LLP Suite 214 100 Jericho Quadrangle Jericho, New York 11753 Attn: David J. Heymann Notwithstanding the foregoing agreement to provide a courtesy copy to Maker's attorneys, such copy shall be a courtesy copy only, and failure to provide such courtesy copy shall have absolutely no effect or entitle Maker to any remedy whatsoever. Any notice duly given to Maker shall be effective whether or not the courtesy copy was given to Maker's attorneys. 15. Nonrecourse. Except as hereinafter in this Section 15 and in Section 39 of the Security Deeds specifically provided, Maker shall not be personally liable for the payment of any sums due hereunder or the performance of any obligations of Maker hereunder or under the other Loan Documents. No judgment for the repayment of the Principal Indebtedness or interest thereon will be enforced against the Maker personally or any property of the Maker other than the Security and other security furnished under the Loan Documents in any action to foreclose the Security Deeds or to otherwise realize upon any security furnished under the Loan Documents or to collect any amount payable hereunder. Notwithstanding the foregoing: (a) Nothing herein contained shall be construed as prohibiting Holder from exercising any and all remedies which the Loan Documents permit, including the right to bring actions or proceedings against Maker and to enter a judgment against Maker, so long as the exercise of any remedy does not extend to execution against or recovery out of any property of Maker other than the security furnished under the Loan Documents; (b) Maker shall be fully and personally liable for (i) misapplying any condemnation awards or insurance awards attributable to the Security, to the full extent of such awards so misapplied, (ii) misapplying any security deposits attributable to the Security, to the full extent of such deposits so misapplied, (iii) collecting any rents in advance in violation of any covenant contained in the Loan Documents, to the full extent of such rents so collected in advance, (iv) committing fraud, misrepresentation or waste in connection with the operation of the Security or the making of the loan evidenced hereby, to the full extent of any loss, damage, expense or costs (including reasonable attorneys' fees) incurred by Holder resulting from such fraud, misrepresentation or waste, (v) failing to pay any debt service on any indebtedness related to the Security, operating and maintenance expenses, insurance premiums, deposits into a reserve for replacements or other sums required by the Loan Documents, but only to the extent of any gross revenues from the Security during the period beginning twelve (12) months prior to a notice of acceleration to Maker through the date of foreclosure or deed in lieu of foreclosure that were available to pay such expenses but were not so used, (vi) failing to pay real estate taxes and assessments which are a lien against the Security during the period of Maker's ownership (excluding any period during which a receiver for the Security has been appointed by a court of competent jurisdiction), to the full extent of such unpaid taxes (excluding, however, any such real estate taxes and assessments for which funds shall have been escrowed by Maker, with or for the benefit of Holder for the payment thereof as provided in the Security Deeds), and (vii) failing to maintain the levels of insurance required under the Security Deeds or any other of the Loan Documents, to the full extent of any insurance proceeds that would have been available had such levels of insurance been maintained; (c) There shall be no limitation, in any event of Maker's personal liability under, and the exercise of any of Holder's rights under any indemnity from Maker to Holder including but not limited to, the three Environmental Indemnification Agreements of even date herewith each from Maker, et al., to Payee with regard to the Security except as may be expressly set forth therein. 16. Time of the Essence. Time is of the essence in this Note and the other Loan Documents. 17. Attorneys' Fees. Any reference to "attorney fees" in this document includes but is not limited to both the fees, charges and costs incurred by Holder through its retention of outside legal counsel and the allocable fees, costs and charges for services rendered by Holder's in-house counsel. Any reference to "attorney fees" shall also include but not be limited to those attorneys or legal fees, costs and charges incurred by Holder in the collection of any Principal Indebtedness, the enforcement of any obligations hereunder, the protection of the Security, the foreclosure of the Security Deeds, the sale of the Security, the defense of actions arising hereunder and the collection, protection or setoff of any claim the Holder may have in a proceeding under Title 11, United States Code. Attorneys' fees provided for hereunder shall accrue whether or not Holder has provided notice of an Event of Default or of an intention to exercise its remedies for such Event of Default. 18. Waiver of Trial by Jury. If and to the extent now or hereafter enforceable under applicable law, Maker hereby waives its right to a trial by jury as to any matter arising out of or concerning the subject matter of this Note. IN WITNESS WHEREOF, Maker has duly executed this Note as a sealed instrument as of the day and year first above written. MAKER: CENTURY PROPERTIES FUND XIX, a California limited partnership By: Fox Partners II, a California general partnership, its general partner By: Fox Capital Management Corporation, a California corporation, its general partner By: Name: Title: Attest: Name: Title: [CORPORATE SEAL] EX-10.6 3 DEED TO SECURE DEBT AND SECURITY AGREEMENT Recording Requested By and When Recorded Mail To: - ---------------------------------- - ---------------------------------- - ---------------------------------- DEED TO SECURE DEBT AND SECURITY AGREEMENT (Wood Lake) From CENTURY PROPERTIES FUND XIX as Grantor To CONNECTICUT GENERAL LIFE INSURANCE COMPANY as Grantee December 15, 1995 THIS DEED TO SECURE DEBT SECURES A PROMISSORY NOTE IN THE AMOUNT OF $22,000,000 (THE "NOTE"). THE NOTE IS ALSO SECURED BY TWO OTHER DEEDS TO SECURE DEBT ALSO BEING FILED SIMULTANEOUSLY HEREWITH IN THE RECORDS OF COBB COUNTY, GEORGIA. GEORGIA INTANGIBLES TAX ON THE NOTE IN THE AMOUNT OF $25,000 IS BEING PAID IN CONJUNCTION WITH THE FILING OF THE FIRST OF THE THREE DEEDS TO SECURE DEBT. DEED TO SECURE DEBT AND SECURITY AGREEMENT TABLE OF CONTENTS Page 1. Payment of Indebtedness.......................................... 6 2. Covenants of Title................................................7 3. Usury.............................................................7 4. Impositions.......................................................8 5. Tax Deposits......................................................9 6. Change in Taxes..................................................11 7. Insurance........................................................12 8. Insurance/Condemnation Proceeds..................................13 9. Restoration Following Fire and Other Casualty or Condemnation....14 10. Disposition of Condemnation or Insurance Proceeds................20 11. Fire and Other Casualty; Self-Help...............................22 12. Rent Insurance Proceeds..........................................23 13. [INTENTIONALLY LEFT BLANK].......................................24 14. Repair; Alterations; Waste; Environmental........................24 15. Environmental Indemnification....................................29 16. Independence of Security.........................................29 17. No Other Liens...................................................30 18. Management.......................................................30 19. [INTENTIONALLY LEFT BLANK].......................................31 20. Sidewalks, Municipal Charges.....................................31 21. Assignment of Rents and Leases...................................31 22. Future Leases....................................................33 23. Grantor's Obligations as Lessor..................................34 24. Leases; Foreclosure..............................................35 25. [INTENTIONALLY LEFT BLANK].......................................35 26. Events of Default................................................35 27. Remedies Upon Default............................................37 28. Acceleration Interest............................................43 29. Late Charge......................................................44 30. Security Interest................................................44 31. Right of Entry...................................................46 32. Estoppel Certificate.............................................46 33. Annual Statements................................................46 34. Rights Cumulative................................................48 35. Subrogation......................................................48 36. No Waiver........................................................48 37. Deed Extension...................................................48 38. Indemnification..................................................49 39. Nonrecourse......................................................49 40. Attorneys' Fees..................................................51 41. Administrative Fees..............................................51 42. Protection of Security; Costs and Expenses.......................52 43. Notices..........................................................53 44. Release..........................................................54 45. Applicable Law...................................................54 46. Invalidity.......................................................54 47. Captions.........................................................55 48. Modifications....................................................55 49. Bind and Inure...................................................55 50. Replacement of Note..............................................55 51. Time of the Essence..............................................56 52. Waiver of Grantor's Rights.......................................56 53. Discontinuance of Proceedings....................................57 54. Limitations on Transfers.........................................57 55. Sale of Security.................................................62 Exhibit A - Description of Land Exhibit B - Description of Debtor and Secured Party DEED TO SECURE DEBT AND SECURITY AGREEMENT THIS DEED TO SECURE DEBT AND SECURITY AGREEMENT (hereinafter referred to as this "Deed") is made as of the 15th day of December, 1995, by CENTURY PROPERTIES FUND XIX, a California limited partnership whose general partner is Fox Partners II, a California general partnership, having its principal place of business at 5665 Northside Drive, N.W., Suite 370, Atlanta, Georgia 30328 (hereinafter referred to as "Grantor"), to CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation having its principal place of business at 900 Cottage Grove Road, Bloomfield, Connecticut 06002 (hereinafter referred to as "Grantee"). WITNESSETH: THAT, to secure (i) payment to Grantee of the principal indebtedness of Twenty Two Million and No/100 Dollars ($22,000,000) together with interest thereon, as evidenced by that certain promissory note (hereinafter referred to as the "Note") of even date herewith, and any renewals, extensions or modifications thereof, given by Grantor to Grantee and made payable to the order of Grantee, with the final payment being due and payable on January 1, 2003, in and by which Note the Grantor promises to pay the said principal indebtedness and interest at the rate and in installments as provided in the Note, (ii) the performance of the covenants herein contained and the payment of any monies expended by Grantee in connection therewith, (iii) the payment of all obligations and the performance of all covenants of Grantor under any other loan documents, agreements or instruments between Grantor and Grantee given in connection with or related to this Deed or the Note and (iv) any and all additional advances made by Grantee to protect or preserve the Security (hereinafter defined) or the security interest created hereby on the Security, or for taxes, assessments, or insurance premiums as hereinafter provided or for performance of any of Grantor's obligations hereunder or for any other purpose provided herein (whether or not the original Grantor remains the owner of the Security at the time of such advances) (all of the aforesaid indebtedness and obligations of Grantor being herein called the "Indebtedness", and all of the documents, agreements and instruments between Grantor and Grantee now or hereafter evidencing or securing the repayment of, or otherwise pertaining to, the Indebtedness being herein collectively called the "Loan Documents"), Grantor does hereby mortgage, grant, bargain, sell, assign, pledge, transfer, and convey unto Grantee and to Grantee's successors and assigns forever, all of the following described land, improvements real and personal property and all of its estate, right, title and interest therein (hereinafter collectively called the "Security"): The land described in Exhibit A attached hereto and made a part hereof, situate, lying and being in the County of Cobb, and State of Georgia (the "Land"); TOGETHER with all buildings and other improvements now or hereafter located on said Land or any part thereof including but not limited to, all extensions, betterments, renewals, renovations, substitutes and replacements of, and all additions and appurtenances to the Security (the "Improvements"); TOGETHER with all of the right, title and interest of Grantor in and to the land lying in the bed of any street, road, highway or avenue in front of or adjoining the Land to the center lines thereof; TOGETHER with the right to use, in perpetuity, in connection with the operation of the Security the name "Wood Lake Apartments" and any other name similar thereto; TOGETHER with all easements now or hereafter located on or appurtenant to the Land and/or Improvements or under or above the same or any part thereof, rights-of-way, licenses, permits, approvals and privileges, belonging or in any way appertaining to the Land and/or Improvements including without limitation (i) any drainage ponds or other like drainage areas not located on the Land which may be required for water run-off, (ii) any easements necessary to obtain access from the Land to such drainage areas, or to any other location to which Grantor has a right to drain water or sewage (iii) any land required to be maintained as undeveloped land by the zoning rules and regulations applicable to the Land, and (iv) any easements and agreements which are or may be established to allow satisfactory ingress to, egress from and operating of the Land and/or the Improvements; TOGETHER with any and all awards heretofore made and hereafter to be made by any governmental, municipal, or state authorities to the present and all subsequent owners of the Security for the taking of all or any portion of the Security by power of eminent domain, including, without limitation, awards for damage to the remainder of the Security and any awards for any change or changes of grade of streets affecting the Security, which said awards are hereby assigned to Grantee, and Grantee, at its option, is hereby authorized, directed and empowered to collect and receive the proceeds of any such awards from the authorities making the same and to give proper receipts and acquittances therefor, and to apply the same toward the payment of the Indebtedness, notwithstanding the fact that such amount may not then be due and payable; and Grantor hereby covenants and agrees to and with Grantee, upon request by Grantee, to make, execute and deliver, at Grantor's expense, any and all assignments and other instruments sufficient for the purpose of assigning the aforesaid awards to Grantee, free, clear and discharged of any and all encumbrances of any kind or nature whatsoever (all of the foregoing Land, Improvements, rights, easements, rights-of-way, licenses, privileges, and awards, collectively, the "Real Property"); TOGETHER with all proceeds, insurance or otherwise, paid for the damage done to any of the Security and all proceeds of the conversion, voluntarily or involuntarily, of any of the Security into cash or liquidated claims; TOGETHER with all fixtures, machinery, equipment, goods, and every other article of personal property, tangible and intangible, now or hereafter attached to or used in connection with the Real Property, or placed on any part thereof and whether or not attached thereto, appertaining or adapted to the use, management, operation or improvement of the Real Property, insofar as the same and any reversionary right thereto may now or hereafter be owned or acquired by Grantor, including, but without limitation: all partitions; screens; awnings; shades; blinds; floor coverings; hall and lobby equipment; heating, lighting, plumbing, ventilating, refrigerating, incinerating, elevator, escalator, air conditioning and communication plants or systems with appurtenant fixtures; vacuum cleaning systems; call systems; sprinkler systems and other fire prevention and extinguishing apparatus and materials; all equipment, manual, mechanical and motorized, for the construction, maintenance, repair and cleaning of, and removal of snow from, parking areas, walks, underground ways, truck ways, driveways, common areas, roadways, highways and streets; all equipment, manual, mechanical and motorized, for the transportation of customers or employees to and from the store facilities on the Real Property; all telephone, computers, and other electronic equipment and appurtenances thereto, including software; and all other machinery, pipes, poles, appliances, equipment, wiring, fittings, panels and fixtures; and any proceeds therefrom, any replacements thereof or additions or accessions thereto; and all building materials, supplies and other property delivered to the Real Property for incorporation into the Improvements thereon, all of which are declared to be a part of the realty and covered by the lien and security title hereof, but said lien and security title shall not cover any fixture, machinery, equipment or article of personal property which is owned by a tenant and not required for the operation or maintenance of the Real Property, provided said fixture, machinery, equipment or article of personal property is not permanently affixed to the realty and may be removed without material damage thereto and is not a replacement of any item which shall have been subject to the lien and security title hereof, but said lien and security title shall include any other fixture, machinery, equipment or article of personal property so incorporated into the Improvements so as to constitute realty under applicable law, whether or not owned by the Grantor; TOGETHER with all of Grantor's books of account and records relating to the Security, including all computers and software relating thereto; TOGETHER with all contracts for sale and leases in the nature of sales of the Real Property, or any portion thereof, now and hereafter entered into and all right, title and interest of Grantor thereunder, including, without limitation, cash or securities deposited thereunder to secure performance by the lessees or contract purchasers; all proceeds and revenue arising from or out of the Real Property or any part thereof; all licenses, permits, franchises, governmental approvals and all sanitary sewer, drainage, water and utility service agreements benefiting the Real Property or any part thereof, together with all accounts, general intangibles, documents, instruments and chattel paper arising from or in connection with the Real Property, including all books and records in connection therewith; and all rights of Grantor under any leases, covenants, agreements, easements, restrictions or declarations recorded with respect to, or as an appurtenance to, the Real Property or any part thereof; (all of the tangible and intangible personal property described in this and the previous two paragraphs, collectively, the "Personal Property"); TOGETHER with all of the right, title and interest of Grantor in and to all and singular the tenements, hereditaments and appurtenances thereunto belonging to or in any way pertaining to the Security; all the estate, right, title and claim whatsoever of Grantor, either in law or in equity, in and to the Security; and any and all other, further or additional title, estate, interest or right which may at any time be acquired by Grantor in or to the Security, and if Grantor shall at any time acquire any further estate or interest in or to the Security, the lien and security title of this Deed shall attach, extend to, cover and be a lien and security title upon such further estate or interest automatically without further instrument or instruments, and Grantor, upon request of Grantee, shall execute such instrument or instruments as shall reasonably be requested by Grantee to confirm such security title, security interest and lien, and Grantor hereby irrevocably appoints Grantee as Grantor's attorney-in-fact (which appointment is coupled with an interest) to execute all such instruments if Grantor shall fail to do so within ten (10) days after demand; TO HAVE AND TO HOLD the Security, and each and every part thereof, unto Grantee and its successors and assigns forever, in fee simple as to the Real Property, for the purposes and uses herein set forth. This Deed is intended (i) to constitute a security agreement as required under the Uniform Commercial Code of the State of Georgia and (ii) to operate and to be construed as a deed passing the title to the Security to Grantee and is made under those provisions of the existing laws of the State of Georgia relating to Deeds to Secure Debt, and not as a mortgage (including, without limitation, Chapter 44-14 of the Official Code of Georgia Annotated 1982). Should the Indebtedness be paid according to the tenor and effect thereof when the same shall become due and payable, and should Grantor perform all covenants herein contained in a timely manner, then this Deed shall be cancelled and surrendered pursuant to the Laws of the State of Georgia. AND, Grantor hereby further covenants, agrees and warrants as follows: 1. Payment of Indebtedness. Grantor will pay the principal indebtedness and interest thereon in accordance with the provisions of the Note and all prepayment charges, late charges and fees required thereunder, and all extensions, renewals, modifications, amendments and replacements thereof, and will keep and perform all the covenants, promises and agreements and pay all sums provided in (i) each of the Note or any other promissory note or notes at any time hereafter issued to evidence the Indebtedness (ii) this Deed and (iii) any and all other Loan Documents, all in the manner herein or therein set forth. Each of the persons and/or entities constituting Grantor hereunder shall be fully liable for such payment and performance, and such liability shall be joint and several. 2. Covenants of Title. Grantor has good and indefeasible title to the entire Real Property in fee simple, has absolute unencumbered title to the Personal Property, and has good right and full power to sell, mortgage and convey the same; the Security is free and clear of easements, restrictions, liens, leases and encumbrances, except those easements, restrictions, liens, leases and encumbrances listed on Schedule B of the policy or policies of title insurance delivered to Grantee as of the recordation of this Deed (the "Permitted Encumbrances"), to which this Deed is expressly subject, or which may hereafter be created in accordance with the terms hereof; and Grantor will warrant and defend title to the Security against all claims and demands whatsoever except the Permitted Encumbrances. Grantee shall have the right, at its option and at such time or times as it, in its sole discretion, shall deem necessary, to take whatever action it may deem necessary to defend or uphold the lien and security title of this Deed or otherwise enforce any of the rights of Grantee hereunder or any obligation secured hereby, including without limitation, the right to institute appropriate legal proceedings for such purposes. 3. Usury. It is hereby expressly agreed that if from any circumstances whatsoever fulfillment of any provision of the Note, this Deed, or any other Loan Documents, at the time performance of such provision shall be due, shall violate any applicable usury statute or any other law, with regard to obligations of like character and amount, then ipso facto the obligation to be fulfilled shall be reduced to the limit of such validity, so that in no event shall any exaction be possible under the Loan Documents that is in excess of the limit of such validity. In no event shall Grantor be bound to pay for the use, forbearance or detention of the money loaned pursuant to the Loan Documents, interest of more than the current legal limit, the right to demand any such excess being hereby expressly waived by Grantee. 4. Impositions. Grantor will pay (if and to the extent Grantor shall not have placed adequate funds in escrow pursuant to Section 5 below to cover such payment), before the last day on which the same may be paid without penalty or interest, all real estate taxes, sewer rents, water charges and all other municipal and governmental assessments, rates, charges, impositions and liens (hereinafter referred to as "Impositions") which now or hereafter are imposed by law upon the Security, whether relating directly to the Security or to property adjoining or abutting the Security. If any Imposition is not paid within the time hereinabove specified, Grantee shall have the right to pay the same, together with any penalty and interest thereon, and the amount or amounts so paid or advanced shall forthwith be payable by Grantor to Grantee and shall be secured by the lien and security title of this Deed; but Grantor may in good faith contest, at Grantor's own cost and expense, by proper legal proceedings, the validity or amount of any Imposition, on the condition that Grantor first shall deposit with Grantee, as security for the payment of such contested item, an amount equal to the contested item plus all penalties and interest which would be payable if Grantor is ultimately required to pay such contested item, and on the further condition that no amount so contested may remain unpaid for such length of time as shall permit the Security, or the lien thereon created by the item being contested, to be sold for the nonpayment thereof, or as shall permit an action, either of foreclosure or otherwise, to be commenced by the holder of any such lien. Grantor will not claim any credit on, or make any deduction from the Indebtedness by reason of the payment of any Imposition. Grantor hereby assigns to Grantee all rights of Grantor now or hereafter arising in and to the refund of any Imposition and any interest thereon. If following receipt of any such refund by Grantee, there exists no Event of Default (as hereinafter defined) hereunder, then Grantee shall pay over the same to Grantor promptly after demand; if there exists an Event of Default hereunder, Grantee may apply said refund in reduction of the Indebtedness in whatever order Grantee may elect. 5. Tax Deposits. Grantor shall deposit with Grantee, or with an escrow agent selected by Grantor, on the first day of the calendar month immediately following the date of this Deed and on the first day of each calendar month thereafter (each of which dates is hereinafter called the "monthly tax deposit date") until the payment in full of the Indebtedness a sum equal to one-twelfth of the Impositions to be levied, charged, assessed or imposed upon or for the Security within one year after said monthly tax deposit date. If on any monthly tax deposit date the amount of Impositions to be levied, charged, assessed or imposed within the ensuing one year period shall not be fixed, such amount for the purpose of computing the deposit to be made by Grantor hereunder, shall be estimated by Grantee, with appropriate adjustment when the amount of such Impositions is fixed. The sums deposited by Grantor under this Section shall be held in an interest bearing account with interest being retained by Grantee and free of trust except to the extent, if any, that applicable law shall otherwise require and applied in payment of such Impositions when due. Grantor shall give thirty (30) days prior written notice to Grantee in each instance when an Imposition is due, specifying the Imposition to be paid and the amount thereof, the place of payment and the last day on which the same may be paid in order to be within the time limit specified in Section 4 hereof entitled "Impositions". Notwithstanding the foregoing provision and so long as Grantor holds title to and controls the Security, Impositions are paid in full when due and there has been no Event of Default, or any state of facts which, with the passage of time or giving of notice, or both, would constitute an Event of Default under the Loan Documents, the interest earned by such escrows, less reasonable escrow costs, will be paid to Grantor on each real estate tax payment date. If for any reason the sums on deposit with Grantee or escrow agent under this Section shall not be sufficient to pay an Imposition within the time specified in Section 4 hereof, then Grantor shall, within ten (10) days after demand by Grantee, deposit sufficient sums so that Grantee may pay such Imposition in full, together with any penalty and interest thereon. Grantee may change its estimate of Impositions for any period, on the basis of a change in an assessment or tax rate or on the basis of a prior miscalculation or for any other reason, in which event Grantor shall deposit with Grantee or escrow agent within ten (10) days after demand the amount of any excess of the deposits which would theretofore have been payable under the revised estimate over the sums actually deposited. If any Imposition shall be levied, charged, assessed or imposed upon or for the Security, or any portion thereof, and if such Imposition shall also be a levy, charge, assessment or imposition upon or for any other premises not covered by the lien and security title of this Deed, then the computation of the amounts to be deposited under this Section shall be based upon the entire amount of such Imposition and Grantor shall not have the right to apportion any deposit with respect to such Imposition. Upon an assignment of this Deed, Grantee shall have the right to arrange to transfer all amounts deposited and still in its possession to the assignee and Grantee shall thereupon be completely released from all liability with respect to such deposit and Grantor or owner of the Security shall look solely to the assignee or transferee in reference thereto. Upon the payment in full by Grantor of the entire Indebtedness, any sums then held by Grantee under this Section shall be refunded to Grantor. All amounts deposited shall be held by Grantee as additional security for the sums secured by this Deed, and Grantor hereby grants to Grantee a security interest in such sums, and upon the occurrence of an Event of Default hereunder Grantee may, in its sole and absolute discretion, apply said amounts to the payment of the Indebtedness in whatever order Grantee may elect. Immediately upon receipt of such by Grantor, Grantor shall deliver to Grantee copies of all notices, demands, claims, bills, and receipts in relation to the Impositions. Notwithstanding the foregoing provisions, Grantee will waive the requirement for deposits as to that portion of Impositions payable directly to the governmental or other authority by tenants under the terms of leases approved by Grantee, provided satisfactory proof of payment is promptly furnished to Grantee. 6. Change in Taxes. In the event any tax shall be due or become due and payable to the United States of America, the State of Georgia or any political subdivision thereof with respect to the execution and delivery or recordation of this Deed or any other Loan Document or the interest of Grantee in the Security, Grantor shall pay such tax at the time and in the manner required by applicable law and Grantor shall hold Grantee harmless and shall indemnify Grantee against any liability of any nature whatsoever as a result of the imposition of any such tax. In the event of the enactment, after the date of this instrument, of any law changing in any way the present law as to the taxation of notes or debts secured by mortgages, for Federal, State, or local purposes, or the manner of collection of any Impositions, so as to affect this Deed or the Note secured hereby, then Grantor shall upon demand make such payments to Grantee and take such other steps, as may be necessary in Grantee's reasonable judgment, to place Grantee in the same financial position as it was prior to any such enactment, failing which, or if the Grantor is not permitted by law to make such payments, the Indebtedness shall, at the option of Grantee, immediately become due and payable. 7. Insurance. Grantor shall at all times until the Indebtedness shall be paid in full, keep the Security insured against loss or damage for its full replacement cost (which cost shall be reset once a year at Grantee's option) under policies of All Risk Replacement Cost Insurance with Agreed Amount Endorsement (including risks of war and nuclear explosion, if available), and shall further provide flood insurance (if the Security is situated in an area which is considered a flood risk area by the federal government or any agency thereof), boiler and machinery insurance, earthquake insurance, rent loss insurance in an amount sufficient to cover the total of all rents accruing from the Security for a one year period, comprehensive general liability insurance in a minimum amount of $1,000,000, and excess or umbrella liability of at least $25,000,000, during any period of restoration, a policy or policies of builder's "all risk" insurance in an amount not less than the full insurable value of the Security against such risks as Grantee may request, and such other appropriate insurance as Grantee may require from time to time, in such amounts and with such companies as shall be approved by Grantee with a Best's rating of A:XII or better, and will assign and deliver the original policy or policies of such insurance to Grantee. Each such policy shall name Grantee as an additional insured and shall provide that all proceeds shall be payable to Grantee, that the same may not be cancelled or modified except upon thirty (30) days prior written notice to Grantee, that no act or thing done by Grantor shall invalidate the policy as against Grantee, shall be endorsed with standard noncontributory mortgagee clauses in favor of and in form acceptable to Grantee, and shall otherwise be in such form as shall be reasonably acceptable to Grantee, so that at all times until the payment in full of the Indebtedness, Grantee shall have and hold the said policy and policies as further collateral for the payment of all Indebtedness. If Grantor shall fail to obtain any such policy or policies required by Grantee, or shall fail to assign and deliver the same to Grantee, then Grantee may obtain such insurance and pay the premium or premiums therefor, in which event Grantor shall, on demand of Grantee, repay such premium or premiums to Grantee and such repayment shall be secured by the lien and security title of this Deed. If Grantor fails to maintain the level of insurance required under this Deed, then Grantor shall indemnify Grantee to the extent that a casualty occurs and insurance proceeds would have been available had such insurance been maintained. Grantor shall promptly provide to Grantee copies of any and all notices (including notice of non-renewal), claims, and demands which Grantor receives from insurers of the Security. Effective from and after any Event of Default, Grantor hereby assigns to Grantee all rights of Grantor in and to any unearned premiums on any insurance policy required to be furnished by Grantor. 8. Insurance/Condemnation Proceeds. Grantor hereby assigns to Grantee all proceeds of any insurance or condemnation awards which Grantor may be entitled to receive for loss or damage to, or taking of, the Security. In the event of loss or damage to, or a taking of, the Security, the proceeds of said insurance or condemnation award shall be payable to Grantee alone and Grantor hereby authorizes and directs any affected insurance company or governmental agency to make payment of the insurance proceeds or condemnation award directly to Grantee; provided, however, if the insurance proceeds or condemnation award in any one instance shall be less than $75,000, Grantor shall be entitled to collect such proceeds or awards and to retain any excess not required for repair or restoration. In the event that any such insurance proceeds or condemnation awards are paid directly to Grantor, Grantor shall make such proceeds or awards available to Grantee within five (5) days of Grantor's receipt thereof. No such loss or damage shall itself reduce the Indebtedness. Grantee is authorized to adjust and compromise such loss without the consent of Grantor, to collect and receive such proceeds or awards in the name of Grantee and Grantor and to endorse Grantor's name upon any check in payment thereof. Subject to the provisions of Sections 9, 10, and 11 hereof, such proceeds or awards shall be applied first toward reimbursement of all costs and expenses of Grantee in collecting said proceeds or awards, then toward payment of the Indebtedness or any portion thereof, whether or not then due and payable, in whatever order Grantee may elect, or Grantee may, at its option, apply said insurance proceeds or condemnation awards in whole or in part toward restoration of the Security for which such insurance proceeds or condemnation awards shall have been paid. In the event of foreclosure of this Deed or other transfer of title to the Security and extinguishment, in whole or in part, of the Indebtedness, all right, title, and interest of Grantor in and to any insurance policy, or premiums or payments in satisfaction of claims or any other rights thereunder then in force, shall pass to the purchaser or grantee notwithstanding the amount of any bid at such foreclosure sale. Nothing contained herein shall prevent the accrual of interest as provided in the Note on any portion of the principal balance due under the Note until such time as the insurance proceeds or condemnation awards are actually received and applied to reduce the principal balance outstanding. 9. Restoration Following Fire and Other Casualty or Condemnation. In the event of damage to the Security by reason of fire or other hazard or casualty, Grantor shall give prompt written notice thereof to Grantee and shall proceed with reasonable diligence to perform repair, replacement and/or rebuilding work (hereinafter referred to as the "Work") to restore the Security to its condition prior to such damage in full compliance with all legal requirements. In the event of a taking by power of eminent domain or conveyance in lieu thereof ("condemnation"), if restoration is feasible as reasonably determined by Grantee, then Grantor shall proceed with reasonable diligence to perform such restoration (also referred to as the "Work"). Before commencing the Work, Grantor shall comply with the following requirements: (a) If the casualty or condemnation is of a nature that requires plans and specifications, Grantor shall furnish to Grantee complete plans and specifications for the Work, for Grantee's approval, which approval shall not be unreasonably withheld. Said plans and specifications shall bear the signed approval thereof by an architect satisfactory to Grantee and shall be accompanied by the architect's signed estimate, bearing the architect's seal, of the entire cost of completing the Work. (b) Grantor shall furnish to Grantee true and correct copies of all permits and approvals required by law in connection with the commencement and conduct of the Work. (c) If required by Grantee in its reasonable discretion, Grantor shall furnish to Grantee, prior to the commencement of the Work, a surety bond for or guaranty of completion of and payment for the Work, which bond or guaranty shall be in form satisfactory to Grantee and shall be signed by a surety or sureties, or guarantor or guarantors, as the case may be, who are acceptable to Grantee, and in an amount not less than the architect's estimate of the entire cost of completing the Work, less the amount of insurance proceeds or condemnation award, if any, then held by Grantee and which Grantee shall have elected or shall be required to apply toward restoration of the Security as provided in Section 10 hereof. Grantor shall not commence any of the Work until Grantor shall have complied with the above requirements, and thereafter Grantor shall perform the Work diligently and in good faith in accordance with the plans and specifications referred to in subsection (a) above. If, as provided in Section 10 hereof, Grantee shall have elected or is required to apply any insurance proceeds or condemnation awards toward repair or restoration of the Security, then so long as the Work is being diligently performed by Grantor in accordance with the provisions of this Deed, Grantee shall disburse such insurance proceeds or condemnation awards to Grantor from time to time during the course of the Work in accordance with the following provisions: A. The Work shall be in the charge of an experienced construction manager satisfactory to Grantee with the consultation of any architect or engineer required pursuant to Section 9(a) above or otherwise required by Grantee in its reasonable discretion. B. Each request for payment shall not be made more often than at thirty (30) day intervals, on ten (10) business days prior notice to Grantee, and shall be accompanied by a certificate of the architect or engineer, if any (or, if none, by a certificate of Grantor), dated not more than ten (10) days prior to the application for withdrawal of funds, stating: (i) that all of the Work for which payment is being requested is in place and has been completed in compliance with the approved plans and specifications and all applicable legal requirements; (ii) that the sum then requested to be withdrawn has been paid by Grantor and/or is justly due to contractors, subcontractors, materialmen, engineers, architects or other persons (whose names and addresses shall be stated) who have rendered or furnished certain services or materials for the Work and giving a brief description of such services and materials and the principal subdivisions or categories thereof and the respective amounts so paid or due to each of said persons in respect thereof and stating the progress of the Work up to the date of said certificate; (iii) that the sum then requested to be withdrawn, plus all sums previously withdrawn, does not exceed the cost of the Work insofar as actually accomplished up to the date of such certificate; (iv) that the remainder of the moneys held by Grantee will be sufficient to pay in full for the completion of the Work; (v) that no part of the cost of the services and materials described in the foregoing paragraph (ii) of this Clause B has been or is being made the basis of the withdrawal of any funds in any previous or then pending application; and (vi) that, except for the amounts, if any, specified in the foregoing paragraph (ii) of this Clause B to be due for services or materials, there is no outstanding indebtedness known, after due inquiry, which is then due and payable for work, labor, services or materials in connection with the Work which, if unpaid, might become the basis of a vendor's, mechanic's, laborer's or materialman's statutory or other similar lien upon the Security or any part thereof. C. Grantor shall deliver to Grantee satisfactory evidence that the Security and every part thereof, and all materials and all property described in the certificate furnished pursuant to the foregoing Clause B, are free and clear of all mortgages, liens, charges or encumbrances, except (a) encumbrances, if any, securing indebtedness due to persons (whose names and addresses and the several amounts due them shall be stated) specified in said certificate furnished pursuant to the foregoing Clause B, which encumbrances will be discharged upon disbursement of the funds then being requested, and (b) this Deed. Grantee shall accept as satisfactory evidence under this Clause C a certificate of a title insurance company acceptable to Grantee or an endorsement to Grantee's existing loan title policy insuring the lien and security title of this Deed, dated as of the date of the making of the disbursement, confirming the foregoing. D. If the casualty or condemnation results in the construction of any improvements outside the foundations of improvements existing prior to the casualty or condemnation, Grantor shall deliver to Grantee a survey of the Security dated as of a date within ten (10) days prior to the making of the advance (or revised to a date within ten days prior to the advance) showing no encroachments other than those, if any, acceptable to Grantee. E. There shall be no Event of Default by Grantor under the Note or under any of the other Loan Documents, or any state of facts existing which, with the passage of time or the giving of notice, or both, would constitute an Event of Default. Grantee at its option may waive any of the foregoing requirements. Upon compliance by Grantor with the foregoing Clauses A, B, C, D, and E (except for such requirements, if any, as Grantee at its option may have waived), Grantor shall, to the extent of the insurance proceeds or condemnation award, if any, which Grantee shall have elected or shall be required to apply to restoration of the Security, pay or cause to be paid to the persons named in the certificate furnished pursuant to the foregoing paragraph (i) of Clause B, the respective amounts stated in said certificate to be due them (after taking into account a ten percent (10%) retainage ("Retainage") prior to completion) and Grantee shall pay to Grantor the amounts stated in said certificate to have been paid by Grantor (after taking into account the Retainage prior to completion). If upon completion of the Work there shall be insurance proceeds or condemnation awards held by Grantee over and above the amounts withdrawn pursuant to the foregoing provisions, plus Retainage, then Grantee, at Grantee's option, may either retain such proceeds or awards and apply the same in reduction of the Indebtedness in whatever order Grantee may elect, or Grantee may pay over such proceeds or awards to Grantor. Upon completion of the Work, in addition to the requirements of the foregoing Clauses A, B, C, D, and E, Grantor shall promptly deliver to Grantee: (a) A written certificate of the architect or engineer, if any (or, if none, a written certificate of Grantor), that the Work has been fully completed in a good and workmanlike manner in accordance with the approved plans and specifications, if any; (b) A written report and endorsement to a policy of a title insurance company acceptable to Grantee insuring the Security against mechanics' and materialmen's liens; (c) A certificate by Grantor in form and substance satisfactory to Grantee, listing all costs and expenses in connection with the completion of the Work and the amount paid by Grantor with respect to the Work; (d) If required, a temporary certificate of occupancy and all other applicable certificates, licenses, consents and approvals issued by governmental agencies or authorities with respect to the Security and by the appropriate Board of Fire Underwriters or other similar bodies acting in and for the locality in which the Security is situated, provided that within thirty (30) days after completion of the Work, Grantor shall obtain and deliver to Grantee a permanent certificate of occupancy for the Security. Upon receipt of the foregoing items, Grantee shall pay any Retainage held by Grantee for the benefit of Grantor. 10. Disposition of Condemnation or Insurance Proceeds. Grantee, in its absolute discretion, may decide whether and to what extent, if any, proceeds of insurance or condemnation will be made available to Grantor for repair or restoration of the Security, but Grantor shall effect such repair or restoration as provided above whether or not Grantee makes any of such proceeds available for that purpose. Notwithstanding the foregoing, Grantee agrees to make insurance or condemnation proceeds available to Grantor for repair or restoration provided: (i) Not more than 20% of the Security is damaged or taken, and, in the case of a condemnation, the portion of the Security not taken by condemnation has not, in Grantee's sole opinion, been rendered economically nonviable by the taking; (ii) There has been no Event of Default under the Loan Documents for the twelve (12) months preceding the damage or taking, and there does not then exist an Event of Default, or any state of facts which, with the passage of time or the giving of notice, or both, would constitute an Event of Default; (iii) Grantor can demonstrate to Grantee's satisfaction that Grantor has the financial ability to make all scheduled payments when due under the Loan Documents during repair or restoration; (iv) Such damage or taking occurs prior to the last loan year; (v) The security of Grantee hereunder will not be impaired by releasing such proceeds to Grantor; (vi) Annual income from leases in place for the Security, as determined by Grantee in its reasonable discretion, plus any insurance for lost rents that will survive restoration provide coverage for the portion of the Note allocable to the Security as provided in Section 54(h), of at least 1.50 times the annual Debt Service Coverage (as hereinafter defined); (vii) The Work will return the Improvements to substantially the size, design, and utility as existed immediately before the casualty; and (viii) The proceeds are released under escrow/construction funding arrangements specified in Section 9 hereof. "Debt Service Coverage" as used in this Deed shall mean the ratio, as determined by Grantee, of (a) Net Operating Income from the Security (and/or the property encumbered by the Second Deed and/or the Third Deed, as the context may require), for the applicable period of time to (b) Total Annual Debt Service. "Net Operating Income" is defined as gross income from operations of the Security for the previous twelve (12)-month period from leases of apartments therein (to the extent Grantee reasonably projects such income will continue for the immediately succeeding twelve (12) month period), subtracting therefrom all necessary and ordinary operating expenses applicable to the Security for such period of time (both fixed and variable to the extent reasonably projected by Grantee to continue for the next succeeding twelve (12) month period), including, but not limited to, utilities, administrative, cleaning, landscaping, security, repairs and maintenance, management fees, real estate and other taxes, assessments and insurance, but excluding therefrom deductions for federal, state and other income taxes, debt service expense, depreciation or amortization of capital expenditures and other similar noncash items. Gross income shall not be anticipated for any greater time period than that approved by generally accepted accounting principles nor shall ordinary operating expenses by prepaid. Documentation of Net Operating Income shall be certified by an officer of Grantor with detail satisfactory to Grantee and shall be subject to the approval of Grantee. "Total Annual Debt Service" shall mean the aggregate debt service payments (including principal and interest) on the Note (or on the First Note and/or the Second Note and/or the Third Note (all as hereinafter defined), as the context may require) for the applicable time period. If Grantee elects not to make the proceeds available for the Work, then such proceeds shall be applied to reduce the Indebtedness in whatever order Grantee may elect. Any application of such proceeds to the principal indebtedness evidenced by the Note shall be at par and shall cause a pro rata reduction in payments of interest and, if applicable, principal, under the Note; provided, however, that if there exists an Event of Default, the prepayment fee as provided in the Note shall also be due. If during the last two loan years, Grantee applies insurance and/or Condemnation proceeds to pay down the Note, and provided no Event of Default then exists, Grantor shall have the option of prepaying the entire Note at par without any prepayment fee. 11. Fire and Other Casualty; Self-Help. If within one hundred twenty (120) days after the occurrence of any damage to the Security in excess of $50,000 or the condemnation of any portion of the Security, Grantor shall not have submitted to Grantee and received Grantee's approval of plans and specifications for the Work or shall not have obtained approval of such plans and specifications from all governmental authorities whose approval is required, or if, after such plans and specifications are approved by Grantee and all such governmental authorities, Grantor shall fail to promptly commence the Work, or if thereafter Grantor fails to perform the Work diligently or is delinquent in the payment to mechanics, materialmen or others of the costs incurred in connection with the Work (except to the extent caused by the failure of Grantee to comply with the terms of this Deed), or, in the case of any loss or damage not in excess of $50,000.00, if Grantor shall fail to commence the Work, or if thereafter Grantor fails to perform the Work diligently or is delinquent in the payment to mechanics, materialmen or others of the costs incurred in connection with the Work (except to the extent caused by the failure of Grantee to comply with the terms of this Deed), then, in addition to all other rights herein set forth, and after giving Grantor twenty (20) days written notice of the nonfulfillment of one or more of the foregoing conditions Grantee, or any lawfully appointed receiver of the Security, may at its respective option, perform or cause the Work to be performed and may take such other steps as it deems advisable to perform the Work, and may enter upon the Security for any of the foregoing purposes, and Grantor hereby waives, for Grantor and all others holding under Grantor, any claim against Grantee or such receiver arising out of anything done by Grantee or such receiver pursuant to this Section, and Grantee may apply insurance proceeds (without the need to fulfill the requirements of Section 9 hereof) to reimburse Grantee, and/or such receiver for all amounts expended or incurred by them, respectively, in connection with the performance of the Work, and any excess costs shall be paid by Grantor to Grantee upon demand, with interest at the Default Rate (hereinafter defined), and such payment shall be secured by the lien and security title of this Deed. 12. Rent Insurance Proceeds. If Grantor shall promptly commence and diligently perform the Work, and there shall be no Event of Default under the Loan Documents, then Grantee shall each month pay to Grantor out of the rent insurance proceeds held by Grantee a sum equal to that amount, if any, of the rent insurance proceeds paid by the insurer which is allocable to the rental loss for the preceding month. Grantee at its option may waive any of the foregoing conditions to the payment of rent insurance proceeds. If Grantor does not fulfill the foregoing conditions entitling Grantor to monthly disbursements of rent insurance proceeds, then such rent insurance proceeds may be applied by Grantee, at Grantee's option, to the payment of the Indebtedness in whatever order Grantee may elect. 13. [INTENTIONALLY LEFT BLANK] 14. Repair; Alterations; Waste; Environmental. Grantor shall keep all of the Security in good and substantial repair, and expressly agrees that it will neither permit nor commit any waste upon the Security, nor do any act or suffer or permit any act to be done, whereby the lien and security title hereof may be impaired and shall comply with all zoning laws, environmental laws, and other laws, ordinances, rules and regulations made or promulgated by any government or municipality, or by any agency thereof or by any other lawful authority, which are now or may hereafter become applicable to the Security. Grantor shall repair or restore any building now or hereafter under construction on the Security and complete the same within a reasonable period of time. Grantor agrees not to initiate or acquiesce in any zoning variance or reclassification, without Grantee's prior written consent. Grantor shall not construct any additional building or buildings or make any other improvements on the Land, nor alter, remove or demolish any Improvements on the Land, without the prior written consent of Grantee, which consent shall not be unreasonably withheld. Grantor shall comply with all terms and implement the recommendations of that certain ADA Compliance Plan dated December 8, 1995 by Wilson and Strickland,Inc. If Grantor fails to observe any of the provisions of this Section, or suffers or permits any Event of Default to exist under this Section, Grantee or a lawfully appointed receiver of the Security at its option, from time to time, may perform, or cause to be performed, any and all repairs and such other work as it deems necessary to bring the Security into compliance with the provisions of this Section and may enter upon the Security for any of the foregoing purposes, and Grantor hereby waives any claim against Grantee and/or such receiver, arising out of such entry or out of any other act carried out pursuant to this Section. Grantor shall upon demand repay to Grantee and such receiver, with interest at the Default Rate, all amounts expended or incurred by them, respectively, in connection with any action taken pursuant to this Section, and such repayment shall be secured by the lien and security title of this Deed. Grantor represents and warrants that there are and at all times will be at least 415 parking spaces as part of the Security. Except for matters reflected in the Environmental Site Assessment - Wood Lake and Wood Ridge Apartments, prepared by ATC Environmental, Inc., Project No. 70106-0004, dated October 19, 1995 (the Environmental Report"), Grantor represents and warrants (i) that Grantor has not used and will not use and, to the best of Grantor's knowledge, no prior owner or current or prior tenant, subtenant, or other occupant of all or any part of the Security has used or is using Hazardous Materials (hereinafter defined) on, from or affecting the Security in any manner that violates the Environmental Laws (hereinafter defined); (ii) that, to the best of Grantor's knowledge, no Hazardous Materials have been disposed of on the Security, intentionally or unintentionally, directly or indirectly, by any person whether related or unrelated to Grantor, nor, to the best of Grantor's knowledge, have any Hazardous Materials migrated onto the Security; and (iii) that Grantor will not permit or suffer any such violation of the Environmental Laws. For purposes of this Deed, the following terms shall have the definition set forth: "Hazardous Materials" shall mean and include those elements, materials, compounds, mixtures, wastes or substances which are contained in any list of hazardous substances adopted by the United States Environmental Protection Agency (the "EPA") or any list of toxic pollutants designated by Congress or the EPA or which are defined as hazardous, toxic, pollutant, infectious, flammable or radioactive by any of the Environmental Laws (hereinafter defined) and, whether or not included in such lists, shall be deemed to include all products or substances containing petroleum, asbestos, and polychlorinated biphenyls. "Environmental Laws" shall mean and include any Federal, State, or local statute, law, ordinance, code, rule, regulation, order, or decree regulating or relating to protection of human health or the environment, or regulating or imposing liability or standards of conduct concerning the use, storage, treatment, transportation, manufacture, refinement, handling, production or disposal of any hazardous, toxic, or dangerous waste, substance, element, compound, mixture or material, as now or at any time hereafter in effect including, without limitation, the Federal Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. Sections 9601 et seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C. Sections 9601 et seq., the Federal Oil Pollution Act of 1990, Sections 2701, et seq., the Federal Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., the Federal Resource Conservation and Recovery Act as amended, 42 U.S.C. Sections 6901 et seq., the Federal Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., the Federal Clean Air Act 42 U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the River and Harbors Act of 1899, 33 U.S.C. Sections 401 et seq., the Georgia Air Quality Act, O.C.G.A. Sections 12-9-1 et seq., the Georgia Water Quality Control Act, O.C.G.A. Sections 12-5-20 et seq., the Ground-water Use Act of 1972, O.C.G.A. Sections 12-5-90 et seq., the Georgia Safe Drinking Water Act of 1977, O.C.G.A. Sections 12-5-170 et seq., the Erosion and Sedimentation Act of 1975, O.C.G.A. Sections 12-7-1 et seq., the Georgia Comprehensive Solid Waste Management Act, O.C.G.A. Sections 12-8-20 et seq., the Georgia Hazardous Waste Management Act, O.C.G.A, Sections 12-8-60 et seq., the Georgia Asbestos Safety Act, O.C.G.A. Sections 12-21-1 et seq., and the Georgia Hazardous Site Response Act, O.C.G.A. Sections 12-8-90 et seq., as any such acts may be amended, modified or supplemented, or rules and regulations of the EPA, the Georgia Department of Natural Resources or any other agency or governmental board or entity having jurisdiction over the Security. Grantor represents and warrants that, except as set forth in the Environmental Report, no generation, treatment, storage or disposal of any Hazardous Materials has occurred or is occurring on the Security and that the Grantor will not permit or suffer any such generation, treatment, storage or disposal of Hazardous Materials on the Security or permit any lien under Georgia law to attach to the Security or any portion thereof or any interest therein. Grantor represents and warrants that it has not received any notice from any governmental agency or any tenant of the Security with regard to such Hazardous Materials, and has received no notice that the environmental and ecological condition of the Security is in violation of any Environmental Law. Grantor represents and warrants that, to the best of Grantor's knowledge and belief and except as set forth in the Environmental Report, the Security does not contain, and has not in the past contained, any asbestos containing material in friable form and there is no current or potential airborne contamination of the Security by asbestos fiber, including any potential contamination that would be caused by maintenance or tenant finish activities in the building(s). Grantor represents and warrants that it has not received any notice that the soil, surface water, and ground water of or on the Security are not free from any spills of oil or other solid or liquid waste, toxic or hazardous substance or contaminate, and Grantor, after making reasonable inquiry, has no knowledge or any such spill. In the event that any investigation, site monitoring, containment, clean-up, removal, restoration or other remedial work of any kind or nature (the "Remedial Work") is reasonably necessary or desirable under any applicable Environmental Law, any judicial order, or by any governmental entity or person because of, or in connection with, the current or future presence, suspected presence, release or suspected release of a Hazardous Material in or about the air, soil, ground water, surface water or soil vapor at, on, about, under or within the Security (or any portion thereof), Grantor shall within thirty (30) days after written demand for performance thereof by Grantee (or such shorter period of time as may be required under any applicable Environmental Law), commence and thereafter diligently prosecute to completion, all such Remedial Work; provided, however, that Grantor may delay commencement of the Remedial Work for such time that Grantor is in good faith and diligently contesting the requirement of the governmental entity or person imposing the obligation to perform the Remedial Work, but only if and to the extent such contest is legally effective under the applicable Environmental Laws to permit such delay without penalty. All Remedial Work shall be performed by contractors approved in advance by Grantee, and under the supervision of a consulting engineer approved by Grantee. All costs and expenses of such Remedial Work shall be paid by Grantor including, without limitation, Grantee's reasonable attorneys' fees, paralegal fees and costs incurred in connection with monitoring or review of such Remedial Work. In the event Grantor shall fail to timely prosecute to completion, such Remedial Work, Grantee may, but shall not be required to, cause such Remedial Work to be performed and all costs and expenses thereof, or incurred in connection therewith, shall become part of the Indebtedness. Grantor shall provide Grantee with prompt written notice (a) upon Grantor's becoming aware of any release or threat of release of any Hazardous Materials upon, under or from the Security; (b) upon Grantor's receipt of any notice from any federal, state, municipal or other governmental agency or authority in connection with any Hazardous Materials located upon or under or emanating from the Security; and (c) upon Grantor's obtaining knowledge of any incurrence of expense by any governmental agency or authority in connection with the assessment, containment or removal of any Hazardous Materials located upon or under or emanating from the Security. 15. Environmental Indemnification. Grantor will indemnify Grantee against, and hold Grantee harmless from, any and all claim, liability, loss, cost damage, charge, lien, debt, fine, penalty, injunctive relief, demand, suit, judgment, adjudication, expense, or injury to person, property or natural resources, including attorney's fees and consulting fees (any of the foregoing being referred to herein as a "Claim"), arising out of, attributable to, which may accrue out of, or which may result from (i) a violation or alleged violation of the Environmental Laws in connection with the Security by any person or entity or other source whether related or unrelated to Grantor, or (ii) the actual or alleged presence, release, transportation, migration, generation, treatment, processing, storage or use or disposal (herein collectively referred to as a "Disposal") of Hazardous Materials (whether intentional or unintentional, direct or indirect, foreseeable or unforeseeable) by any person or entity or other source, whether related or unrelated to Grantor, provided that in every case if Grantee owns the Security at the time of a Claim, such violation or Disposal giving rise to such Claim occurred prior to the time Grantee owned the Security. This indemnity shall survive the event of foreclosure of the Deed or conveyance of the Security in lieu thereof. 16. Independence of Security. Grantor shall not by act or omission permit any building or other improvement on any premises not subject to the lien and security title of this Deed to rely on the Security or any part thereof or any interest therein to fulfill any municipal or governmental requirement, and Grantor hereby assigns to Grantee any and all rights to give consent for all or any portion of the Security or any interest therein to be so used. Similarly, no part of the Security shall rely on any premises not subject to the lien and security title of this Deed or any interest therein to fulfill any governmental or municipal requirement. Grantor shall not by act or omission impair the integrity of the Real Property as a single zoning lot, and as one or more complete tax parcels, separate and apart from all other premises. Any act or omission by Grantor which would result in a violation of any of the provisions of this Section shall be void. 17. No Other Liens. Grantor shall not consent, agree to, or permit any mortgage, lien, security title, or security interest upon or affecting the Security or any part thereof except as granted or permitted in this Deed and any other lien or security interest granted to Grantee. Grantor will promptly pay and discharge any and all amounts which are now or hereafter become liens against the Security whether or not superior to the lien and security title hereof or to any assignment of rents and leases given to Grantee. The covenants of this Section shall survive any sale of the Security and any conveyance thereof by deed in lieu of foreclosure with respect to any such liens in existence as of the date of transfer of title. 18. Management. During the term of the loan secured hereby, Grantor shall at all times retain a professional management company to operate and manage the Security. A written management agreement shall be required and the management company and the form and content of the management agreement shall be subject to Grantee's approval, which shall not be unreasonably withheld or delayed. No change in such management shall be made without the prior written approval of Grantee which shall not be unreasonably withheld or delayed, and any attempted change in management without such consent shall be void. The management agreement must provide that it is subordinate to the lien of this Deed or terminable without cause upon thirty (30) days' prior written notice, and may not be modified or amended in any material manner without Grantee's prior written approval. Management fees shall not constitute a lien upon the Security and Grantee shall have no liability for payment of such fees. 19. [INTENTIONALLY LEFT BLANK] 20. Sidewalks, Municipal Charges. Grantor will promptly pay and discharge any and all license fees and similar charges, with penalties and interest thereon, which may be imposed by the municipality in which the Security is situated, for the use of vaults, chutes, areas and other space beyond the lot line and under or abutting the public sidewalks in front of or adjoining the Security, and Grantor will promptly cure any violation of law and comply with any order of such municipality respecting the repair, replacement or condition of the sidewalk or curb in front of or adjoining the Security, and in default thereof Grantee may, upon five (5) days notice to Grantor, pay any and all such license fees or similar charges, with penalties and interest thereon, and the charges of the municipality for such repair or replacement, and any amount so paid or advanced by Grantee and all costs and expenses incurred in connection therewith (including, without limitation, attorneys' fees), with interest thereon at the default rate specified in the Note, shall be a demand obligation of Grantor to Grantee, and, to the extent permitted by law, shall be added to the Indebtedness and shall be secured by the lien and security title of this Deed. 21. Assignment of Rents and Leases. Grantor hereby presently, irrevocably, absolutely and unconditionally grants, transfers, assigns and sets over unto Grantee all of its right, title and interest in and to all present and future leases, license agreements, concession agreements, lease termination agreements and other occupancy agreements of any nature, oral or written, of the Land and of space in the Improvements together with all modifications, supplements, extensions, renewals and replacements thereof now existing or hereafter made, and also together with the rights to sue for, collect and receive all rents, prepaid rents, additional rents, royalties, security deposits, damages payable upon default by tenant, or other sums in any of said leases provided to be paid to the lessor thereunder, profits, income, license fees, concession fees, lease termination fees and issues of the Security (collectively, "Rents"), to be applied by Grantee in payment of the Indebtedness, and also together with any and all guaranties of the obligations of the tenants thereunder and the rights of Grantor to receive, hold and apply all bonds and security in all of said leases provided to be furnished to the lessor thereunder, and also together with the rights of Grantor to enforce any and all of the agreements, terms, covenants and conditions in all of said leases provided and to give notices thereunder. Grantee may receive and collect the Rents upon the occurrence of an Event of Default for so long as any such Event of Default shall exist, and during the pendency of any foreclosure proceeding and during any redemption period. Grantor agrees to consent to a receiver if this is believed necessary or desirable by Grantee to enforce its rights under this Section. Grantee hereby grants to Grantor a revocable license to collect the Rents as they respectively come due and to enforce said leases, so long as there exists no Event of Default under this Deed. Grantor shall not otherwise assign or pledge, or contract, expressly or by implication, to assign or pledge, any lease of the Land or space in the Improvements or the rights to sue for, collect and receive any Rents, or the rights to receive, hold and apply any bonds and security in any of said leases provided to be furnished to the lessor thereunder, or the rights to enforce any of the agreements, terms, covenants or conditions of said leases or to give notices thereunder, unless in each instance the written consent thereto of Grantee is first obtained. Nothing in this Deed shall be construed to obligate Grantee, expressly or by implication, to perform any of the covenants of Grantor as lessor under any of the leases hereinabove assigned or to pay any sum of money or damages therein provided to be paid by the lessor. If Grantee shall from time to time suffer or permit Grantor to sue for, collect or receive any Rents, or to receive, hold or apply any bonds or security under said leases, or to enforce any of the agreements, terms, covenants or conditions thereunder or to give notices thereunder, neither such sufferance nor permission shall constitute a waiver or relinquishment by Grantee of the rights hereunder and hereby assigned to Grantee with respect to any subsequent Rents, or with respect to any subsequent receipt, holding or application of bonds or security or any subsequent enforcement of such agreements, terms, covenants or conditions or any subsequent notices. 22. Future Leases. The standard form of apartment lease used from time to time by Grantor shall be presented to, and subject to the prior approval of, Grantee. All such leases entered into after the date hereof shall be on such standard form or forms approved by Grantee. All leases shall provide that in addition to the annual minimum rental specified in the lease, the tenant will pay its separately metered utility charges for heat, lighting, hot water and sewer service. All leases must be subordinate to the lien and security title of this Deed unless Grantee otherwise specifies. Each lease must contain a provision that, upon notice to tenant by Grantee, the lease shall become superior, in whole or in part, to the lien and security title of this Deed. Without limiting the foregoing, Grantee hereby reserves the right to subordinate this Deed to any lease subsequently made by recording in the Records of Cobb County, Georgia, in which this Deed is recorded a declaration to that effect, executed by Grantee, which declaration once so recorded shall be binding upon the tenant under such lease and such tenant's successors and assigns. Within ten (10) days after request by Grantee, Grantor will furnish to Grantee a true and complete copy of each lease, amendment, modification, extension, or renewal of lease, hereafter made by Grantor with respect to space in the Security. Grantor will from time to time upon demand of Grantee, confirm in writing the assignment to Grantee of any or all leases of the Land and space in the Improvements, and such written confirmation shall be in such form as Grantee shall require and as shall be necessary to make the same recordable. 23. Grantor's Obligations as Lessor. (a) Grantor shall, at Grantor's cost and expense, promptly and fully perform each and every covenant, condition, promise and obligation on the part of the lessor to be performed pursuant to the terms of each and every lease or letting, written or oral, now or hereafter made with respect to the Security or any part or parts thereof, the failure of which when considered in the aggregate would reasonably be expected to have, or would have, a material adverse effect on the Security, and shall not suffer or permit there to exist any default in such performance on the part of such lessor or permit any event to occur which would give the tenant under any such lease the right to terminate the same or to offset rent. (b) Grantor shall give Grantee immediate notice of any default under any lease or of the receipt by Grantor of any notice of default from the lessee or its successors or assigns under a lease, and Grantor shall furnish to Grantee immediately any and all information which Grantee may reasonably request concerning the performance and observance of all covenants, agreements and conditions contained in the leases by the lessor thereunder to be kept, observed and performed and concerning the compliance with all terms and conditions of the leases. (c) In the event of any failure by Grantor to keep, observe or perform any covenant, agreement or condition contained in the leases or to comply with the terms and conditions of the leases as required in clause (a) of this Section 23, any performance, observance or compliance by Grantee pursuant to this Deed on behalf of Grantor shall not remove or waive, as between Grantor and Grantee the corresponding Event of Default under the terms of this Deed. 24. Leases; Foreclosure. Any proceedings or other steps taken by Grantee to foreclose this Deed, or otherwise to protect the interests of Grantee hereunder, shall not operate to terminate the rights of any present or future tenant of space in the Improvements, notwithstanding that said rights may be subject and subordinate to the lien and security title of this Deed, unless Grantee specifically elects otherwise in the case of any particular tenant. The failure to make any such tenant a defendant in any such foreclosure proceeding and to foreclose such tenant's rights will not be asserted by Grantor or any other defendant in such foreclosure proceeding as a defense to any proceeding instituted by Grantee to foreclose this Deed or otherwise protect the interests of Grantee hereunder. 25. [INTENTIONALLY LEFT BLANK] 26. Events of Default. Each of the following shall constitute an "Event of Default" hereunder and shall entitle the Grantee to exercise its remedies hereunder and under any of the other Loan Documents or as otherwise provided by law: (a) Any payment of any installment of principal or interest due under the Note, or payment of any other sum due under the Note or under any of the other Loan Documents, is not received by Grantee within five (5) business days following the date when such payment was due; (b) Failure of the Grantor in the observance or performance of any covenant, promise or agreement provided in this Deed or in any other Loan Document other than relating to the payment of indebtedness or money (a "failure to perform") for thirty (30) days after the giving of notice by Grantee to Grantor specifying the nature of the failure to perform; provided, however, that if the nature of such failure to perform is such that the same cannot be cured within such thirty (30) day period, such failure to perform shall not be deemed an Event of Default if Grantor shall within such period commence to cure that failure to perform and thereafter diligently prosecute the cure to completion, but in no event more than one hundred twenty (120) days in the aggregate. Notwithstanding anything contained herein to the contrary, the notice and cure period provided under this clause(b) shall not be applicable to and shall not be in addition to any specific notice and cure or performance period provided under any other provision of this Deed, and the specific notice and cure or performance period provided for in such provision shall control, and a failure by Grantor to cure a default under such provision within the applicable cure period shall be an Event of Default under this Deed; (c) Any representation, warranty, or statement of the Grantor, or the managing general partner of Grantor, contained herein or in any of the Loan Documents, including without limitation the Environmental Indemnification Agreement, or in any writing delivered to Grantee simultaneously with the execution and delivery of the Loan Documents, proves to be untrue in any material respect as of the date when made; (d) Grantor, or the managing general partner of Grantor, shall (i) have an order for relief entered in a proceeding under Title 11, United States Code, whether such order shall result from a voluntary or involuntary petition, (ii) seek or consent to the appointment of a receiver or trustee for itself or for any of the Security, (iii) file a petition or initiate a proceeding under the bankruptcy, insolvency, receivership, or similar laws of the United States, any state or any jurisdiction, (iv) make a general assignment for the benefit of creditors, or (v) be unable to pay its debts as they mature; (e) A court shall enter an order, judgment or decree appointing, without the consent of Grantor, or the managing general partner of Grantor, a receiver or trustee for it or for any of the Security or approving a petition filed against Grantor which seeks relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, and such order, judgment or decree shall remain in force, undischarged or unstayed, sixty (60) days after it is entered; (f) Any default shall occur and be continuing beyond any cure or grace period expressly provided under that certain Deed to Secure Debt and Security Agreement (hereinafter referred to as the "Second Deed"), given by Grantor to Grantee, dated of even date herewith and to be recorded on or about the date hereof in the Records of Cobb County, Georgia, conveying an apartment project known as "Wood Ridge Apartments" in Cobb County, Georgia, to secure the Note; or (g) Any default shall occur and be continuing beyond any cure or grace period expressly provided under that certain Deed to Secure Debt and Security Agreement (hereinafter referred to as the "Third Deed"), given by Grantor to Grantee, dated of even date herewith and to be recorded on or about the date hereof in the Records of Cobb County, Georgia, conveying an apartment project known as "Plantation Crossing Apartments" in Cobb County, Georgia, to secure the Note. 27. Remedies Upon Default. Immediately upon the occurrence of any Event of Default, Grantee shall have the option, in addition to and not in lieu of or substitution for all other rights and remedies provided in this Deed or any other Loan Document or provided by law or in equity, and is hereby authorized and empowered by Grantor, to do any or all of the following: (a) Declare without notice the entire unpaid amount of the Indebtedness immediately due and payable and, at Grantee's option, (i) to bring suit therefor, or (ii) to bring suit for any delinquent payment of or upon the Indebtedness, or (iii) to take any and all steps and institute any and all other proceedings of law or in equity that Grantee deems necessary to enforce payment of the Indebtedness and performance of other obligations secured hereunder and to protect the lien and security title of this Deed. (b) Grantee may sell the Security or any part of the Security at one or more public sale or sales before the door of the courthouse of the county in which the Land or any part of the Land is situated, to the highest bidder of cash, in order to pay the Indebtedness, and all expenses of sale and of all proceedings in connection therewith, including reasonable attorneys' fees, after advertising the time, place and terms of sale once a week for four (4) weeks immediately preceding such sale (but without regard to the number of days) in a newspaper in which Sheriff's sales are advertised in said county. At any such public sale, Grantee may execute and deliver to the purchaser a conveyance of the Security or any part of the Security in fee simple with full warranties of title, and to this end Grantor hereby constitutes and appoints Grantee the agent and attorney-in-fact of Grantor to make such sale and conveyance, and thereby to divest Grantor of all right, title and equity that Grantor may have in and to the Security and to vest the same in the purchaser or purchasers at such sale or sales, and all the acts and doings of said agent and attorney-in-fact are hereby ratified and confirmed and any recitals in said conveyance or conveyances as to facts essential to a valid sale shall be binding upon Grantor. The aforesaid power of sale and agency hereby granted are coupled with an interest and are irrevocable by death or otherwise, are granted as cumulative of the other remedies provided hereby or by law for collection of the Indebtedness and shall not be exhausted by one exercise thereof but may be exercised until full payment of all of the Indebtedness. In the event of any sale under this Deed by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceeding or otherwise, the Security may be sold as an entirety or in separate parcels and in such manner or order as Grantee in its sole discretion may elect, and if Grantee so elects, Grantee may sell the Personal Property covered by this Deed at one or more separate sales in any manner permitted by the Uniform Commercial Code of the State of Georgia, and one or more exercises of the powers herein granted shall not extinguish or exhaust such powers, until the entire Security are sold or the Indebtedness is paid in full. If the Indebtedness is now or hereafter further secured by any chattel mortgages, pledges, contracts of guaranty, assignments of lease or other security instruments, Grantee may at its option exhaust the remedies granted under any of said security instruments either concurrently or independently, and in such order as Grantee may determine. (c) Cause to be brought down to date a title examination and tax histories of the Security, procure title insurance or title reports or, if necessary, procure new abstracts and tax histories. (d) Procure an updated or entirely new environmental audit of the Security including building, soil, ground water and subsurface investigations; have the Improvements inspected by an engineer or other qualified inspector and procure a building inspection report; procure an MAI or other appraisal of the Security or any portion thereof; enter upon the Security at any time and from time to time to accomplish the foregoing and to show the Security to potential purchasers and potential bidders at foreclosure sale; make available to potential purchasers and potential bidders all information obtained pursuant to the foregoing and any other information in the possession of Grantee regarding the Security. (e) Grantee, upon application to a court of competent jurisdiction, shall be entitled as a matter of strict right, without notice and without regard to the adequacy or value of any security for the Indebtedness or the solvency of any party bound for its payment, to the appointment of a receiver to take possession of and whether or not a receiver has taken possession of the Security to operate the Security and to collect and apply the Rents, including those past due and unpaid, after payment of all necessary charges and expenses, in reduction of the Indebtedness. The receiver shall have all of the rights and powers permitted under the laws of the State of Georgia. Except for damage caused by Grantee's willful misconduct, Grantor hereby waives any claim Grantor may have against Grantee for mismanagement of the Security during Grantee's operation of the Security under this subparagraph or as mortgagee in actual possession under applicable statutes. (f) Grantee shall have the right to enter and take possession of the Security in accordance with the following: (i) If an Event of Default shall have occurred, Grantor, upon demand of Grantee, shall forthwith surrender to Grantee the actual possession of the Security and, to the extent permitted by law, Grantee itself, or by such officers or agents as it may appoint, may enter and take possession of all of the Security without the appointment of a receiver, or an application therefor, and may exclude Grantor and its agents and employees wholly therefrom, and may have joint access with Grantor to the books, papers and accounts of Grantor. (ii) If Grantor shall for any reason fail to surrender or deliver the Security or any part thereof after such demand by Grantee, Grantee may obtain a judgment or decree conferring upon Grantee the right to immediate possession or requiring Grantor to deliver immediate possession of the Security to Grantee. Grantor will pay to Grantee, upon ten (10) days notice, all expenses of obtaining such judgment or decree, including reasonable compensation to Grantee, its attorneys and agents, and all such expenses and compensation shall, until paid, become part of the Indebtedness and shall be secured by this Deed. (iii) Upon every such entering upon or taking possession of, Grantee may hold, store, use, operate, manage and control the Security and conduct the business thereof, and, from time to time (i) make all necessary and proper maintenance, repairs, renewals, replacements, additions, betterments and improvements thereto and thereon and purchase or otherwise acquire additional fixtures, personalty and other property; (ii) insure or keep the Security insured; (iii) manage and operate the Security and exercise all the rights and powers of Grantor to the same extent as Grantor could in its own name or otherwise act with respect to the same; and (iv) enter into any and all agreements with respect to the exercise by others of any of the powers herein granted to Grantee, all as Grantee from time to time may determine to be in its best interest. Grantee may collect and receive all the income, rents, issues, profits and revenues from the Security, including those past due as well as those accruing thereafter, and Grantee may apply any moneys and proceeds received by Grantee, in whatever order or priority Grantee in its sole discretion may determine, to the payment of (i) all expenses of taking, holding, managing and operating the Security (including compensation for the services of all persons employed for such purposes); (ii) the cost of all such maintenance, repairs, renewals, replacements, additional, betterments, improvements, purchases and acquisitions; (iii) the cost of such insurance; (iv) such taxes, assessments and other similar charges as Grantee may at its option pay; (v) other proper charges upon the Security or any part thereof; (vi) the reasonable compensation, expenses and disbursements of the attorneys and agents of Grantee; (vii) accrued interest; (viii) deposits required in Paragraph 5 and other sums required to be paid under this Deed; or (ix) overdue installments of principal. Anything in this subparagraph to the contrary notwithstanding, Grantee shall not be obligated to discharge or perform the duties of a landlord to any tenant or incur any liability as the result of any exercise by Grantee of its rights under this Deed, and Grantee shall be liable to account only for the rents, incomes, issues, profits and revenues actually received by Grantee. (iv) In the event that all such interest, deposits and principal installments and other sums due under any of the terms, covenants, conditions and agreements of this Deed shall be paid and all Events of Default shall be cured, and as a result thereof Grantee surrenders possession of the Security to Grantor, the same right of taking possession shall continue to exist if any subsequent Events of Default shall occur. (g) Grantee may, at its option without waiving any Event of Default, pay, perform or observe any or all of Grantor's obligations under the Loan Documents, and all payments made or costs or expenses incurred by Grantee in connection therewith shall be secured hereby and shall be, without demand, immediately repaid by Grantor to Grantee with interest thereon at the default rate provided in the Note. Grantee shall be the sole judge of the necessity for any such actions and of the amounts to be paid. Grantee is hereby empowered to enter and to authorize others to enter upon the Security or any part thereof for the purpose of performing or observing any such defaulted term, covenant or condition without hereby becoming liable to Grantor or any person in possession holding under Grantor. (h) Apply against the Indebtedness in such order as Grantee shall determine any funds held for the benefit of Grantor in escrow by Grantee or by any third-party escrow agent under any of the Loan Documents, including without limitation any funds held under the escrow established by Section 5 of this Deed. (i) Upon any foreclosure sale, Grantee may bid for and purchase the Security and shall be entitled to apply all or any part of the Indebtedness as a credit to the purchase price. In the event of any sale of the Security by foreclosure, through judicial proceedings, by advertisement or otherwise, the proceeds of any such sale which are applied in accordance with the Deed shall be applied in the order following to: (i) all expenses incurred for the collection of the Indebtedness and the foreclosure of this Deed, including reasonable attorneys' fees, or such attorneys' fees as are permitted by law; (ii) all sums expended or incurred by Grantee directly or indirectly in carrying out the terms, covenants and agreements of the Note or notes evidencing the Indebtedness, of this Deed and any other Loan Documents, together with interest thereon as therein provided; (iii) all late payment charges, prepayment fees, advances and other amounts due under any of the Loan Documents; (iv) all accrued and unpaid interest upon the Indebtedness; (v) the unpaid principal amount of the Indebtedness; and (vi) the surplus, if any, to the person or persons legally entitled thereto. In the event of any acceleration of the Indebtedness pursuant to the first paragraph of this Section, Grantor shall pay to Grantee together with the principal indebtedness and interest thereon an amount equal to the prepayment fee provided for in the Note and such fee shall be included as part of the Indebtedness. Failure to exercise any option to accelerate in the event of a default or other circumstance permitting the exercise of such option, shall not constitute a waiver of the default or of the right to exercise such option at a later time, or a waiver of the right to exercise such option in the event of any other default or circumstance specified above. 28. Acceleration Interest. In addition to any late payment charge which may be due under the Note, Grantor shall pay interest on all sums due hereunder at a rate (the "Default Rate") equal to the lesser of (i) the interest rate set forth in the Note plus four percent (4%) per annum, or (ii) the maximum rate permitted by law, from and after the first to occur of the following events: if Grantee elects to cause the acceleration of the Indebtedness; if a petition under Title 11, United States Code, shall be filed by or against Grantor or if Grantor shall seek or consent to the appointment of a receiver or trustee for itself or for any of the Security, file a petition seeking relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, make a general assignment for the benefit of creditors, or be unable to pay its debts as they become due; if a court shall enter an order, judgment or decree appointing, with or without the consent of Grantor, a receiver or trustee for it or for any of the Security or approving a petition filed against Grantor which seeks relief under the bankruptcy or other similar laws of the United States, any state or any jurisdiction, and any such order, judgment or decree shall remain in force, undischarged or unstayed, sixty (60) days after it is entered; or if all sums due hereunder are not paid on the Maturity Date as set forth in the Note. 29. Late Charge. In the event any sums due under the Note, this Deed or any other Loan Document, are not paid by Grantor when due, without regard to any cure or grace period, Grantor shall pay to Grantee for the month during which such payment is not made when due and for each month or fraction thereof that such sum remains unpaid, a late charge equal to the lesser of four percent (4%) of such installment or the maximum amount allowed by law, as the reasonable estimate by Grantee and Grantor of a fair average compensation for the loss that may be sustained by Grantee due to the failure of Grantor to make timely payments, and such amount shall be secured hereby. Such late charge shall be paid without prejudice to the right of Grantee to collect any other amounts provided to be paid or to declare an Event of Default under this Deed or any other Loan Document. 30. Security Interest. This Deed shall, as to any equipment and other Personal Property covered hereby, be deemed to constitute a security agreement, and Grantor, as debtor, hereby grants to Grantee, as secured party, a security interest therein pursuant to the Uniform Commercial Code as enacted in the State of Georgia. Grantor agrees, upon request of Grantee, to furnish an inventory of Personal Property owned by Grantor and subject to this Deed and, upon request by Grantee, to execute any supplements to this Deed, any separate security agreement and any financing statements and continuation statements in order to include specifically said inventory of Personal Property or otherwise to perfect the security interest granted hereby. Upon any Event of Default, Grantee shall have all of the rights and remedies provided in said Code or otherwise provided by law or by this Deed, including but not limited to the right to require Grantor to assemble such Personal Property and make it available to Grantee at a place to be designated by Grantee which is reasonably convenient to both parties, the right to take possession of such Personal Property with or without demand and with or without process of law and the right to sell and dispose of the same and distribute the proceeds according to law. The parties hereto agree that any requirement of reasonable notice shall be met if Grantee sends such notice to Grantor at least five (5) days prior to the date of sale, disposition or other event giving rise to the required notice, and that the proceeds of any disposition of any such Personal Property may be applied by Grantee first to the reasonable expenses in connection therewith, including reasonable attorneys' fees and legal expenses incurred, and then to payment of the Indebtedness. With respect to the Personal Property that has become so attached to the Real Property that an interest therein arises under the real property law of the State, this Deed shall also constitute a financing statement and a fixture filing under the Georgia Uniform Commercial Code. Grantor warrants that (i) Grantor's (that is "Debtor's) name, identity or corporate structure and residence or principal place of business are as set forth in Exhibit B attached hereto and by this reference made a part hereof; (ii) Grantor (that is, "Debtor") has been using or operating under said name, identity or corporate structure without change for the time period set forth in said Exhibit B; and (iii) the location of the collateral is upon the Land. Grantor covenants and agrees that Grantor will furnish Grantee with notice of any change in the matters addressed by clauses (i) and (iii) of this paragraph within thirty (30) days of the effective date of any such change and Grantor will promptly execute any financing statements or other instruments deemed necessary by Grantee to prevent any filed financing statement from becoming misleading or losing its perfected status. 31. Right of Entry. Grantee and Grantee's representatives may at all times upon two (2) days prior telephone notice to Grantor enter upon the Security and inspect the same, or cause it to be inspected by agents, employees or independent contractors of Grantee, and show the same to others, but Grantee shall not be obligated to make any such entry or inspection. 32. Estoppel Certificate. Grantor, within fifteen (15) days after written request from Grantee, will furnish a signed statement in writing, duly acknowledged, of the amount then due or outstanding hereunder and whether or not any offsets or defenses exist against the Indebtedness, and if so, specifying such offsets and defenses. Upon request by Grantee, Grantor shall exercise any right it may have to request an estoppel certificate from any or all of the tenants on the Security within five (5) days following Grantee's request. 33. Annual Statements. Grantor shall, within ninety (90) days after the end of each fiscal year of Grantor, deliver to Grantee (a) annual statements audited and certified by an independent certified public accountant reasonably satisfactory to Grantee and prepared in accordance with generally accepted accounting principles, together with any "Notes to Financial Statements", showing in detail (l) a balance sheet for the Security as of the last day of such fiscal year, (2) a statement of earnings from the Security for such fiscal year showing, among other things, all rents and other income therefrom and all expenses paid or incurred in connection with the operation of the Security, (3) a statement of cash flow and accounts receivable for the Security; and (b) a statement signed by Grantor listing all leases of space in the Improvements as of the last day of such fiscal year, the respective areas demised thereunder, the names of the tenants, the respective expiration dates of the leases, the respective rentals provided for therein, and such other information as may reasonably be requested by Grantee. Grantee hereby approves the certified public accounting firm of Imowitz, Koenig & Co., LLP. In addition, Grantor agrees upon request from time to time to furnish Grantee (i) with unaudited quarterly cash flow reports for the Security within forty-five (45) days after the end of each fiscal year quarter, (ii) with current rent rolls for the Security, and (iii) with a proforma income statement and current expense statement for the current and prior year by January 15 of the current year. If Grantor omits to prepare and deliver promptly any report required by this Section, Grantee may elect, in addition to exercising any remedy for an Event of Default as provided for in this Deed, to make an audit of all books and records of Grantor and its beneficiaries, including without limitation their bank accounts, which in any way pertain to the Security, and to prepare the statement or statements which Grantor failed to procure and deliver. Such audit shall be made and such statements shall be prepared by an independent Certified Public Accountant to be selected by Grantee. Grantor shall pay all expenses of the audit and other services, which expenses shall be secured hereby as part of the Indebtedness and shall be immediately due and payable with interest thereon at the Default Rate set forth herein. Grantee shall afford any information received pursuant to this Section the same degree of confidentiality that Grantee affords similar information proprietary to Grantee; provided, however, that Grantee does not in any way warrant or represent that such information received from Grantor will remain confidential, and, provided further, that Grantee shall have the unconditional right to disclose, as necessary, any such information in the event Grantee sells, transfers, conveys, or assigns the Deed or any portion of the Indebtedness. 34. Rights Cumulative. Each right and remedy of Grantee under this Deed, the Note and any other Loan Documents, shall be in addition to every other right and remedy of Grantee and such rights and remedies may be enforced separately or in any combination. 35. Subrogation. To the extent that proceeds of the Indebtedness are used to pay any outstanding lien, charge or encumbrance affecting the Security, such proceeds have been advanced by Grantee at Grantor's request, and Grantee shall be subrogated to all rights, interest and liens owned or held by any owner or holder of such outstanding liens, charges and encumbrances, irrespective of whether such liens, charges or encumbrances are released of record; provided, however, that the terms and provisions hereof shall govern the rights and remedies of Grantee and shall supersede the terms, provisions, rights, and remedies under the lien or liens to which Grantee is subrogated hereunder. 36. No Waiver. Any failure by Grantee to insist upon the strict performance by Grantor of any of the terms and provisions hereof shall not be deemed to be a waiver of any of the terms and provisions hereof, and Grantee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Grantor of any and all of the terms and provisions hereof to be performed by Grantor. 37. Deed Extension. The lien and security title hereof shall remain in full force and effect during any postponement or extension of the time of payment of the Indebtedness, or of any part thereof, and any number of extensions or modifications hereof, or any additional notes taken by Grantee, shall not affect the lien and security title hereof or the liability of Grantor or of any subsequent obligor to pay the principal indebtedness unless and until such lien or liability be expressly released in writing by Grantee. 38. Indemnification. Grantor shall indemnify and hold Grantee harmless from and against all obligations, liabilities, losses, costs, expenses, fines, penalties or damages (including attorneys' fees) which Grantee may incur by reason of this Deed or with regard to the Security prior to the exercise of any remedies under this Deed, except to the extent caused by the gross negligence or intentional misconduct of Grantee. Grantor shall defend Grantee against any claim or litigation involving Grantee for the same, and should Grantee incur such obligation, liability, loss, cost, expense, fine, penalty or damage, then Grantor shall reimburse Grantee upon demand. Any amount owed Grantee under this provision shall bear interest at the Default Rate set forth herein and shall be secured hereby. 39. Nonrecourse. Except as hereinafter in this Section and in Section 15 of the Note specifically provided, Grantor shall not be personally liable for the payment of any sums due hereunder or the performance of any obligations of Grantor hereunder or under any other Loan Document. No judgment for the repayment of the Indebtedness will be enforced against the undersigned personally or any property of the Grantor other than the Security and any other security furnished under the Loan Documents in any action to foreclose this Deed or to otherwise realize upon any security furnished under the Loan Documents or to collect any amount payable under the Loan Documents. Notwithstanding the foregoing: (a) Nothing herein contained shall be construed as prohibiting Grantee from exercising any and all remedies which the Loan Documents permit, including the right to bring actions or proceedings against Grantor and to enter a judgment against Grantor, so long as the exercise of any remedy does not extend to execution against or recovery out of any property of Grantor other than the security furnished under the Loan Documents; (b) Grantor shall be fully and personally liable for (i) misapplying any condemnation awards or insurance awards attributable to the Security, to the full extent of such awards so misapplied, (ii) misapplying any security deposits attributable to the Security, to the full extent of such deposits so misapplied, (iii) collecting any rents in advance in violation of any covenant contained in the Loan Documents, to the full extent of such rents so collected in advance, (iv) committing fraud, misrepresentation or waste in connection with the operation of the Security or the making of the loan evidenced hereby, to the full extent of any loss, damage, expense or costs (including reasonable attorneys' fees) incurred by Grantee resulting from such fraud, misrepresentation or waste, (v) failing to pay any debt service on any indebtedness related to the Security, operating and maintenance expenses, insurance premiums, deposits into a reserve for replacements or other sums required by the Loan Documents, but only to the extent of any gross revenues from the Security during the period beginning twelve (12) months prior to a notice of acceleration to Grantor through the date of foreclosure or deed in lieu of foreclosure that were available to pay such expenses but were not so used, (vi) failing to pay real estate taxes and assessments which are a lien against the Security during the period of Grantor's ownership (excluding any period during which a receiver for the Security has been appointed by a court of competent jurisdiction), to the full extent of such unpaid taxes (excluding, however, any such real estate taxes and assessments for which funds shall have been escrowed by Grantor with or for the benefit of Grantee for the payment thereof as provided in Section 5 hereof), and (vii) failing to maintain the levels of insurance required under this Deed or any other of the Loan Documents, to the full extent of any insurance proceeds that would have been available had such levels of insurance been maintained; (c) There shall be no limitation, in any event of Grantor's personal liability under, and the exercise of any of Grantee's rights under any indemnity from Grantor to Grantee including but not limited to, the Environmental Indemnification Agreement of even date herewith from Grantor to Grantee with regard to the Security except as may be expressly set forth therein. 40. Attorneys' Fees. Any reference to "attorney fees", attorneys' fees", or "attorney's fees", in this document includes but is not limited to both the fees, charges and costs incurred by Grantee through its retention of outside legal counsel and the allocable fees, costs and charges for services rendered by Grantee's in-house counsel. Any reference to "attorney fees", attorneys' fees", or "attorney's fees", shall also include but not be limited to those attorneys or legal fees, costs and charges incurred by Grantee in the collection of any Indebtedness, the enforcement of any obligations hereunder, the protection of the Security, the foreclosure of this Deed, the sale of the Security, the defense of actions arising hereunder and the collection, protection or setoff of any claim the Grantee may have in a proceeding under Title 11, United States Code. Attorneys' fees provided for hereunder shall accrue whether or not Grantee has provided notice of default or of an intention to exercise its remedies for such default. 41. Administrative Fees. Grantee shall have the right to charge administrative fees during the term of the Note as Grantee may determine, in its sole reasonable discretion, in connection with any servicing requests made by Grantor requiring Grantee's evaluation, preparation and processing of any such requests. Administrative fees shall not be charged for routine servicing matters contemplated by the Loan Documents including, without limitation: processing payments; processing insurance and UCC continuation documentation; processing escrow draws; review of tenant leases, subordination non-disturbance and attornment agreements and tenant estoppels on standard forms approved by Grantee without material modifications. Such administrative fees shall apply without limitation to requests for matters not permitted or contemplated by the Loan Documents (including, without limitation: request for transfers or assignments, requests for partial releases; requests for review of new easements), and to requests, which, while contemplated by the Loan Documents, because of the nature of the request, will require significantly more time than an institutional lender, acting reasonably, would contemplate for such request (including without limitation, request for the approval of tenant leases, tenant estoppels and tenant subordination, non-disturbance and attornment agreements which contain material differences from Grantee's standard form.) Grantee shall also be entitled to reimbursement for professional fees it incurs for such administration, including without limitation, those of architects, engineers and attorneys (whether (i) employed by Grantee or its affiliate or (ii) engaged by Grantee or its affiliates as independent contractors). 42. Protection of Security; Costs and Expenses. Grantor shall appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of the Grantee, and shall pay all costs and expenses, including without limitation cost of evidence of title and reasonable attorneys' fees, in any such action or proceeding in which Grantee may appear, and in any suit brought by Grantee to foreclose this Deed or to enforce or establish any other rights or remedies of Grantee hereunder. If Grantor fails to perform any of the covenants or agreements contained in this Deed, or if any action or proceeding is commenced which affects Grantee's interest in the Security or any part thereof, including, but not limited to, eminent domain, code enforcement, or proceedings of any nature whatsoever under any federal or state law, whether now existing or hereafter enacted or amended, relating to bankruptcy, insolvency, arrangement, reorganization or other form of debtor relief, or to a decedent, then Grantee may, but without obligation to do so and without notice to or demand upon Grantor and without releasing Grantor from any obligation hereunder, make such appearances, disburse such sums and take such action as Grantee deems necessary or appropriate to protect Grantee's interest, including, but not limited to, disbursement of reasonable attorneys' fees, entry upon the Security to make repairs or take other action to protect the security hereof, and payment, purchase, contest or compromise of any encumbrance, charge or lien which in the judgment of Grantee appears to be prior or superior hereto. Grantor further agrees to pay all reasonable expenses of Grantee (including without limitation fees and disbursements of counsel) incident to the protection of the rights of Grantee hereunder, or to enforcement or collection of payment of the Indebtedness, whether by judicial or non-judicial proceedings, or in connection with any bankruptcy, insolvency, arrangement, reorganization or other debtor relief proceeding of Grantor, or otherwise. Any amounts disbursed by Grantee pursuant to this Section shall be additional indebtedness of Grantor secured by the Loan Documents as of the date of disbursement and shall bear interest at the Default Rate. All such amounts shall be payable by Grantor immediately without demand. Nothing contained in this Section shall be construed to require Grantee to incur any expense, make any appearance, or take any other action. 43. Notices. Any notice, demand, request, statement or consent made hereunder shall be in writing, signed by the party giving such notice, request, demand, statement, or consent, and shall be deemed to have been properly given when either delivered personally, delivered to a reputable overnight delivery service providing a receipt or deposited in the United States mail, postage prepaid and registered or certified return receipt requested, at the address set forth below, or at such other address within the continental United States of America as may have theretofore have been designed in writing. The effective date of any notice given as aforesaid shall be the date of personal service, one (1) business day after delivery to such overnight delivery service, or three (3) business days after being deposited in the United States mail, whichever is applicable. For purposes hereof, the addresses are as follows: If to Grantee: CIGNA Corporation c/o CIGNA Investment, Inc. 900 Cottage Grove Road Hartford, CT 06152-2319 Attn: Investment Services, S-319 with a copy to: CIGNA Corporation Investment Law Department 900 Cottage Grove Road Hartford, CT 06152-2215 Attn: Real Estate Division, S-215A If to Grantor: Century Properties Fund XIX 5665 Northside Drive,N.W. Suite 370 Atlanta, Georgia 30328 with a courtesy copy to: Post & Heymann, LLP Suite 214 100 Jericho Quadrangle Jericho, New York 11753 Attn: David J. Heymann Notwithstanding the foregoing agreement to provide a courtesy copy to Grantor's attorneys, such copy shall be a courtesy copy only, and failure to provide such courtesy copy shall have absolutely no effect or entitle Grantor to any remedy whatsoever. Any notice duly given to Grantor shall be effective whether or not the courtesy copy was given to Grantor's attorneys. 44. Release. Upon the satisfaction in full of the Indebtedness, Grantee shall release of record the Security from the lien hereof and shall surrender this Deed and all notes evidencing indebtedness secured by this Deed to Grantor. Grantor shall pay all costs of recordation. 45. Applicable Law. The provisions hereof shall be construed in accordance with the laws of the State of Georgia (the "State"). 46. Invalidity. If any provision of this Deed shall be held invalid or unenforceable, the same shall not affect in any respect whatsoever the validity of the remainder of this Deed, except that if such provision relates to the payment of a monetary sum, then the Grantee may, at its option, declare the Indebtedness due and payable upon sixty (60) days prior written notice to Grantor and, provided there exists no Event of Default hereunder, without prepayment fee or premium. 47. Captions. The captions in this instrument are inserted only as a matter of convenience and for reference, and are not and shall not be deemed to be any part hereof. 48. Modifications. This Deed may not be changed or terminated except in writing signed by both parties. The provisions of this Deed shall extend and be applicable to all renewals, amendments, extensions, consolidations, and modifications of the other Loan Documents, and any and all references herein to the Loan Documents shall be deemed to include any such renewals, amendments, extensions, consolidations or modifications thereof. 49. Bind and Inure. The provisions of this Deed shall be binding on the Grantor and its heirs, successors and assigns, and any subsequent owners of the Security. The covenants of Grantor herein shall run with the land, and this Deed and all of the covenants herein contained shall inure to the benefit of the Grantee, its successors and assigns. 50. Replacement of Note. Upon receipt of evidence reasonably satisfactory to Grantor of the loss, theft, destruction or mutilation of the Note, and in the case of any such loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to Grantor or, in the case of any such mutilation, upon surrender and cancellation of the Note, Grantor will execute and deliver, in lieu thereof, a replacement Note, identical in form and substance to the Note and dated as of the date of the Note and upon such execution and delivery all references in this Deed to the Note shall be deemed to refer to such replacement Note. 51. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of Grantor under this Deed, the Note and any and all other instruments now or hereafter evidencing, securing or otherwise relating to the Indebtedness. 52. Waiver of Grantor's Rights. BY EXECUTION OF THIS DEED AND BY INITIALING THIS PARAGRAPH, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT OF GRANTEE TO ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE NOTE AND ANY OTHER SECURED INDEBTEDNESS AND THE POWER OF ATTORNEY GIVEN HEREIN TO GRANTEE TO SELL THE SECURITY BY NONJUDICIAL FORECLOSURE UPON DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE OTHER THAN SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED; (B) WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE UNITED STATES OF AMERICA (INCLUDING, WITHOUT LIMITATION, THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF), THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON OF ANY OTHER APPLICABLE LAW, (1) TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO GRANTEE, EXCEPT SUCH NOTICE (IF ANY) AS IS SPECIFICALLY REQUIRED TO BE GIVEN UNDER THE PROVISIONS OF THIS DEED AND (2) CONCERNING THE APPLICATION, RIGHTS OR BENEFITS OF ANY STATUTE OF LIMITATION OR ANY MORATORIUM, REINSTATEMENT, MARSHALLING, FORBEARANCE, APPRAISEMENT, VALUATION, STAY, EXTENSION, HOMESTEAD, EXEMPTION OR REDEMPTION LAWS; (C) ACKNOWLEDGES THAT GRANTOR HAS READ THIS DEED AND ANY AND ALL QUESTIONS OF GRANTOR REGARDING THE LEGAL EFFECT OF THIS DEED AND ITS PROVISIONS HAVE BEEN EXPLAINED FULLY TO GRANTOR, AND GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR'S CHOICE PRIOR TO EXECUTING THIS DEED AND INITIALING THIS PARAGRAPH; AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY GRANTOR AS PART OF A BARGAINED FOR LOAN TRANSACTION AND THAT THIS DEED IS VALID AND ENFORCEABLE BY GRANTEE AGAINST GRANTOR IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS HEREOF. INITIALED BY GRANTOR: --------------------- 53. Discontinuance of Proceedings. In case Grantee shall have proceeded to enforce any right, power or remedy under this Deed by foreclosure, entry or otherwise or in the event Grantee commences advertising of the intended exercise of the sale under power provided hereunder, and such proceeding or advertisement shall have been withdrawn, discontinued or abandoned for any reason, or shall have been determined adversely to Grantee, then in every such case (i) Grantor and Grantee shall be restored to their former positions and rights, (ii) all rights, powers and remedies of Grantee shall continue as if no such proceeding had been taken, (iii) each and every Event of Default declared or occurring prior or subsequent to such withdrawal, discontinuance or abandonment shall and shall be deemed to be a continuing Event of Default and (iv) neither this Deed, nor the Note, nor the Indebtedness, nor any other instrument concerned therewith, shall be or shall be deemed to have been reinstated or otherwise Grantor hereby expressly waives the benefit of any statute or rule of law now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the above. 54. Limitations on Transfers. Except as set forth in this Section, neither the Security, nor any interest in the Security, nor any interest (direct or indirect) in Grantor may be transferred, sold, assigned or conveyed. Grantee may, at its option, accelerate the entire Indebtedness at any time during the term of this Deed, if, without Grantee's prior written approval, which approval may be granted or withheld in Grantee's sole discretion, either (i) Grantor sells, assigns, transfers or otherwise ceases to own the Security (except pursuant to a transfer expressly permitted pursuant to this Section, pursuant to leases of individual apartment units in the ordinary course of Grantor's business, pursuant to a condemnation of any portion of the Security or pursuant to the replacement of any Personal Property with comparable Personal Property in the ordinary course of Grantor's business), or (ii) an interest (direct or indirect) in Grantor is transferred or assigned. Grantee hereby consents to the transfer (directly or indirectly) of the interest in Grantor of the general partner of Grantor to Insignia Financial Group, Inc. or any entity controlled (directly or indirectly) by Insignia Financial Group, Inc. Grantor shall be entitled to make a one-time sale, transfer or assignment in whole or in part of its interest in the Security; subject to the following terms and conditions: (a) There shall then exist no Event of Default hereunder. (b) A current property inspection by Grantee or Grantee's designee must disclose that all reasonably necessary maintenance on, or damage or destruction to the Security, has been completed or repaired. (c) The proposed transferee shall be a Qualified Real Estate Investor (as hereinafter defined). (d) The proposed transferee must have specific related real estate experience in the Metropolitan Statistical Area where the Security is located. (e) Prior to the proposed transfer, the proposed transferee shall own or manage at least 1,000 apartment units. (f) At least sixty (60) days prior to such transfer Grantor must provide Grantee with all of the material provisions of such transfer including, without limitation, the proposed date of transfer, the name, net worth, background and address of the proposed transferee, and the purchase price. (g) Grantor shall provide Grantee with such evidence as Grantee may require that the proposed transferee shall fulfill each and every obligation of Grantor under the Loan Documents and such transfer shall not affect or impair Grantee's security and rights under the Loan Documents. (h) If the proposed sale of the Security does not also include the sale of the properties encumbered by the Second Deed (hereinafter referred to as the "Second Deed Security") and the Third Deed (hereinafter referred to as the "Third Deed Security"), then the indebtedness then outstanding under the Note shall, pursuant to documentation in all respects satisfactory to Grantee, be divided, amended and restated into three separate notes to be secured separately by this Deed, the Second Deed and the Third Deed, respectively, as follows: (i) The note to be secured by this Deed (hereinafter referred to as the "First Note") shall be in the principal amount of $7,750,000 (less a pro rata amount of any prior amortization under the Note) and mandatory monthly amortization payments shall be in the amount of $57,271.82. Otherwise the terms of the First Note shall be the same as the terms of the Note. (ii) The note to be secured by the Second Deed (hereinafter referred to as the "Second Note") shall be in the principal amount of $9,000,000 (less a pro rata amount of any prior amortization under the Note) and mandatory monthly amortization payments shall be in the amount of $66,509.21. Otherwise the terms of the Second Note shall be the same as the terms of the Note. (iii) The note to be secured by the Third Deed (hereinafter referred to as the "Third Note") shall be in the principal amount of $5,250,000 (less a pro rata amount of any prior amortization under the Note) and mandatory monthly amortization payments shall be in the amount of $38,797.04. Otherwise the terms of the Third Note shall be the same as the terms of the Note. In the event, after the proposed transfer, any two of the Security, the Second Deed Security and the Third Deed Security, remain owned, directly or indirectly, by the same or affiliated parties, then the notes and deeds related to such properties shall be cross-defaulted and cross-collateralized; otherwise such notes and deeds shall no longer be cross-defaulted or cross-collateralized. (i) Such notice received under (f) above shall be accompanied by the payment of a non-refundable fee in the amount of one percent (1.0%) of the outstanding balance of the principal portion of the Note allocable to the Security as provided in (h) above, in cash or certified check to be retained by Grantee in order to induce Grantee to allow the proposed transferee to assume the obligations of Grantee under the Loan Documents, and such fee shall be returned to Grantor if Grantee disapproves of such transfer. (j) If the Second Deed Security and/or the Third Deed Security are not included in the proposed sale, then the loan-to-value ratio and Debt Service Coverage as to the allocated loan amounts for such properties as provided in (h) above, based on a then current appraisal using a 9% capitalization rate and calculated only with regard to the remaining property securing such remaining notes, must either (a) equal a 65% loan-to-value ratio with Debt Service Coverage of at least 1.5, or (b) equal or exceed the combined loan-to-value ratios and Debt Service Coverage of the Security, the Second Deed Security and the Third Deed Security immediately prior to the transfer. In the event they do not exceed the foregoing required ratio and coverage, then the Second Note and/or the Third Note will be required to be paid down at Grantee's option so that the resulting loan-to-value ratio is 65% and Debt Service Coverage is 1.5. In the event Grantee requires the Second Note and/or the Third Note to be paid down, such paydown will not be subject to any prepayment fee. (k) The loan-to-value ratio for the note(s) and property(ies) being transferred (calculated in the aggregate assuming cross-default and cross-collateralization is to continue as to the transferred properties, or calculated separately if cross-default and cross-collateralization is not continued), based on a then current appraisal of the property(ies) being transferred using a 9% capitalization rate must not exceed 65% and Debt Service Coverage for the note(s) being transferred must be at least 1.5. (l) Grantor shall pay for all of Grantee's costs and expenses associated with the transfer, including without limitation, attorney's fees charged by Grantee's staff counsel and special counsel. (m) Notwithstanding the above, a sale of the Security and the Second Deed Security, leaving the Third Deed Security as the only remaining security for the Third Note is permitted only if, immediately after such sale, the loan to value ratio as to the Third Note is no more than 60% and the Debt Service Coverage for the Third Note, based only upon the Third Deed Security, is at least 1.8. For purposes of this Section, "Qualified Real Estate Investor" is defined as any reputable corporation, partnership, joint venture, joint-stock company, trust or individual with a substantial net worth and cash position sufficient to own and operate this size and type of property which shall be based in the United States, shall be free from any bankruptcy, reorganization or insolvency proceedings or any criminal charges or proceedings, and shall not have been, at the time of transfer or in the past, a litigant, plaintiff or defendant in any suit brought against or by Grantee in connection with a mortgage loan. Grantee agrees to be reasonable in the review of such qualifications. 55. Sale of Security. Notwithstanding the provisions of Section 54, Grantor shall have the right to sell, transfer or assign in whole or in part its interest in the Security to any party (and to have this Deed cancelled in connection therewith) so long as: (a) Subsections (a), (j) and (l) of Section 54 are satisfied; provided, however, that if as a result of such sale the only note remaining outstanding is the Third Note and neither this Deed nor the Second Deed remain outstanding as security for the Third Note, then immediately after such sale, the loan to value ratio as to the Third Note must be no more than 60% and the Debt Service Coverage for the Third Note, based only upon the Third Deed Security, must be at least 1.8. (b) Grantor must prepay the principal amount allocable to the Security as provided in Section 54(h) above, in full in connection with such sale. (c) Grantor must pay a prepayment fee equal to the greater of (i) one percent (1.0%) of the principal amount prepaid or (ii) Yield Maintenance (as defined in the Note). (d) Grantor must provide Grantee with notice of such sale at least sixty (60) days prior to such sale. 56. Regarding Certain Capital Improvements and Repairs. Grantor shall, within six (6) months from the date hereof, complete and pay for the repair/replacement of certain exterior wood components of certain of the apartment buildings included in the Security as contemplated by the Architectural-Engineering Evaluation and Building Condition Report prepared by Wilson and Strickland, Inc. dated October 26, 1995 and estimated to cost approximately $47,500 (including the similar work required by the Second Deed with regard to the Second Deed Security). On or before the last day of said six (6) month period, Grantor will provide to Grantee a certificate of Grantor in form and content satisfactory to Grantee, certifying that all said repairs and/or replacements have been completed and paid for, together with such other evidence as Grantee may reasonably request confirming that such work has been completed and paid for. If Grantor fails to complete such work in all material respects within six (6) months of the date hereof, then Grantee shall have the option upon thirty (30) days notice to Grantor to require that Grantor deposit in escrow with an escrow agent chosen by Grantee and pursuant to an escrow agreement satisfactory to Grantee, the funds necessary, in the reasonable discretion of Grantee, to pay for the completion of the incomplete items. Such escrowed funds shall be disbursed to Grantor if and when such work has been completed to the reasonable satisfaction of Grantee. All escrowed funds shall constitute additional security for the Note and upon the occurrence and during the continuation of any Event of Default, Grantee, at its option, shall be entitled to receive all such escrowed funds (including any interest earned thereon) and apply them to any sums due Grantee under the Note or under this Deed. IN WITNESS WHEREOF, the Grantor has duly executed this Deed as a sealed instrument on the day and year first above written. GRANTOR: Signed, Sealed and CENTURY PROPERTIES FUND XIX, delivered in the a California limited partnership presence of: By: Fox Partners II, a California - --------------------------- general partnership, its general Unofficial Witness partner By: Fox Capital Management - --------------------------- Corporation, a California Notary Public corporation, its general partner My Commission Expires: By: ------------------------ - --------------------------- Name: Title: [NOTARIAL SEAL] Attest: ------------------- Name: Title: [CORPORATE SEAL] EXHIBIT A Description of Land EXHIBIT B Description of "Debtor" and "Secured Party" A. Debtor: 1. Name and Identity or Corporate Structure: Century Properties Fund XIX, a California limited partnership. 2. The residence or principal place of business of Debtor in the State of Georgia is located at 5665 Northside Drive, N.W., Atlanta, Fulton County, Georgia. 3. If Debtor has more than one place of business in the State of Georgia, Debtor's chief executive office in the State of Georgia is located at 5665 Northside Drive, N.W., Atlanta, Fulton County, Georgia. 4. Debtor has been using or operating under said name and identity or corporate structure without change for the following time period: From July 1, 1984 until the date hereof. B. Secured Party: CONNECTICUT GENERAL LIFE INSURANCE COMPANY, a Connecticut corporation. EX-10.7 4 FORM OF FIRST MORTGAGE NOTE DATED AS OF DECEMBER 29, 1995 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-10.8 5 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 6 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from Century Properties Fund XIX and is qualified in its entirety by reference to such financial statements. 1 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 2,868,000 0 0 0 0 0 94,428,000 34,894,000 64,379,000 0 62,342,000 0 0 0 663,000 64,379,000 0 14,630,000 0 10,570,000 0 0 6,001,000 (2,047,000) 0 (2,047,000) 0 (1,636,000) 0 (3,683,000) (36.39) (36.39) Depreciation includes a $500,000 allowance for impairment of value.
-----END PRIVACY-ENHANCED MESSAGE-----