AMENDED, RESTATED AND CONSOLIDATED MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT

 

<PAGE>

 

                                                                   Exhibit 10.47

 

================================================================================

 

                             Acadia New Loudon, LLC,

 

                                   as mortgagor

 

                                                       (Borrower)

 

                                       to

 

                   GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,

 

                                  as mortgagee

 

                                                         (Lender)

 

               ---------------------------------------------------

 

                       AMENDED, RESTATED AND CONSOLIDATED

                       MORTGAGE, ASSIGNMENT OF LEASES AND

                           RENTS AND SECURITY AGREEMENT

 

               ---------------------------------------------------

 

                  Dated:                 As of August 13, 2004

                  Property Location:     873 Loudon Road and 6 Weed Road

                                         Latham, New York

 

                              PREPARED BY AND UPON

                              RECORDATION RETURN TO:

 

                              Kaye Scholer LLP

                              425 Park Avenue,

                               New York, New York 10022

                              Attention:   Stephen Gliatta, Esq.

 

================================================================================

 

THIS MORTGAGE DOES NOT COVER REAL PROPERTY PRINCIPALLY IMPROVED BY ONE OR MORE

STRUCTURES CONTAINING, IN THE AGGREGATE, NOT MORE THAN SIX RESIDENTIAL DWELLING

UNITS, EACH HAVING ITS OWN SEPARATE COOKING FACILITIES

 

<PAGE>

 

           AMENDED, RESTATED AND CONSOLIDATED MORTGAGE, ASSIGNMENT OF

                     LEASES AND RENTS AND SECURITY AGREEMENT

 

        THIS AMENDED, RESTATED AND CONSOLIDATED MORTGAGE, ASSIGNMENT OF LEASES

AND RENTS AND SECURITY AGREEMENT (herein "INSTRUMENT") is made as of August 13,

2004, and is given by the mortgagor, Acadia New Loudon, LLC, a Delaware limited

liability company whose address is c/o Acadia Realty Trust, 1311 Mamaroneck

Avenue, White Plains, New York 10605 (herein "BORROWER"), to the mortgagee,

GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a corporation organized and existing

under the laws of the state of Delaware, whose address is 600 Steamboat Road,

Greenwich, Connecticut 06830, together with its successors, assigns and

transferees (herein "LENDER").

 

                                    RECITALS

 

                A.       Lender is making a secured loan to Borrower in the

original principal amount of $15,000,000 (the "LOAN"). The Loan is evidenced by

that certain Amended, Restated and Consolidated Promissory Note dated the date

hereof made by Borrower to Lender in such principal amount (as the same may be

amended, modified, restated, severed, consolidated, renewed, replaced, or

supplemented from time to time, the "NOTE").

 

                B.       Lender is the holder of the mortgages described on

Schedule 1 hereto (collectively, the "ORIGINAL MORTGAGES") and of the notes

secured thereby (collectively, the "ORIGINAL NOTES").

 

                C.       Lender is also the holder of that certain promissory

note of even date herewith in the principal amount of $7,064,107.76 made by

Borrower to Lender (the "NEW NOTE" and together with the Original Notes,

collectively, the "EXISTING NOTES"), which New Note is secured by that certain

Mortgage, Assignment of Leases and Rents and Security Agreement of even date

herewith given by Borrower to Lender (the "NEW MORTGAGE" and together with the

Original Mortgages, the "EXISTING MORTGAGES").

 

                D.       The outstanding principal indebtedness evidenced by the

Existing Notes and secured by the Existing Mortgages is $15,000,000.00 and

Borrower represents and warrants that Borrower has no offsets, defenses on

counterclaims under or with respect to any of its obligations under the Existing

Notes or Existing Mortgages.

 

                E.       Simultaneously with the execution and delivery hereof,

Borrower is executing and delivering the Note, which Note is intended to

consolidate, amend and restate in their entirety the Existing Notes and to

evidence the principal indebtedness heretofore evidenced by the Existing Notes.

 

                F.       Borrower and Lender desire to confirm the lien of the

Existing Mortgages, to consolidate the Existing Mortgages and the liens created

thereby, to amend and restate the Existing Mortgages in their entirety and to

spread the lien of the Existing Mortgages, all pursuant to the terms set forth

herein (the Existing Mortgages, as so consolidated, amended and restated

 

<PAGE>

 

and spread, and as hereafter from time to time extended, split, spread, renewed,

modified, consolidated, or further amended and restated, this "INSTRUMENT").

 

                NOW THEREFORE, in consideration of the premises and other good

and valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, Borrower and Lender hereby agree that, effective as of the date

hereof, the Existing Mortgages and the respective liens thereof are hereby

combined and consolidated so that together they shall hereafter constitute in

law but one mortgage, a single lien covering the Collateral (as hereinafter

defined) and securing the principal sum of $15,000,000 and that the Existing

Mortgages are hereby amended and restated in their entirety, and the

consolidated lien thereof is hereby spread, as follows:

 

        BORROWER, in consideration of the indebtedness herein recited,

irrevocably grants, conveys, mortgages and assigns to Lender, WITH POWER OF SALE

AND RIGHTS OF ENTRY AND POSSESSION, the following described property located in

the County of Albany, State of New York, and more particularly described on

Exhibit "A" attached hereto and incorporated herein by reference for all

purposes.

 

        TOGETHER with all buildings, improvements and tenements now or hereafter

erected on the property, and all heretofore or hereafter vacated alleys and

streets abutting the property, and all easements, rights, appurtenances, rents

(subject however to the assignment of rents to Lender herein), royalties,

mineral, oil and gas rights and profits, water, water rights, and water stock

appurtenant to the property, and all fixtures, machinery, equipment, engines,

boilers, incinerators, building materials, appliances and goods of every nature

whatsoever now or hereafter located in, or on, or used, or intended to be used

in connection with the property, including, but not limited to, those for the

purposes of supplying or distributing heating, cooling, electricity, gas, water,

air and light; and all elevators, and related machinery and equipment, fire

prevention and extinguishing apparatus, security and access control apparatus,

plumbing, bath tubs, water heaters, water closets, sinks, ranges, stoves,

refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows,

storm doors, screens, blinds, shades, curtains and curtain rods, mirrors,

cabinets, paneling, rugs, attached floor coverings, furniture, pictures,

antennas, trees and plants, tax refunds, trade names, licenses, permits,

Borrower's rights to insurance proceeds, unearned insurance premiums and chooses

in action; all of which, including replacements and additions thereto and

substitutions therefor, shall be deemed to be and remain a part of the real

property covered by this Instrument; and all of the foregoing, together with

said property are herein referred to as the "PROPERTY";

 

        TOGETHER with all right, title and interest in, to and under any and all

leases now or hereinafter in existence (as amended or supplemented from time to

time) and covering space in or applicable to the Property (hereinafter referred

to collectively as the "LEASES" and singularly as a "LEASE"), together with all

rents, earnings, income, profits, benefits and advantages arising from the

Property and from said Leases and all other sums due or to become due under and

pursuant thereto, and together with any and all guarantees of or under any of

said Leases, and together with all rights, powers, privileges, options and other

benefits of Borrower as lessor under the Leases, including, without limitation,

the immediate and continuing right to receive and collect all rents, income,

revenues, issues, profits, condemnation awards, insurance proceeds, moneys and

security payable or receivable under the Leases or pursuant to any of the

provisions

 

                                        2

<PAGE>

 

thereof, whether as rent or otherwise, the right to accept or reject any offer

made by any tenant pursuant to its Lease to purchase the Property and any other

property subject to the Lease as therein provided and to perform all other

necessary or appropriate acts with respect to such Leases as agent and

attorney-in-fact for Borrower, and the right to make all waivers and agreements,

to give and receive all notices, consents and releases, to take such action upon

the happening of a default under any Lease, including the commencement, conduct

and consummation of proceedings at law or in equity as shall be permitted under

any provision of any Lease or by any law, and to do any and all other things

whatsoever which the Borrower is or may become entitled to do under any such

Lease together with all accounts receivable, contract rights, franchises,

interests, estates or other claims, both at law and in equity, relating to the

Property, to the extent not included in rent earnings and income under any of

the Leases;

 

        TOGETHER with all right, title and interest in, to and under any and all

reserve, deposit or escrow accounts (the "ACCOUNTS") made pursuant to any loan

document made between Borrower and Lender with respect to the Property, together

with all income, profits, benefits and advantages arising therefrom, and

together with all rights, powers, privileges, options and other benefits of

Borrower under the Accounts, and together with the right to do any and all other

things whatsoever which the Borrower is or may become entitled to do under the

Accounts;

 

        TOGETHER with all agreements, contracts, certificates, guaranties,

warranties, instruments, franchises, permits, licenses, plans, specifications

and other documents, now or hereafter entered into, and all rights therein and

thereto, pertaining to the use, occupancy, construction, management or operation

of the Property and any part thereof and any improvements or respecting any

business or activity conducted on the Property and any part thereof and all

right, title and interest of Borrower therein, including the right to receive

and collect any sums payable to Borrower thereunder and all deposits or other

security or advance payments made by Borrower with respect to any of the

services related to the Property or the operation thereof;

 

        TOGETHER with all tradenames, trademarks, servicemarks, logos,

copyrights, goodwill, books and records and all other general intangibles

relating to or used in connection with the operation of the Property; and

 

        TOGETHER with any and all proceeds resulting or arising from any of the

foregoing (the Property, the Leases, the Accounts, and all other property,

whether real, personal, tangible, or intangible, described above, and all

proceeds thereof, may be referred to collectively as the "COLLATERAL").

 

        THIS INSTRUMENT SECURES TO LENDER (a) the repayment of the indebtedness

evidenced by the Note in the principal sum of FIFTEEN MILLION AND NO/100 DOLLARS

($15,000,000) (the "PRINCIPAL"), with interest thereon, with the balance of the

indebtedness, if not sooner paid, due and payable on September 6, 2014 (the

"MATURITY DATE"), and all renewals, extensions and modifications thereof; (b)

the performance of the covenants and agreements of Borrower contained in an

Environmental Indemnity Agreement (herein so-called) between Lender and Borrower

dated of even date herewith; (c) the payment of all other sums, with interest

thereon, advanced by Lender in accordance herewith to protect the security of

this Instrument; and (d) the performance of the covenants and agreements of

Borrower herein

 

                                         3

<PAGE>

 

contained, or contained in any other Loan Document, INCLUDING BORROWER'S

COVENANT TO REPAY ALL FUTURE ADVANCES (the Note, this Instrument, and all other

documents or instruments given by Borrower or others and accepted by Lender for

purposes of evidencing, securing, perfecting, or guaranteeing the indebtedness

evidenced by the Note may be referred to as the "LOAN DOCUMENTS"). Without

limitation of the foregoing, the following documents and instruments of even

date herewith are also Loan Documents: (i) Assignment of Leases and Rents from

Borrower to Lender, (ii) Assignment of Agreements, Licenses, Permits and

Contracts from Borrower to Lender, (iii) the Clearing Account Agreement (the

"CLEARING ACCOUNT AGREEMENT") among Borrower, Lender, Acadia Realty Limited

Partnership ("MANAGER") and Fleet National Bank, (iv) the Deposit Account

Agreement (the "DEPOSIT ACCOUNT AGREEMENT") among Borrower, Lender, Manager and

Deposit Bank, (v) the Guaranty of Recourse Obligations (the "GUARANTY") made by

Acadia Realty Limited Partnership, a Delaware limited partnership ("GUARANTOR"),

(vi) the Certificate of Borrower and (vii) Environmental Indemnity Agreement

made by Borrower for the benefit of Lender (the "ENVIRONMENTAL INDEMNITY

AGREEMENT"), as each of the foregoing may be (and each of the foregoing defined

terms shall refer to such documents as they may be) amended, restated, replaced,

supplemented or otherwise modified from time to time.

 

        Borrower covenants that Borrower is lawfully seized of the estate hereby

conveyed and has the right to mortgage, grant, convey and assign the Property,

that the Property is unencumbered, and that Borrower will warrant and defend

generally the title to the Property against all claims and demands, subject to

any easements and restrictions listed in a schedule of exceptions to coverage in

any title insurance policy insuring Lender's interest in the Property.

 

        Borrower represents, warrants, covenants and agrees in favor of Lender

as follows:

 

        SECTION 1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly

pay when due the principal of and interest on the indebtedness evidenced by the

Note, any prepayment and late charges provided in the Note and all other sums

secured by this Instrument.

 

        SECTION 2. INTENTIONALLY DELETED.

 

        SECTION 3. APPLICATION OF PAYMENTS. Lender may apply any payments

received from or on behalf of Borrower to any of the obligations of Borrower

then due under the Loan Documents, in any order determined by Lender.

 

        SECTION 4. CHARGES; LIENS. Borrower shall pay all rents, taxes, charges

assessments and impositions attributable to the Property (collectively "TAXES")

when due. Unless Lender is paying such Taxes in accordance with Section 25,

Borrower shall promptly furnish to Lender all notices of amounts due under this

Section, and in the event Borrower shall make payment directly, Borrower shall

promptly furnish to Lender receipts evidencing such payments. Except only for

the liens and security interests in favor of Lender under this Instrument and

the other Loan Documents, which Borrower shall pay and discharge in accordance

with the Loan Documents, Borrower shall promptly discharge any lien encumbering

all or any portion of or interest in the Property (unless such lien is bonded

within 30 days after Borrower first receives notice of such lien), irrespective

of the priority of the same. Borrower

 

                                        4

<PAGE>

 

shall pay, when due, the claims of all persons supplying labor or materials to

or in connection with the Property (unless such claims are the subject of a bona

fide dispute in which Borrower is contesting the amount or validity thereof).

 

        SECTION 5. HAZARD INSURANCE. Borrower shall at all times keep the

improvements now existing or hereafter erected on the Property insured against

all losses, hazards, casualties, liabilities and contingencies as Lender shall

reasonably require and in such amounts and for such periods as Lender shall

reasonably require. Borrower shall purchase and maintain policies of insurance

with respect to the Property in such amounts and covering such risks as shall be

satisfactory to Lender, including, but not limited to, the following:

 

                (a)      Property damage insurance covering loss or damage to the

Property caused by fire, lightning, hail, windstorm, explosion, hurricane (to

the extent available), vandalism, malicious mischief, and, if available and

subject to subsection (i) below, coverage for damage or destruction caused by

the acts of "Terrorists" (or such policies shall have no exclusion from coverage

with respect thereto) and such other losses, hazards, casualties, liabilities

and contingencies as are normally and usually covered by fire policies in effect

where the Property is located endorsed to include all of the extended coverage

perils and other broad form perils, including the standard "all risks" clauses.

Such policy shall be in an amount not less than that necessary to comply with

any coinsurance percentage stipulated in the policy, but not less than the

lesser of 100% of the full replacement cost of the improvements on the Property

(without any deduction for depreciation) or the unpaid principal amount of the

loan evidenced by the Note, and shall contain a replacement cost endorsement.

The deductible under such policy, if any, shall not exceed the lesser of five

percent (5%) of Net Operating Income or $50,000. Further, if any of the

improvements or the use of the Property shall at any time constitute legal

nonconforming structures or uses under current zoning ordinances, such policy

shall contain an "Ordinance or Law Coverage" or "Enforcement" endorsement

providing coverage for demolition, increased cost of construction and inability

to rebuild.

 

                 (b)      Broad form boiler and machinery insurance in an amount

equal to the lesser of 100% of the full replacement cost of the building

(without any deduction for depreciation) in which the boiler or similar vessel

is located, or $2,000,000. In addition, Lender may require a rider to such

policy to extend such coverage to electrical machinery and equipment, air

conditioning, refrigeration, and mechanical objects.

 

                (c)      If the Property is in an area prone to geological

phenomena, including, but not limited to, sinkholes, mine subsidence or

earthquakes, insurance covering such risks in an amount equal to 100% of the

full replacement cost of the improvements on the Property (without any deduction

for depreciation), and with a maximum permissible deductible equal to the lesser

of $25,000 or 10% of the face value of the policy.

 

                (d)      Flood insurance if the Property is in an area now or

hereafter designated by the Federal Emergency Management Agency as a Zone "A" &

"V" Special Hazard Area, or such other Special Hazard Area if Lender so requires

in its sole discretion. Such policy shall be in an amount equal to 100% of the

full replacement cost of the improvements on the Property (without any deduction

for depreciation), and shall have a maximum permissible deductible of $3,000.

 

                                        5

<PAGE>

 

                (e)      Business interruption or rent loss insurance in an

amount equal to the gross income or rentals from the Property for an indemnity

period of eighteen months, such amount being adjusted annually.

 

                (f)      During any period of reconstruction, renovation or

alteration of the Property in excess of 10% of the Note, a completed value, "All

Risks" Builders Risk form or "Course of Construction" insurance policy in

non-reporting form and in an amount satisfactory to Lender in Lender's sole

discretion.

 

                (g)      Commercial General Liability insurance covering bodily

injury and death in an amount not less than $1,000,000 per occurrence and

$2,000,000 in the aggregate with no deductible, together with at least

$25,000,000 excess and/or umbrella liability insurance for any and all claims.

If Lender permits such liability coverage to be written on a blanket basis, then

such policy shall provide that the aggregate limit of insurance applies

separately to the Property.

 

                (h)      If required by applicable state laws, worker's

compensation or employer's liability insurance in accordance with such laws.

 

                (i)      Notwithstanding anything in subsection (a) above to the

contrary, Borrower shall be required to obtain and maintain coverage in its

property insurance policy (or by a separate policy) against loss or damage by

terrorist acts provided that such coverage is available. Borrower shall obtain

such coverage from a carrier which otherwise satisfies the rating criteria

specified in this Section 5 (a "QUALIFIED CARRIER") or in the event that such

coverage is not available from a Qualified Carrier, Borrower shall obtain such

coverage from the highest rated insurance company providing such coverage. If

such coverage with respect to terrorist acts is available as aforesaid, Borrower

shall obtain and maintain such coverage in an amount equal to 100% of the "Full

Replacement Cost" of the Property.

 

                (j)      Such other insurance and endorsements, if any, as Lender

may reasonably require from time to time, or which are required by the Loan

Documents.

 

        Each carrier providing any insurance, or portion thereof, required by

this Section shall be issued by companies approved by Lender and licensed to do

business in the State, with a claims paying ability rating of "AA" or better by

S&P (and the equivalent by any other Rating Agency) and a rating of A:X or

better in the current Best's Insurance Reports; provided, that, the liability

insurance required under paragraph (g) of this Section shall be issued by

companies approved by Lender and licensed to do business in the State, with a

claims paying ability rating of "A+" or better by S&P (and the equivalent by any

other Rating Agency) and a rating of A:X or better in the current Best's

Insurance Reports. Borrower shall cause all insurance (except general public

liability insurance) carried in accordance with this Section to be payable to

Lender as a mortgagee and not as a coinsured, and, in the case of all policies

of insurance carried by each lessee for the benefit of Borrower, if any, to

cause all such policies to be payable to Lender as Lender's interest may appear.

All premiums on insurance policies shall be paid, in the manner provided under

Section 25(d) hereof, or in such other manner as Lender may designate in

writing.

 

                                        6

<PAGE>

 

         All insurance policies and renewals thereof (i) shall be in a form

acceptable to Lender, (ii) shall provide for a term of not less than one year,

(iii) shall provide by way of endorsement, rider or otherwise that such

insurance policy shall not be canceled, endorsed, altered, or reissued to effect

a change in coverage unless such insurer shall have first given Lender 30 days

prior written notice thereof, (iv) shall include a standard mortgagee clause in

favor of and in form acceptable to Lender, (v) shall provide for claims to be

made on an occurrence basis, except that boiler and machinery coverage may be

made on an accident basis, and (vi) shall contain an agreed value clause updated

annually (if the amount of coverage under such policy is based upon the

replacement cost of the Property). All property damage insurance policies

(except for flood and earthquake policies) must automatically reinstate after

each loss.

 

        Any blanket insurance policy shall specifically allocate to the Property

the amount of coverage from time to time required hereunder and shall otherwise

provide the same protection as would a separate "stand-alone" policy insuring

only the Property in compliance with the provisions of this Section 5.

 

        Lender shall have the right to hold the policies, and Borrower shall

promptly furnish to Lender all renewal notices and all receipts of paid

premiums. Not less than five (5) days prior to the expiration date of any

insurance policy required hereunder, a certificate of insurance evidencing the

renewal of such policy, together with evidence satisfactory to Lender of payment

in full of the annual premium therefor, shall be delivered by Borrower to

Lender. Not more than forty-five (45) days after to the expiration date of any

insurance policy required hereunder, Borrower shall deliver to Lender a renewal

insurance policy in form satisfactory to Lender.

 

        If the Property is damaged or destroyed, in whole or in part, by fire or

other casualty (a "CASUALTY"), Borrower shall give immediate written notice

thereof to Lender and to the insurance carrier. If a Casualty covered by any of

the policies of insurance (an "INSURED CASUALTY") occurs where the loss does not

exceed $1,000,000, provided no Event of Default has occurred and is continuing,

Borrower may settle and adjust any claim without the prior consent of Lender;

provided such adjustment is carried out in a competent and timely manner, and

Borrower is hereby authorized to collect and receipt for the insurance proceeds.

In the event of an Insured Casualty where the loss equals or exceeds $1,000,000

(a "SIGNIFICANT CASUALTY"), Borrower may settle and adjust any claim with the

prior consent of Lender (which consent shall not be unreasonably withheld or

delayed) unless an Event of Default has occurred and is continuing in which case

Lender may settle and adjust any claim without the consent of Borrower and agree

with the insurer(s) on the amount to be paid on the loss, which settlement and

adjustment shall be in Lender's sole and absolute discretion. The proceeds with

respect to any Significant Casualty shall be due and payable solely to Lender

and held by Lender in the Casualty/Condemnation Subaccount and disbursed in

accordance herewith. If Borrower or any party other than Lender is a payee on

any check representing insurance proceeds with respect to a Significant

Casualty, Borrower shall immediately endorse, and cause all such third parties

to endorse, such check payable to the order of Lender. Borrower hereby

irrevocably appoints Lender as its attorney-in-fact, coupled with an interest,

to endorse such check payable to the order of Lender. Borrower further

authorizes Lender, at Lender's option, (a) to hold the balance of such proceeds

with respect to any Significant Casualty to be used to reimburse Borrower for

the cost of reconstruction or repair of the Property or (b) subject to the

immediately following paragraph, to apply such proceeds to the payment of the

sums secured by this Instrument whether or not then

 

                                         7

<PAGE>

 

due, in any order. The expenses incurred by Lender in the settlement, adjustment

and collection of any insurance proceeds shall become part of the Debt and shall

be reimbursed by Borrower to Lender upon demand.

 

        Lender shall not exercise Lender's option to apply insurance proceeds to

the payment of the sums secured by this Instrument if all of the following

conditions are met: (i) no Event of Default has occurred which is then

continuing; (ii) Lender determines that there will be sufficient funds to

restore and repair the Property to the Pre-existing Condition (as hereinafter

defined); (iii) Lender agrees in writing that the rental income of the Property,

after restoration and repair of the Property to the Pre-existing Condition, will

be sufficient to meet all operating costs and other expenses, payments for

reserves and loan repayment obligations (including any obligations under any

permitted subordinate financing) relating to the Property and maintain a Debt

Service Coverage Ratio of at least 1.25 to 1.0; (iv) Lender determines that

restoration and repair of the Property to the Pre-existing Condition will be

completed within one year of the date of the loss or casualty to the Property,

but in no event later than six months prior to the Maturity Date; (v) less than

30 percent of the total floor area of the improvements has been damaged,

destroyed or rendered unusable as a result of such fire or other casualty; (vi)

tenant leases demising in the aggregate at least 65% of the total rentable space

at the Property in effect as of the date of the occurrence of such fire or other

casualty remain in full force and effect during and after the completion of the

restoration and repair of the Property; and (vii) Lender is reasonably satisfied

that the Property can be restored and repaired as nearly as possible to the

condition it was in immediately prior to such casualty and in compliance with

all applicable zoning, building and other laws and codes (the "PRE-EXISTING

CONDITION"). If Lender elects to make the insurance proceeds available for the

restoration and repair of the Property, Borrower agrees that, if at any time

during the restoration and repair, the cost of completing such restoration and

repair, as determined by Lender, exceeds the undisbursed insurance proceeds,

Borrower shall, immediately upon demand by Lender, deposit the amount of such

excess with Lender, and Lender shall first disburse such deposit to pay for the

costs of such restoration and repair on the same terms and conditions as the

insurance proceeds are disbursed.

 

        If the insurance proceeds are held by Lender to reimburse Borrower for

the cost of restoration and repair of the Property, then Borrower shall restore

the Property to the equivalent of its original condition or such other condition

as Lender may approve in writing, and Borrower shall promptly begin such

restoration and at all times thereafter diligently prosecute such restoration to

completion. Lender may, at Lender's option, condition disbursement of said

proceeds on Lender's approval of such plans and specifications of an architect

satisfactory to Lender, contractor's cost estimates, architect's certificates,

waivers of liens, sworn statements of mechanics and materialmen and such other

evidence of costs, percentage completion of construction, application of

payments; and satisfaction of liens as Lender may reasonably require. If the

insurance proceeds are applied to the payment of the sums secured by this

Instrument, any such application of proceeds to principal shall not extend or

postpone the due dates of the monthly installments due under the Note, under

Section 25(d) hereof, or otherwise under the Loan Documents, or change the

amounts of such installments. If the Property is sold at foreclosure or pursuant

to power of sale or if Lender acquires title to the Property, Lender shall have

all of the right, title and interest of Borrower in and to any insurance

policies and unearned premiums thereon and in and to the proceeds resulting from

any damage to the Property prior to such sale or acquisition.

 

                                        8

<PAGE>

 

        SECTION 6. PRESERVATION AND MAINTENANCE OF PROPERTY. Borrower (a) shall

not commit waste or permit impairment or deterioration of the Property, (b)

shall not abandon the Property, (c) shall restore or repair promptly and in a

good and workmanlike manner all or any part of the Property to the equivalent of

its original condition, or such other condition as Lender may approve in

writing, in the event of any damage, injury or loss thereto, whether or not

insurance proceeds are available to cover in whole or in part the costs of such

restoration or repair, (d) shall keep the Property, including improvements,

fixtures, equipment, machinery and appliances thereon in good repair and shall

replace fixtures, equipment, machinery and appliances on the Property when

necessary to keep such items in good repair, (e) shall comply with all laws,

ordinances, regulations and requirements of any governmental body applicable to

the Property, (f) shall provide for management of the Property by Acadia Realty

Limited Partnership, or otherwise provide for professional third-party

management of the Property by a commercial property manager with substantial

experience in managing properties of the applicable kind, and otherwise

satisfactory to Lender, pursuant to a contract approved by Lender in writing,

unless such requirement shall be waived by Lender in writing, (g) shall

generally operate and maintain the Property in a manner to ensure maximum

rentals, and (h) shall give notice in writing to Lender of and, unless otherwise

directed in writing by Lender, appear in and defend any action or proceeding

purporting to affect the Property, the security of this Instrument or the rights

or powers of Lender. Neither Borrower nor any tenant or other person shall

remove, demolish or alter any improvement now existing or hereafter erected on

the Property or any fixture, equipment, machinery or appliance in or on the

Property except when incident to the replacement of fixtures, equipment,

machinery and appliances with items of like kind.

 

        SECTION 7. USE OF PROPERTY. Unless required by applicable law or unless

Lender has otherwise agreed in writing, Borrower shall not allow changes in the

use for which all or any part of the Property was intended at the time this

Instrument was executed. Borrower shall not subdivide the Property or initiate

or acquiesce in a change in the zoning classification of the Property without

Lender's prior written consent.

 

        SECTION 8. PROTECTION OF LENDER'S SECURITY. If Borrower fails to perform

the covenants and agreements contained in this Instrument, or if any action or

proceeding is commenced which affects the Property or title thereto or the

interest of Lender therein, including, but not limited to, eminent domain,

insolvency, code enforcement, or arrangements or proceedings involving a

bankrupt or decedent, Lender, at Lender's option, may make such appearances,

disburse such sums and take such action as Lender deems necessary, in its sole

discretion, to protect Lender's interest, including, but not limited to, (i)

disbursement of attorney's fees, (ii) entry upon the Property to make repairs,

(iii) procurement of satisfactory insurance as provided herein, (iv) the payment

of any Taxes then due and payable, and (v) payment of any other amounts

contemplated in any of the Loan Documents. Any amounts disbursed by Lender

pursuant to this Section, with interest thereon, shall become additional

indebtedness of Borrower secured by this Instrument. Unless Borrower and Lender

agree to other terms of payment, such amounts shall be immediately due and

payable upon demand and shall bear interest from the date of disbursement at the

rate then applicable to principal under the Note unless collection from Borrower

of interest at such rate would be contrary to applicable law, in which event

such amounts shall bear interest at the highest rate which may be collected

 

                                        9

<PAGE>

 

from Borrower under applicable law. Nothing contained in this Section or

elsewhere in any of the Loan Documents shall require Lender to incur any expense

or take any action hereunder.

 

        SECTION 9. INSPECTION. Lender may make or cause to be made reasonable

entries upon and inspections of the Property including, but not limited to,

Phase I and/or Phase II environmental audits and inspections.

 

        SECTION 10. BOOKS AND RECORDS. Borrower shall keep and maintain at all

times at Borrower's address stated herein, or such other place as Lender may

approve in writing, complete and accurate books of accounts and records adequate

to reflect correctly the results of the operation of the Property and copies of

all written contracts, leases and other instruments which affect the Property.

Such books, records, contracts, leases and other instruments shall be subject to

examination and inspection at any reasonable time by Lender.

 

        Borrower shall furnish to Lender annually, within 120 days after each

calendar year, a complete copy of Borrower's annual financial statements

prepared as a compilation (without a review and without disclosures) by a "big

four" accounting firm or another independent certified public accountant

reasonably acceptable to Lender, each in accordance with GAAP or a federal

income tax basis of accounting, in either case, consistently applied, and

containing balance sheets and statements of profit and loss for Borrower and the

Property in such detail as Lender may reasonably request. Each such statement

(x) shall be in form and substance satisfactory to Lender, (y) shall set forth

the financial condition and the income and expenses for the Property for the

immediately preceding calendar year, including statements of annual Net

Operating Income as well as (1) a list of commercial tenants, if any, occupying

more than twenty percent of the rentable space of the Property, (2) a breakdown

showing (a) the year in which each commercial Lease then in effect expires, and

(b) the percentage of rentable space covered by such commercial Lease as stated

in such Lease, and (z) shall be accompanied by an Officer's Certificate (as

defined in Section 25 hereof) certifying (1) that such statement is true,

correct, complete and accurate and presents fairly the financial condition of

the Property and has been prepared in accordance with GAAP or a federal income

tax basis of accounting, in either case, consistently applied, and (2) whether

there exists an Event of Default, and if so, the nature thereof, the period of

time it has existed and the action then being taken to remedy it.

 

        On or before the 45th day after the end of each three-month fiscal

quarter of Borrower (which may include months for which reports shall have been

submitted under the prior sentence), Borrower shall deliver to Lender management

prepared financial statements for such quarter. Each set of such financial

statements (i) shall consist of an operating statement of income and expenses of

the Property, (ii) shall be in form and detail reasonably satisfactory to Lender

and (iii) shall be accompanied by an Officer's Certificate certifying that the

applicable statements are true, complete, and accurate and do not omit to state

any material information. All of such financial statements shall provide

information for the applicable month or quarter and on a year-to-date basis (and

at the end of the fourth quarter, for the year).

 

        Borrower shall furnish, together with the foregoing financial statements

and at any other time upon Lender's request, a rent schedule for the Property,

certified by Borrower, showing the name of each tenant, and for each tenant, the

space occupied, the lease expiration date, the rent payable and the rent paid.

 

                                       10

<PAGE>

 

        In addition to the above delivery of financial statements and rent

schedule, Borrower shall deliver to Lender updated versions of such financial

statements at any other time upon Lender's request, including operating

statements of income and expenses of the Property. Borrower shall also furnish

to Lender, during any Cash Management Period, the Annual Budget in accordance

with Section 28(h) of this Instrument. Further, Borrower shall provide to

Lender, as soon as the same are available to Borrower, all financial statements

and sales reports received from any tenant at the Property.

 

        SECTION 11. CONDEMNATION. Borrower shall promptly give Lender notice of

the actual or threatened commencement of any condemnation or eminent domain

proceeding affecting the Property (a "CONDEMNATION") and shall deliver to Lender

copies of any and all papers served in connection with such Condemnation.

Following the occurrence of a Condemnation, Borrower, regardless of whether an

Award is available, shall promptly proceed to restore, repair, replace or

rebuild the Property in accordance with Legal Requirements to the extent

practicable to be of at least equal value and of substantially the same

character (and to have the same utility) as prior to such Condemnation. If a

Condemnation occurs where the award or payment in respect thereof (an "AWARD")

does not exceed $500,000 or which results in the taking of 5% or less of the

Property, provided no Event of Default has occurred and is continuing, Borrower

may make any compromise, adjustment or settlement in connection with such

Condemnation without the prior consent of Lender; provided such adjustment is

carried out in a competent and timely manner, and Borrower is hereby authorized

to collect and receipt for the Award. In the event of a Condemnation where the

Award is in excess of $500,000 or which results in the taking of more than 5% of

the Property, Lender is hereby irrevocably appointed as Borrower's

attorney-in-fact, coupled with an interest, with exclusive power to collect,

receive and retain any Award and, so long as no Event of Default is continuing,

with Borrower's consent (which consent shall not be unreasonably withheld or

delayed) to make any compromise, adjustment or settlement in connection with

such Condemnation. Borrower shall cause any Award that is payable to Borrower to

be paid directly to Lender. Lender shall hold such Award in the

Casualty/Condemnation Subaccount and disburse such Award in accordance with the

terms hereof.

 

        Borrower authorizes Lender to apply such Award, after the deduction of

Lender's expenses incurred in the collection of such amounts, at Lender's

option, to restoration or repair of the Property or to payment of the sums

secured by this Instrument, whether or not then due, in the order determined by

Lender, with the balance, if any, to Borrower. Unless Borrower and Lender

otherwise agree in writing, any application of proceeds to principal shall not

extend or postpone the due date of the monthly installments due hereunder or

under any of the Loan Documents or change the amount of such installments.

Borrower agrees to execute such further evidence of assignment of any awards,

proceeds, damages or claims arising in connection with such condemnation or

taking as Lender may require.

 

        SECTION 12. BORROWER AND LIEN NOT RELEASED. From time to time, Lender

may, at Lender's option, without giving notice to or obtaining the consent of

Borrower, Borrower's successors or assigns or of any junior lienholder or

guarantors, without liability on Lender's part and notwithstanding Borrower's

breach of any covenant or agreement of Borrower in this Instrument, extend the

time for payment of said indebtedness or any part thereof, reduce the payments

thereon, release anyone liable on any of said indebtedness, accept a renewal

note or

 

                                       11

<PAGE>

 

notes therefor, modify the terms and time of payment of said indebtedness,

release from the lien of this Instrument any part of the Property, take or

release other or additional security, reconvey any part of the Property, consent

to any map or plan of the Property, consent to the granting of any easement,

join in any extension or subordination agreement, and agree in writing with

Borrower to modify the rate of interest or period of amortization of the Note or

change the amount of the monthly installments payable thereunder. Any actions

taken by Lender pursuant to the terms of this Section shall not affect the

obligation of Borrower or Borrower's successors or assigns to pay the sums

secured by this Instrument and to observe the covenants of Borrower contained

herein, shall not affect the guaranty of any person, corporation, partnership or

other entity for payment of the indebtedness secured hereby, and shall not

affect the lien or priority of lien hereof on the Property. Borrower shall pay

Lender a reasonable service charge, together with such title insurance premiums

and attorney's fees as may be incurred at Lender's option, for any such action

if taken at Borrower's request.

 

         SECTION 13. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument

is intended to be a security agreement pursuant to the Uniform Commercial Code

for any of the items specified above as part of the Collateral which, under

applicable law, may be subject to a security interest pursuant to the Uniform

Commercial Code, and Borrower hereby grants Lender a security interest in said

items. Borrower agrees that Lender may file this Instrument, or a reproduction

thereof, in the real estate records or other appropriate index, as a financing

statement for any of the items specified above as part of the Collateral. Any

reproduction of this Instrument or of any other security agreement or financing

statement shall be sufficient as a financing statement. In addition, Borrower

agrees to execute and deliver to Lender, upon Lender's request, any financing

statements, as well as extensions, renewals and amendments thereof, and

reproductions of this Instrument in such form as Lender may require to perfect a

security interest with respect to said items. Borrower shall pay all costs of

filing such financing statements and any extensions, renewals, amendments and

releases thereof, and shall pay all reasonable costs and expenses of any record

searches for financing statements Lender may reasonably require. Without the

prior written consent of Lender, Borrower shall not create or suffer to be

created pursuant to the Uniform Commercial Code any other security interest in

said items, including replacements and additions thereto. Upon Borrower's breach

of any covenant or agreement of Borrower contained in this Instrument, including

the covenants to pay when due all sums secured by this Instrument, Lender shall

have the remedies of a secured party under the Uniform Commercial Code and, at

Lender's option, may also invoke the remedies provided herein or in any of the

Loan Documents, or pursuant to any applicable law as to such items. In

exercising any of said remedies, Lender may proceed against the items of real

property and any items of personal property specified above as part of the

Collateral separately or together and in any order whatsoever, without in any

way affecting the availability of Lender's remedies under the Uniform Commercial

Code or of the remedies provided herein or in any of the Loan Documents. For

purposes of the Security Agreement and the fixture filing, the Borrower shall

constitute the "DEBTOR" and shall have the address specified in the first

paragraph of this Instrument and the Lender shall constitute the "SECURITY

PARTY" and shall have the address specified in the first paragraph of this

Instrument.

 

        SECTION 14. LEASES OF THE PROPERTY. Borrower shall comply with and

observe Borrower's obligations as landlord under all leases of the Property or

any part thereof. Borrower will not lease any portion of the Property for any

use contrary to the existing character

 

                                       12

<PAGE>

 

of the Property except with the prior written approval of Lender. Borrower may

execute or modify, without Lender's prior written consent, any lease of space at

the Property now existing or hereafter made which affects less than 20,000

square feet of space at the Property and provided the term of such lease is less

than five years (an "EXEMPT LEASE") provided such lease:

 

                        (i)      is on a standard lease form pre-approved by

Lender;

 

                        (ii)     is at a net effective rent (after taking into

account any free rent, construction allowances or other concessions granted by

landlord) no less than the current actual rent or fair market rent then

prevailing for similar properties and leases in the market area;

 

                        (iii)    contains rent or other concessions which are

legally required or are otherwise customary and reasonable for similar

properties and leases in the market area;

 

                        (iv)     represents a bona fide arm's length transaction;

 

                        (v)      does not permit any use which would violate any

provision of any existing lease or is otherwise inconsistent with the uses and

quality of existing tenants;

 

                        (vi)     is provided to Lender within ten days after

execution;

 

                        (vii)    as modified or amended does not become a lease

which fails to satisfy the criteria for an Exempt Lease pursuant to this

Section;

 

                        (viii)   as modified or amended does not materially

modify the financial terms of Borrower's standard form of lease or materially

reduce the rights and remedies of the Borrower or Lender under said standard

lease;

 

                        (ix)     is subordinate by its terms to this Instrument

provided that Lender shall have agreed to provide such tenant with a

non-disturbance agreement in form and substance reasonably acceptable to Lender;

provides that the tenant thereunder is required to attorn to Lender, such

attornment to be effective upon Lender's acquisition of title to the Property;

that the tenant agrees to execute such further evidences of attornment as Lender

may from time to time request; that the attornment of the tenant shall not be

terminated by foreclosure; that in no event shall Lender, as holder of this

Instrument or as successor landlord, be liable to the tenant for any act or

omission of any prior landlord or for any liability or obligation of any prior

landlord occurring prior to the date that Lender or any subsequent owner acquire

title to the Property; and that Lender may, at Lender's option, accept or reject

such attornment.

 

        Borrower shall be required to obtain Lender's consent, which shall not

be unreasonably withheld, for the creation of any lease and subleases at the

Property other than an Exempt Lease. The request for approval of each such

proposed lease shall be made to Lender in writing and Borrower shall furnish to

Lender (and any loan servicer specified from time to time by Lender): (i) such

biographical and financial information about the proposed tenant as Lender may

reasonably require in conjunction with its review, (ii) a copy of the proposed

form of lease, and (iii) a summary of the material terms of such proposed lease

(including, without limitation, rental terms and the term of the proposed lease

and any options). Lender's failure to approve or

 

                                        13

<PAGE>

 

disapprove any such lease or sublease within ten (10) Business Days after

Lender's receipt of such request shall be deemed to constitute Lender's approval

thereof.

 

        As to all leases other than Exempt Leases, Borrower shall not, without

the prior written consent of Lender (which shall not be unreasonably withheld),

(i) cancel, amend or modify any such lease, (ii) approve any assignment,

sublease or underlease of any such lease, or (iii) cancel or modify any

guaranty, or release any security deposit or letter of credit constituting

security pertaining to any such lease. Lender's failure to approve or disapprove

any of the matters described in the preceding sentence within ten (10) Business

Days after Lender's receipt of such request shall be deemed to constitute

Lender's approval thereof.

 

        Borrower shall promptly send Lender copies of any notices of default

received from the tenant under any lease; and will enforce (short of terminating

such lease) the performance by the tenant of the tenant's obligations under any

lease.

 

        Except for security deposits, no lease, whether an Exempt Lease or

otherwise, shall provide for payment of rent more than one month in advance, and

Borrower shall not under any circumstances collect any such rent more than one

month in advance.

 

        Borrower, at Lender's request, shall furnish Lender with executed copies

of all leases hereafter made of all or any part of the Property, and all leases

hereafter entered into (other than Exempt Leases) will be in form and substance

subject to the approval of Lender. All leases of the Property or a separate

agreement in recordable form and substance satisfactory to Lender shall

specifically provide that such leases are subordinate to this Instrument; that

the tenant attorns to Lender, such attornment to be effective upon Lender's

acquisition of title to the Property; that the tenant agrees to execute such

further evidences of attornment as Lender may from time to time request; that

the attornment of the tenant shall not be terminated by foreclosure; that in no

event shall Lender, as holder of this Instrument or as successor landlord, be

liable to the tenant for any act or omission of any prior landlord or for any

liability or obligation of any prior landlord occurring prior to the date that

Lender or any subsequent owner acquire title to the Property; and that Lender

may, at Lender's option, accept or reject such attornment. Notwithstanding the

foregoing, Lender agrees to enter into a non-disturbance agreement with any

tenant at the Property, which agreement shall be in form and substance and on

terms and conditions reasonably acceptable to Lender. Except as otherwise

provided in this Section, Borrower shall not, without Lender's written consent,

(1) execute, modify, surrender or terminate, either orally or in writing, any

lease at the Property now existing or hereafter made of all or any part of the

Property, (2) permit an assignment or sublease of a lease, or (3) request or

consent to the subordination of any lease of all or any part of the Property to

any lien subordinate to this Instrument. Notwithstanding the foregoing and

provided that no Event of Default is continuing, , Borrower may, without

Lender's consent, terminate a Lease which covers less than 22,000 rentable

square feet provided that (i) the tenant under such Lease is in default under

such Lease and (ii) Borrower shall give Lender not less than thirty (30) days

prior written notice specifying the date on which Borrower will terminate such

Lease. If Borrower becomes aware that any tenant proposes to do, or is doing,

any act or thing which may give rise to any right of set-off against rent,

Borrower shall (i) take such steps as shall be reasonably calculated to prevent

the accrual of any right to a set-off against rent, (ii) notify Lender thereof

and of the amount of said set-offs, and (iii) within ten days after such

accrual, reimburse the tenant who shall have

 

                                       14

<PAGE>

 

acquired such right to set-off or take such other steps as shall effectively

discharge such set-off and as shall assure that rents thereafter due shall

continue to be payable without set-off or deduction.

 

Upon Lender's request, Borrower shall absolutely assign to Lender, by written

instrument satisfactory to Lender, all leases now existing or hereafter made of

all or any part of the Property and all security deposits made by tenants in

connection with such leases of the Property. Upon assignment by Borrower to

Lender of any leases of the Property, Lender shall have all of the rights and

powers possessed by Borrower prior to such assignment and Lender shall have the

right to modify, extend or terminate such existing leases and to execute new

leases, in Lender's sole discretion.

 

        SECTION 15. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN

BORROWER.

 

                (a)      As used in this Section 15 and elsewhere in this

Instrument, the following capitalized terms shall have the respective meanings

set forth below:

 

                        (i)      "CONTROL": with respect to any Person, either

(i) ownership directly or indirectly of 49% or more of all equity interests in

such Person or (ii) the possession, directly or indirectly, of the power to

direct or cause the direction of the management and policies of such Person,

through the ownership of voting securities, by contract or otherwise.

 

                        (ii)     "KEY PRINCIPALS": Acadia Realty Limited

Partnership, a Delaware limited partnership, and Acadia Realty Trust, a Maryland

real estate investment trust.

 

                        (iii)    "PERMITTED ENCUMBRANCES": (i) the liens created

by the Loan Documents, (ii) all liens and other matters disclosed in Lender's

title insurance policy, (iii) liens, if any, for Taxes not yet due and payable

and not delinquent and (iv) any workers', mechanics' or other similar liens on

the Property provided that any such Lien is bonded or discharged within 30 days

after Borrower first receives notice of such lien and (v) such other title and

survey exceptions as Lender approves in writing in Lender's discretion.

 

                        (iv)     "PERMITTED TRANSFERS": (i) a Lease entered into

in accordance with the Loan Documents, (ii) a Permitted Encumbrance, (iii) a

Transfer and Assumption, (iv) provided that no Event of Default shall then

exist, (1) a Transfer of an indirect interest in Borrower other than the

membership interest held by Acadia Realty Limited Partnership (the "SOLE

MEMBER"), (2) a Transfer of publicly traded shares in Acadia Realty Trust or (3)

a Transfer of an interest in the Sole Member to any Person, in either case,

provided that (A) such Transfer shall not (x) cause the transferee (other than

any Key Principal), together with its Affiliates, to acquire Control of Borrower

or the Sole Member or to increase its direct or indirect interest in Borrower or

in the Sole Member to an amount which equals or exceeds 49% or (y) result in

Borrower or the Sole Member no longer being Controlled by any Key Principal, (B)

after giving effect to such Transfer, Key Principals (in the aggregate) shall

continue to own at least 51% of all equity interests (direct or indirect) in

Borrower, (C) Borrower shall give Lender notice of such Transfer together with

copies of all instruments effecting such Transfer not less than 10 days prior to

the date of such Transfer, and (D) the legal and financial structure of Borrower

and its

 

                                       15

<PAGE>

 

members and the single purpose nature and bankruptcy remoteness of Borrower and

its members after such Transfer, shall satisfy Lender's then current applicable

underwriting criteria and requirements, (v) provided that no Event of Default

shall then exist, a Transfer of a direct or indirect interest in Borrower or

Sole Member that occurs by devise or bequest or by operation of law upon the

death of a natural person that was the holder of such interest to a member of

the immediate family of such interest holder or a trust established for the

benefit of such immediate family member, provided that (A) no such Transfer

shall result in a change of the day to day operations of the Property, (B)

Borrower shall give Lender notice of such Transfer together with copies of all

instruments effecting such Transfer not less than 20 days after the date of such

Transfer, (C) the legal and financial structure of Borrower and Sole Member, and

the single purpose nature and bankruptcy remoteness of Borrower and Sole Member

after such Transfer, shall satisfy Lender's then current applicable underwriting

criteria and requirements, (D) if any such Transfer would result in a change of

Control of Borrower or Sole Member and occurs prior to the occurrence of a

Secondary Market Transaction, such Transfer is approved by Lender in writing

within 30 Business Days after any such Transfer, and (E) if any such Transfer

would result in a change of Control of Borrower or Sole Member and occurs after

the occurrence of a Secondary Market Transaction, Borrower, at Borrower's sole

cost and expense, shall, within 30 Business Days after any such Transfer, (a)

deliver (or cause to be delivered) if required by Lender or any Rating Agency a

Rating Comfort Letter to Lender, (b) obtain the prior written consent of Lender

which shall not be unreasonably withheld and (c) reimburse Lender for all

reasonable expenses incurred by Lender in connection with such Transfer, or (vi)

provided that no Event of Default shall then exist, a Transfer of a direct or

indirect interest in Borrower or Sole Member to any Person (other than any Key

Principal) (the "NEW SPONSOR"), pursuant to which, after giving effect to such

Transfer, the New Sponsor, together with its Affiliates, acquires Control of

Borrower or the Sole Member or holds a direct or indirect interest in Borrower

or in Sole Member in an amount equaling or exceeding 49% provided that (A)

Lender consents to such Transfer, which consent shall not be unreasonably

withheld, (B) Borrower delivers to Lender evidence reasonably satisfactory to

Lender showing that, after giving effect to such Transfer, Borrower and Sole

Member remain in full compliance with Section 29 hereof, as the provisions

thereof may be modified by Lender taking into account the ownership structure of

New Sponsor and its Affiliates, (C) if the Loan (as defined in Section 32(e)

hereof), by itself or together with other loans, has been the subject of a

Secondary Market Transaction, then Lender shall have received a Rating Comfort

Letter from the applicable Rating Agencies, (D) if the Loan has not been the

subject of a Secondary Market Transaction, then Lender shall have determined in

its reasonable discretion (taking into consideration such factors as Lender may

determine, including the attributes of the loan pool in which the Loan might

reasonably be expected to be securitized) that no rating for any securities that

would be issued in connection with such securitization will be diminished,

qualified, or withheld by reason of such Transfer to New Sponsor, (E) the

identity, experience, and financial condition of the New Sponsor shall be

satisfactory to Lender in its reasonable discretion, (F) a replacement

guarantor(s) (the identity, experience and financial condition of which shall be

satisfactory to Lender in its reasonable discretion) shall execute and deliver

to Lender any and all documents reasonably required by Lender, in form and

substance reasonably required by Lender, in Lender's sole discretion, after

which Guarantor shall be released from all liabilities and obligations under the

Guaranty, and (G) counsel to New Sponsor and replacement guarantor(s) shall

deliver to Lender opinions in form and substance satisfactory to Lender as to

such matters as Lender shall reasonably require,

 

                                       16

<PAGE>

 

which may include opinions as to substantially the same matters as were required

in connection with the origination of the Loan.

 

                        (v)      "PERSON": any individual, corporation,

partnership, limited liability company, joint venture, estate, trust,

unincorporated association, any other person or entity, and any federal, state,

county or municipal government or any bureau, department or agency thereof and

any fiduciary acting in such capacity on behalf of any of the foregoing.

 

                        (vi)     "RATING AGENCY": each of Standard & Poor's

Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), Moody's

Investors Service, Inc. ("MOODY'S"), and Fitch IBCA Duff & Phelps ("FITCH") or

any other nationally-recognized statistical rating organization to the extent

any of the foregoing have been engaged by Lender or its designee in connection

with or in anticipation of any Secondary Market Transaction.

 

                        (vii)    "RATING COMFORT LETTER": a letter issued by each

of the applicable Rating Agencies which confirms that the taking of the action

referenced to therein will not result in any qualification, withdrawal or

downgrading of any existing ratings of Securities created in a Secondary Market

Transaction.

 

                         (viii)   "SECONDARY MARKET TRANSACTION": any of (i) the

sale, assignment, or other transfer of all or any portion of the loan evidenced

by the Note and this Instrument or the Loan Documents or any interest therein to

one or more investors, (ii) the sale, assignment, or other transfer of one or

more participation interests in the loan evidenced by the Note and this

Instrument or Loan Documents to one or more investors, or (iii) the transfer or

deposit of all or any portion of the loan evidenced by the Note and this

Instrument or Loan Documents to or with one or more trusts or other entities

which may sell certificates or other instruments to investors evidencing an

ownership interest in the assets of such trust or the right to receive income or

proceeds therefrom.

 

                        (ix)     "TRANSFER": any sale, conveyance, transfer,

lease or assignment, or the entry into any agreement to sell, convey, transfer,

lease or assign, whether by law or otherwise, of, on, in or affecting (i) all or

part of the Property (including any legal or beneficial direct or indirect

interest therein), (ii) any direct or indirect interest in Borrower (including

any profit interest), or (iii) any direct or indirect interest in the Sole

Member.

 

                        (x)      "TRANSFER AND ASSUMPTION": is defined in

paragraph (c) of this Section 15.

 

                (b)      Borrower shall not directly or indirectly make, suffer

or permit the occurrence of any Transfer other than a Permitted Transfer.

 

                (c)      Notwithstanding the foregoing, Borrower shall have a

one-time right to Transfer the Property to another party (the "TRANSFEREE

BORROWER") and have the Transferee Borrower assume all of Borrower's obligations

under the Loan Documents, and have replacement guarantors and indemnitors assume

all of the obligations of the indemnitors and guarantors of the Loan Documents

(collectively, a "TRANSFER AND ASSUMPTION"). Borrower may make a written

application to Lender for Lender's consent to the Transfer and Assumption,

subject to the conditions set forth in subparagraphs (i) and (ii) of this

paragraph (c). Together

 

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with such written application, Borrower will pay to Lender the reasonable review

fee then required by Lender. Borrower also shall pay on demand all of the

reasonable costs and expenses incurred by Lender, including reasonable

attorneys' fees and expenses, and including the fees and expenses of Rating

Agencies and other outside entities, in connection with considering any proposed

Transfer and Assumption, whether or not the same is permitted or occurs.

 

                        (i)      Lender's consent, which may be withheld in

Lender's reasonable discretion, to a Transfer and Assumption shall be subject to

the following conditions:

 

                                        (1)      No Event of Default has occurred

                and is continuing;

 

                                        (2)      Borrower has submitted to Lender

                true, correct and complete copies of any and all information and

                documents of any kind reasonably requested by Lender concerning

                the Property, Transferee Borrower, replacement guarantors and

                indemnitors and Borrower;

 

                                         (3)      Evidence reasonably satisfactory

                to Lender has been provided showing that the Transferee Borrower

                and such of its Affiliates as shall be designated by Lender

                comply and will comply with Section 29 hereof, as those

                provisions may be modified by Lender taking into account the

                ownership structure of Transferee Borrower and its Affiliates;

 

                                        (4)       If the Loan (as defined in

                Section 32(e) hereof), by itself or together with other loans,

                has been the subject of a Secondary Market Transaction, then

                Lender shall have received a Rating Comfort Letter from the

                applicable Rating Agencies;

 

                                        (5)      If the Loan has not been the

                subject of a Secondary Market Transaction, then Lender shall

                have determined in its reasonable discretion (taking into

                consideration such factors as Lender may determine, including

                the attributes of the loan pool in which the Loan might

                reasonably be expected to be securitized) that no rating for any

                 securities that would be issued in connection with such

                securitization will be diminished, qualified, or withheld by

                reason of the Transfer and Assumption;

 

                                        (6)      Borrower shall have paid all of

                Lender's reasonable costs and expenses in connection with

                considering the Transfer and Assumption, and shall have paid the

                amount reasonably requested by Lender as a deposit against

                 Lender's costs and expenses in connection with effecting the

                Transfer and Assumption;

 

                                        (7)      Borrower, the Transferee

                Borrower, and the replacement guarantors and indemnitors shall

                have indicated in writing in form and substance reasonably

                satisfactory to Lender their readiness and ability to satisfy

                the conditions set forth in subsection (ii) below; and

 

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<PAGE>

 

                                        (8)      The identity, experience, and

                financial condition of the Transferee Borrower and the

                replacement guarantors and indemnitors shall be satisfactory to

                Lender in its reasonable discretion.

 

                        (ii)     If Lender consents to the Transfer and

Assumption, the Transferee Borrower and/or Borrower as the case may be, shall

immediately deliver the following to Lender:

 

                                         (1)      Borrower shall deliver to Lender

                an assumption fee in the amount of 1.00% of the then unpaid

                Principal; provided that, notwithstanding the foregoing,

                Borrower shall deliver to Lender an assumption fee in the amount

                of .25% in the event that Borrower makes a Transfer to (i)

                Acadia Strategic Opportunity Fund, L.P or (ii) Acadia Strategic

                Opportunity Fund II, LLC;

 

                                         (2)      Borrower, Transferee Borrower

                and the original and replacement guarantors and indemnitors

                shall execute and deliver to Lender any and all documents

                reasonably required by Lender, in form and substance reasonably

                required by Lender, in Lender's sole discretion;

 

                                        (3)      Counsel to the Transferee

                Borrower and replacement guarantors and indemnitors shall

                deliver to Lender opinions in form and substance satisfactory to

                Lender as to such matters as Lender shall reasonably require,

                which may include opinions as to substantially the same matters

                 as were required in connection with the origination of the Loan;

 

                                        (4)      Borrower shall cause to be

                delivered to Lender, an endorsement (relating to the change in

                the identity of the vestee and execution and delivery of the

                Transfer and Assumption documents) to Lender's title insurance

                policy in form and substance acceptable to Lender, in Lender's

                reasonable discretion (the "ENDORSEMENT"); and

 

                                        (5)      Borrower shall deliver to Lender

                a payment in the amount of all remaining unpaid costs incurred

                by Lender in connection with the Transfer and Assumption,

                 including but not limited to, Lender's reasonable attorneys fees

                and expenses, all recording fees, and all fees payable to the

                title company for the delivery to Lender of the Endorsement.

 

        SECTION 16. FURTHER ENCUMBRANCES. Except only for the liens and security

interests in favor of Lender under this Instrument and the other Loan Documents,

without Lender's prior written consent, which Lender may withhold in its sole

discretion, Borrower shall not execute, cause, allow or suffer any mortgage,

deed of trust, deed to secure debt, assignment of leases or rents, statutory

lien, mechanic's lien or other similar involuntary lien (with respect to any

such statutory lien, mechanic's lien or other similar involuntary lien, unless

such lien is bonded or discharged within 30 days after Borrower first receives

notice of such lien), irrespective of its priority, to encumber all or any

portion of the Property or the leases, rents or profits thereof, or any interest

in any of the foregoing.

 

                                       19

<PAGE>

 

        SECTION 17. GENERAL INDEMNITY. In addition to any other indemnification

obligation set forth elsewhere in the Loan Documents, Borrower shall, at its

sole cost and expense, protect, defend, indemnify, release and hold harmless the

Lender and its shareholders, directors, officers, agents, employees,

contractors, attorneys, servicers, and successors and assigns (the "INDEMNIFIED

PARTIES") from and against any and all claims, suits, liabilities (including,

without limitation, strict liabilities), actions, proceedings, obligations,

debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,

charges, fees, expenses, judgments, awards, amounts paid in settlement, or

punitive damages, of whatever kind or nature (including, but not limited to

attorneys' fees and other costs of defense) (the "LOSSES") imposed upon or

incurred by or asserted against any Indemnified Parties and directly or

indirectly arising out of or in any way relating to any one or more of the

following (but excluding Losses arising out of Lender's gross negligence or

willful misconduct): (a) ownership of this Instrument or any of the Loan

Documents, or ownership of the Property or any interest therein, or demand for

or receipt of any Rents; (b) any amendment to, or restructuring of, any of the

Loan Documents or the obligations evidenced or secured thereby; (c) any and all

lawful action that may be taken by Lender in connection with the enforcement of

the provisions of any of the Loan Documents, whether or not suit is filed in

connection with same, or in connection with Borrower, any guarantor or

indemnitor and/or any member, partner, joint venturer or shareholder thereof

becoming a party to a voluntary or involuntary federal or state bankruptcy,

insolvency or similar proceeding; (d) any accident, injury to or death of

persons or loss of or damage to property occurring in, on or about the Property

or any part thereof or on the adjoining sidewalks, curbs, adjacent property or

adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on

or about the Property or any part thereof or on the adjoining sidewalks, curbs,

adjacent property or adjacent parking areas, streets or ways; (f) any failure on

the part of Borrower to perform or be in compliance with any of the terms of any

of the Loan Documents; (g) performance of any labor or services or the

furnishing of any materials or other property in respect of the Property or any

part thereof; (h) 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 Instrument, or to supply a copy thereof in a timely

fashion to the recipient of the proceeds of the transaction in connection with

which this Instrument is made; (i) any failure of the Property to be in

compliance with any applicable laws; (j) the enforcement by any Indemnified

Party of the provisions of this Section; (k) any and all claims and demands

whatsoever which may be asserted against Lender by reason of any alleged

obligations or undertakings on its part to perform or discharge any of the

terms, covenants, or agreements contained in any Lease; (l) the payment of any

commission, charge or brokerage fee to anyone which may be payable in connection

with the funding of the loan evidenced by the Note; or (m) any misrepresentation

made by Borrower in any of the Loan Documents. Any amounts payable to any

Indemnified Party by reason of the application of this Section shall become

immediately due and payable upon demand and shall bear interest at rate then

applicable to principal outstanding under the Note.

 

        SECTION 18. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN

POSSESSION. As part of the consideration for the indebtedness evidenced by the

Note, Borrower hereby absolutely and unconditionally assigns and transfers to

Lender all the rents and revenues of the Property, including those now due, past

due, or to become due by virtue of any lease or other agreement for the

occupancy or use of all or any part of the Property,

 

                                       20

<PAGE>

 

regardless of to whom the rents and revenues of the Property are payable.

Borrower hereby authorizes Lender or Lender's agents to collect the aforesaid

rents and revenues and hereby directs each tenant of the Property to pay such

rents to Lender or Lender's agents; provided, however, that prior to written

notice given by Lender to Borrower of an Event of Default, Borrower shall

collect and receive all rents and revenues of the Property as trustee for the

benefit of Lender and Borrower, to apply the rents and revenues so collected to

the sums secured by this Instrument in any order determined by Lender, so long

as no such Event of Default has occurred, to the account of Borrower, it being

intended by Borrower and Lender that this assignment of rents constitutes an

absolute assignment and not an assignment for additional security only. Upon

delivery of written notice by Lender to Borrower of an Event of Default, and

without the necessity of Lender entering upon and taking and maintaining full

control of the Property in person, by agent or by a court-appointed receiver,

Lender shall immediately be entitled to possession of all rents and revenues of

the Property as specified in this Section as the same become due and payable,

including, but not limited to, rents then due and unpaid, and all such rents

shall immediately upon delivery of such notice and during the continuance of

such Event(s) of Default be held by Borrower as trustee for the benefit of

Lender only; provided, however, that the written notice by Lender to Borrower of

such Event(s) of Default shall contain a statement that Lender exercises its

rights to such rents. Borrower agrees that commencing upon delivery of such

written notice of Borrower's breach by Lender to Borrower, each tenant of the

Property shall make such rents payable to and pay such rents to Lender or

Lender's agents on Lender's written demand to any tenant therefor, delivered to

such tenant personally, by mail or by delivering such demand to the tenant at

its location in the Property, without any liability on the part of said tenant

to inquire further as to the existence of a default by Borrower. Borrower hereby

covenants that Borrower has not executed any prior assignment of said rents,

that Borrower has not performed, and will not perform, any acts or has not

executed, and will not execute, any instrument which would prevent Lender from

exercising its rights under this Section, and that at the time of execution of

this Instrument there has been no anticipation or prepayment of any of the rents

of the Property for more than one month prior to the due dates of such rents.

Borrower covenants that Borrower will not hereafter collect or accept payment of

any rents of the Property more than one month prior to the due dates of such

rents. Borrower further covenants that Borrower will execute and deliver to

Lender such further assignments of rents and revenues of the Property as Lender

may from time to time request.

 

        Upon an Event of Default, or upon Borrower's breach of any material

covenant of Borrower as landlord or lessor under any lease beyond applicable

notice and cure periods, Lender shall be entitled to the appointment of a

receiver for the Property, without notice to Borrower or any other person or

entity and Lender may in person, by agent or by a court-appointed receiver,

regardless of the adequacy of Lender's security, enter upon and take and

maintain full control of the Property in order to perform all acts necessary and

appropriate for the operation and maintenance thereof including, but not limited

to, the execution, cancellation or modification of leases, the collection of all

rents and revenues of the Property, the enforcement or fulfillment of any terms,

condition or provision of any lease, the making of repairs to the Property and

the execution or termination of contracts providing for the management or

maintenance of the Property, all on such terms as are deemed best to protect the

security of this Instrument. In the event Lender elects to seek the appointment

of a receiver for the Property upon Borrower's breach of any covenant or

agreement of Borrower in this Instrument, Borr