THIS SECURITY AGREEMENT (this
“Agreement”) is made and entered into as of
January 15, 2009, by and between Cole REIT III Operating
Partnership, LP, a Delaware limited partnership (“
Grantor ”), whose address is 2555 East Camelback Road,
Suite 400, Phoenix, Arizona 85016, and Series D, LLC, an
Arizona limited liability company (“ Lender ”),
whose address is 2555 East Camelback Road, Suite 400, Phoenix,
Arizona 85016.
Grantor, as collateral security for the payment
and performance of the Secured Obligations (as defined below),
hereby grants to Lender a security interest (the “
Security Interest ”) in all of Grantor’s right,
title and interest in the limited liability company membership
interests of Cole SC Hoover AL, LLC, a Delaware limited liability
company (the “ Cole SPE ”), whether now owned or
hereafter acquired, whether now existing or hereafter arising, and
wherever located, together with all of the following, whether now
owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located: (a) all of Grantor’s
membership interests, or any other interest, in the Cole SPE;
(b) all rights, benefits and privileges held by Grantor under
the Amended and Restated Limited Liability Company Agreement of
Cole SC Hoover AL, LLC dated as of January 15, 2009, as it may
be amended, modified or restated from time to time, including all
voting rights and rights to receive dividends, distributions and
other payments from the Cole SPE; (c) all proceeds of the
above-described property; and (d) all books and records
pertaining to the above-described property, including any computer
readable memory and computer hardware or software necessary to
process such memory (collectively, the “ Collateral
”).
The Collateral shall secure, in such order of
priority as Lender may elect, the following (collectively, the
“ Secured Obligations ”):
(a) payment and performance of all
obligations of Grantor under the terms of the Promissory Note of
even date herewith (the “Note”), in the maximum
principal amount of $11,070,000.00, executed by the Grantor in
favor of Lender, together with all extensions, modifications,
substitutions or renewals thereof, or other advances made
thereunder;
(b) payment and performance of every
obligation, covenant and agreement of Grantor contained in this
Agreement, together with all extensions, modifications,
substitutions or renewals hereof; and
(c) payment and performance of every
obligation, covenant and agreement of Grantor and Cole SPE
contained in each of the Loan Documents (as defined in the Note),
together with all extensions, modifications, substitutions or
renewals thereof.
3.
REPRESENTATIONS AND WARRANTIES OF GRANTOR
Grantor hereby
represents and warrants to Lender that:
3.1 Other Agreements . The execution,
delivery and performance by Grantor of this Agreement and all other
documents and instruments relating to the Secured Obligations will
not result in any breach of the terms and conditions or constitute
a default under any agreement or instrument under which Grantor is
a party or is obligated.
3.2 Priority . The Security Interest in
the Collateral granted to Lender constitutes, and hereafter will
constitute, a security interest of first priority.
3.3 Title . Grantor is the owner of, and
has good title to, the Collateral free of all security interests or
other encumbrances, and no financing statement covering the
Collateral is filed or recorded in any public office.
3.4 Authority . Grantor has the full
power, authority and legal right to grant to Lender the Security
Interest, and no further consent, authorization, approval or other
action is required for the grant of the Security Interest or for
Lender’s exercise of its rights and remedies under this
Agreement, except as may be required in connection with the sale of
the Collateral by Lender by the laws affecting the offering and
sale of securities.
3.5 State of Organization; Name . Grantor
is organized under the laws of the State of Delaware and the exact
legal name of Grantor is “Cole REIT III Operating
Partnership, LP”.
4.1 Transfers . Grantor shall not sell,
transfer, assign or otherwise dispose of any Collateral or any
interest therein (except as permitted herein) without obtaining the
prior written consent of Lender and shall keep the Collateral free
of all security interests or other encumbrances.
4.2 Payments of Charges . Grantor shall
pay when due all taxes, assessments and other charges which may be
levied or assessed against the Collateral.
4.3 Notice to Lender . Grantor shall give
Lender 45 days’ prior written notice of any change of
the names under which it does business or the state of its
organization.
4.4 Defense of Collateral . Grantor, at
its cost and expense, shall protect and defend this Agreement, all
of the rights of Lender hereunder, and the Collateral against all
claims and demands of other parties, including defenses, setoffs,
claims and counterclaims asserted by any Obligor against Grantor
and/or Lender. Grantor shall pay all claims and charges that in the
reasonable opinion of Lender might prejudice, imperil or otherwise
affect the Collateral or the Security Interest.
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4.5 Perfection of Security Interest . The
Security Interest, at all times, shall be perfected and shall be
prior to any other interests in the Collateral. Grantor shall act
and perform as necessary and shall execute and file all security
agreements, financing statements, continuation statements, control
agreements, and other documents requested by Lender to establish,
maintain and continue the perfected Security Interest. Grantor
further authorizes Lender to file an initial financing statement,
including all necessary amendments, without any signature of
Grantor, to perfect the Security Interest in the Collateral.
Grantor, on written demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any
searches, deemed necessary by Lender from time to time to establish
and determine the validity and the continuing priority of the
Security Interest.
4.6 Payment of Charges . If Grantor fails
to pay any taxes, assessments, expenses or charges, or fails to
keep all of the Collateral free from other security interests,
encumbrances or to perform otherwise as required herein, Lender may
advance the monies necessary to pay the same or to so
perform.
5. EVENTS OF
DEFAULT; REMEDIES
5.1 Events of Default . The occurrence of
any of the following events or conditions shall constitute an
“Event of Default”:
(i) Any failure to pay any principal or
interest or any other part of the Secured Obligations when the same
shall become due and payable.
(ii) The
Failure of Grantor to comply with any term or provision of this
Agreement.
(iii) The occurrence of an “Event of
Default” under and as defined in the Note or any of the other
Loan Documents.
5.2 Remedies . Upon the occurrence of any
Event of Default, and at any time while such Event of Default is
continuing, Len
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