Exhibit 10.3

 

PROMISSORY

NOTE

(with Incentive

Participation)

 

$5,000,000.00 December 31, 2014

 

THIS PROMISSORY NOTE (this "Note") is made as of December 31, 2014 by THE
RESIDENCES AT SHERBURNE COMMONS, INC., a Massachusetts c. 180 non-profit
corporation] ("Borrower"), having an address at c/o 40 Sherburne Commons,
Nantucket, Massachusetts 02554, to and in favor of CORNERSTONE OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership its successors and assigns
("Lender"), having an address at 2 South Pointe Drive, Suite 100, Lake Forest,
California 92630.

 

NOW, THEREFORE, FOR VALUE RECEIVED, Borrower, unconditionally promises to pay to
the order of Lender, without any counterclaim, setoff or deduction whatsoever,
on or before the Maturity Date (as hereinafter defined), at the office of
Lender, or at such other place as Lender may designate to Borrower in writing
from time to time, the principal sum of FIVE MILLION AND N0/100 DOLLARS
($5,000,000.00), together with (i) interest on so much thereof as is from time
to time outstanding and unpaid, from the date of the advance of the principal
evidenced hereby, at the rate of three and one half percent (3.5%) per annum
(the "Note Rate"), compounded annually, and (ii) the Additional Interest
(defined below), at such time as is required by the terms hereof, all in lawful
money of the United States of America, which shall at the time of payment be
legal tender in payment of all debts and dues, public and private.

 

SECTION 1

 

TERMS AND

CONDITIONS

 

1.01         Payment of Interest. Interest shall be computed hereunder based on
a 360-day year and paid for the actual number of days elapsed for any whole or
partial month in which interest is being calculated. In computing the number of
days during which interest accrues, such accrual shall commence on the date
hereof, and the day on which funds are repaid shall be included unless repayment
is credited prior to close of business. Payments in federal funds immediately
available in the place designated for payment received by Lender prior to 2:00
p.m. local time on a business day at the place designated for payment shall be
credited prior to close of business, while other payments may, at the option of
Lender, not be credited until immediately available to Lender in federal funds
at the place designated for payment prior to 2:00 p.m. local time at said place
of payment on a day on which Lender (or if Lender designates another entity to
receive payment on behalf of Lender, such entity) is open for business.

 

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Payments of interest only shall be payable in monthly installments, beginning on
the first day of the first month following the date of this Note and continuing
on the first day of each and every month (each a "Payment Date") thereafter
through and including December 31, 2017 (the "Maturity Date"), at which time the
entire outstanding principal balance hereof, together with all accrued but
unpaid interest thereon and the Additional Interest then due, shall be due and
payable in full; PROVIDED, HOWEVER, at Borrower's election, interest may accrue
and not be payable for the period commencing on the date hereof, through and
including December 31, 2015, and all such accrued but unpaid interest shall then
be payable in full commencing January 1, 2016, and interest shall then be
payable on each succeeding Payment Date. Each such monthly installment shall be
applied first to the payment of accrued interest and then to reduction of
principal, if any. For purposes of making payments hereunder, but not for
purposes of calculating interest accrual periods, if the day on which any
payment is due is not a Business Day (as defined in the Security Instrument),
then amounts due on such date shall be due on the immediately preceding Business
Day.

 

1.02           Payment of Principal. Outstanding and unpaid principal due
hereunder shall be paid to Lender by remittance to Lender of the entire Net
Proceeds payable to Borrower for any of the residential cottages (the
"Cottages") in the Sherburne Commons multiunit senior independent and assisted
living facility situated at 21 South Shore Road, Nantucket, Massachusetts being
the premises leased to Borrower pursuant to that certain Second Amended and
Restated Ground Lease dated December 9, 2009, as amended and assigned to
Borrower, and which are not subject to that certain Liquidating Trust Agreement
dated December 1, 2009 established in the Bankruptcy Case In re: Sherburne
Commons, Inc., Case No. 08-18026-WCH (US Bankruptcy Court for the District of
Massachusetts). As used herein, "Net Proceeds" shall mean the gross actual
consideration paid by purchasers of the Cottages, whether by outright sale or by
payment of one time entrance fees, less customary closing costs, including
brokerage fees, recording fees, documentary deed stamps, Nantucket Land Bank
excise fees, closing attorney fees, and all other normal and customary fees and
charges incurred in the normal practice of real estate conveyance. In connection
therewith, Borrower shall (i) submit a report monthly to Lender evidencing the
status of the Cottages, including detailing which are being marketed but unsold,
which are under contract for sale and the anticipated date of closing, and which
have been sold since the prior reporting period, a form of such report is
attached hereto as Exhibit A; (ii) deliver to Lender within five (5) days of
execution a true and correct copy of each purchase agreement executed by
Borrower and the purchaser and shall notify Lender not less than ten (10) days
in advance of any sale so identified and the place and person conducting the
closing; and (iii) deliver a true and complete closing statement evidencing the
Net Proceeds realized therefrom, in adequate detail evidencing the Gross Sale
Price and deductions therefrom to result in the Net Proceeds with respect to the
subject transaction. Borrower shall remit to Lender such Net Proceeds from each
such sale not later than ten days following the closing of such sale,
accompanied by a true copy of the closing statement certified as true and
correct by Borrower and certifying that no other undisclosed agreements exist
between Borrower, as seller, and the buyer, whether oral or written with respect
to the subject transaction. Such remitted Net Proceeds shall be applied to
principal then outstanding. Unless previously paid in full, any then outstanding
principal shall be paid, in full, on the Maturity Date. Borrower may prepay
principal in whole or part upon ten days advance notice to Lender without
penalty or premium.

 

1.03           Additional Interest Incentive Participation.

 

(i)              Definitions. As used in this Section 1.03, the following terms
are defined as follows.

 

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(a)          "Acceleration Default" means the Lender's acceleration of the
indebtedness evidenced by this Note after the occurrence of an Event of Default.

 

(b)          "Additional Interest Maturity Date" means December 31, 2018.

 

(c)          "Additional Interest Maximum" means One Million Dollars
($1,000,000).

 

(d)          "Additional Interest Threshhold" means Six Million Dollars
($6,000,000) of Cottage Sales Net Proceeds. The Additional Interest Threshold
shall be determined by monthly sales reports and net proceeds reconciliations
submitted to Lender by the chief financial officer of Borrower and certified as
true and correct for the reporting period.

 

(e)          "Cottage Sales Net Proceeds" means the gross actual consideration
paid by purchasers of the Cottages, less customary closing costs, including
brokerage fees, recording fees, documentary deed stamps, Nantucket Land Bank
excise fees, closing attorney fees, and all other normal and customary fees and
charges incurred in the normal practice of real estate conveyance. Such net
proceeds shall be evidenced by a complete and adequately detailed closing
statement with respect to the subject transaction.

 

(ii)           Additional Interest. In addition to the payment of interest
("Regular Interest") and principal provided for in Sections 1.01 and 1.02 of
this Note, Borrower agrees to pay to Lender, as "Additional Interest" fifty
percent (50%) of the Cottage Sales Net Proceeds received by Borrower during the
period from and after the date upon which the Additional Interest Threshold has
been achieved (notwithstanding that some portion of Cottage Sales Net Proceeds
may have been previously remitted to Lender in payment of Principal under this
Note as provided in Section 1.02 hereof), up to and including the Additional
Interest Maturity Date, but Additional Interest due as of the Maturity Date
shall also include the amounts payable with respect to Cottages under contract
for sale but which have not yet been actually sold and which Additional Interest
with respect to such contracted but unsold Cottages as of the Additional
Interest Maturity Date shall be remitted to Lender promptly upon the completion
of the transaction represented thereby, but in no event shall Lender receive
more than the Additional Interest Maximum. The Additional Interest shall be
payable not later than ten days following Borrower's receipt of Cottage Sales
Net Proceeds and shall be evidenced by a true, complete and adequately detailed
closing statement with respect to the subject transaction.

 

(iii)          Termination. Lender's right to the payment of Additional Interest
shall terminate upon the Additional Interest Maturity Date, subject to payment
of the Additional Interest then due Lender and including Additional Interest due
after the Additional Interest Maturity Date with respect to Cottages under
contract but for which the completion of the transaction is subsequent thereto.

 

(iv)           No Joint Venture. Nothing in this Note or the Loan Documents is
intended or shall be construed to make Borrower and Lender partners or joint
venturers or to make either of them liable for the debts or obligations of the
other, it being the express and unequivocal intent of Borrower and Lender that
their relationship shall be solely and exclusively that of debtor and creditor.

 

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1.04          Prepayment. This Note may be prepaid in whole or in part without
premium or penalty.

 

1.05          Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by, among other things, that certain
Leasehold Mortgage, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (the "Security Instrument"), dated of even date herewith, made by
Borrower in favor of Lender, encumbering certain property located in Nantucket
County, Massachusetts. The Security Instrument, together with this Note, any
indemnity and guaranty agreement, any hazardous substances indemnity agreement,
and such other agreements, documents and instruments, together with any and all
renewals, modifications, amendments, restatements, consolidations,
substitutions, replacements, and extensions and modifications thereof, are
herein referred to collectively as the "Loan Documents". All of the terms and
provisions of the Loan Documents are incorporated herein by reference. Some of
the Loan Documents are to be filed for record on or about the date hereof in the
appropriate public records. In the event that (i) Borrower repays all principal
and interest outstanding pursuant to this Note as provided for in Sections 1.01
and 1.02 (but not including the Additional Interest provided in Section 1.03) on
or before the Maturity Date and prior to the Additional Interest Maturity Date,
whether through securing alternate financing or otherwise, and (ii) Borrower has
adopted one or more forms of multiple ownership of the Cottages (by way of
example but without limitation, condominium, co-operative, or tenancy in
common), Lender agrees to provide Borrower with a partial release of the
Collateral subject to the Security Instrument which do not constitute Cottages.

 

1.06         Default. It is hereby expressly agreed that should any default
occur in the payment of principal or interest as stipulated above and such
payment is not made when due, or should any other monetary or any material
non-monetary default occur under any of the Loan Documents which is not cured
within any applicable grace or cure period therein, but including without
limitation, any sale, transfer, conveyance or other violation of the terms of
Section 1.13 of the Security Instrument, then an "Event of Default" shall exist
hereunder, and in such event the indebtedness evidenced hereby, including all
sums advanced or accrued hereunder or under any other Loan Document, and all
unpaid interest accrued thereon, and including any unpaid Additional Interest,
shall, at the option of Lender and without notice to Borrower, at once become
due and payable and may be collected forthwith, whether or not there has been a
prior demand for payment and regardless of the stipulated date of maturity.

 

In the event that any payment is not received by Lender on the date when due,
then in addition to any default interest payments due hereunder, Borrower shall
also pay to Lender a late charge in an amount equal to five percent (5.0%) of
the amount of such overdue payment in order to defray Lender's expenses in
addressing and processing the delinquent payment and compensate Lender from the
loss of the use of such payment. Such amount shall be secured by the Loan
Documents, but shall not result in any extension of the Maturity Date nor a
waiver of any other right or remedy available to Lender in connection with the
Loan Documents.

 

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So long as any default exists hereunder, regardless of whether or not there has
been an acceleration of the indebtedness evidenced hereby, and at all times
after maturity of the indebtedness evidenced hereby (whether by acceleration or
otherwise), interest shall accrue on the amount due under this Note at a rate
per annum equal to the Note Rate plus five percent (5.0%), or if such increased
rate of interest may not be collected under applicable law, then at the maximum
rate of interest, if any, which may be collected from Borrower under applicable
law (the "Default Interest Rate"), and such default interest shall be
immediately due and payable. Such amounts shall be secured by the Loan
Documents, but shall not result in any extension of the Maturity Date nor a
waiver of any other right or remedy available to Lender in connection with the
Loan Documents.

 

Borrower acknowledges that it would be extremely difficult or impracticable to
determine Lender's actual damages resulting from any late payment or default,
and such late charges and default interest are reasonable estimates of those
damages and do not constitute a penalty. The remedies of Lender in this Note or
in the other Loan Documents, or at law or in equity, shall be cumulative and
concurrent, and may be pursued singly, successively or together in Lender's
discretion. Time is of the essence with respect to all matters concerning or
relating to this Note. Borrower agrees to pay on demand all expenses and costs
of enforcement, administration and collection incurred or paid by Lender
including, but not limited to, reasonable attorneys' fees and disbursements of
Lender, whether or not with respect to retained firms, the reimbursement for the
expenses of in-house staff, or otherwise and whether or not any legal proceeding
is commenced hereunder. The foregoing amounts shall be paid together with
interest thereon at the Default Interest Rate from the date paid or incurred by
Lender until such expenses are paid by the Borrower.

 

1.07          Exculpation.    Notwithstanding anything in the Loan Documents to
the contrary, but subject to the qualifications set forth below, Lender agrees
that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for
the other obligations arising under the Loan Documents to the full extent (but
only to the extent) of the security granted therefor, the same being all
properties (whether real or personal), rights, estates and interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents (collectively, the "Propertv"),
(ii) if default occurs in the timely and proper payment of all or any part of
such indebtedness evidenced hereby or in the timely and proper performance of
the other material obligations of Borrower under the Loan Documents, any
judicial proceedings brought by Lender against Borrower shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, and confirmation of any sale
under power of sale, and no attachment, execution or other writ of process shall
be sought, issued or levied upon any assets, properties or funds of Borrower
other than the Property except with respect to the liabilities described below
in this section and in Section 1.08 below, and (iii) in the event of a
foreclosure of such liens, security titles, estates, assignments, rights or
security interests securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, whether by judicial
proceedings or exercise of power of sale, no judgment for any deficiency upon
the indebtedness evidenced hereby shall be sought or obtained by Lender against
Borrower, except with respect to the liability described below in this section;
provided, however, that, notwithstanding the foregoing provisions of this
section, Borrower shall be fully and personally liable and subject to legal
action (a) for proceeds paid under any insurance policies (or paid as a result
of any other claim or cause of action against any person or entity) by reason of
damage, loss or destruction to all or any portion of the Property, to the full
extent of such proceeds not previously delivered to Lender, but which, under the
terms of the Loan Documents, should have been delivered to Lender, (b) for
proceeds or awards resulting from the condemnation or other taking in lieu of
condemnation of all or any portion of the Property, or any of them, to the full
extent of such proceeds or awards not previously delivered to Lender, but which,
under the terms of the Loan Documents, should have been delivered to Lender, (c)
for all tenant security deposits or other refundable deposits paid to or held by
Borrower or any other person or entity in connection with leases of all or any
portion of the Property which are not applied in accordance with the terms of
the applicable lease or other agreement, (d) for rent and other payments
received from tenants under leases of all or any portion of the Property paid
more than one (1) month in advance, (e) for rents, issues, profits and revenues
of all or any portion of the Property received or applicable to a period after
any notice of default from Lender hereunder or under the Loan Documents in the
event of any default hereunder or thereunder which are not either applied to the
ordinary and necessary expenses of owning and operating the Property or paid to
Lender, (f) for damage to the Property as a result of intentional misconduct or
gross negligence of, or material waste to or of the Property by, Borrower or any
of its principals, officers or general partners or members, or any agent or
employee of any such persons, or any removal of the Property in violation of the
terms of the Loan Documents, to the full extent of the losses or damages
actually incurred by Lender on account of such damage or removal, (g) for
Borrower's failure to pay any valid taxes, assessments, mechanic's liens,
materialmen's liens or other claims which could create liens on any portion of
the Property, accruing prior to the date Lender acquires actual possession and
control of the Property, which would be superior to the lien or security title
of the Security Instrument or the other Loan Documents, to the full extent of
the amount claimed by any such lien claimant, (h) for all obligations and
indemnities of Borrower under the Loan Documents relating to hazardous or toxic
substances or compliance with environmental laws and regulations to the full
extent of any losses or damages (including, without limitation, those resulting
from diminution in value of the Property or any portion thereof) incurred by
Lender as a result of the existence of such hazardous or toxic substances or
failure to comply with environmental laws or regulations, (i) for fraud or
material misrepresentation in connection with or related to the Loan, including
without limitation, the origination thereof and/or performance thereof, by
Borrower or any of its principals, officers, directors, general partners or
members, any guarantor, any indemnitor or any agent, employee or other person
authorized or apparently authorized to make statements or representations on
behalf of Borrower, any principal, officer, director, general partner,
beneficial owner or member of Borrower, or any guarantor or any indemnitor, to
the full extent of any losses, damages and expenses of Lender on account thereof
(including, without limitation, reasonable attorneys’ fees and expenses), (j)
for any amounts paid under leases containing early lease termination and/or
surrender options or otherwise paid by tenants in consideration of an early
termination and/or surrender of any lease and not delivered to Lender in
accordance with the Security Instrument, (k) for all damage, liability, loss,
cost and expense (including, without limitation, reasonable attorneys’ fees)
incurred by Lender as a result of the termination or revocation of any
governmental license or authorization necessary to permit the operation of the
Property as an assisted living facility, and (l) the costs incurred in
recovering such amounts, including, without limitation, reasonable attorneys'
fees and expenses. References herein to particular sections of the Loan
Documents shall be deemed references to such sections as affected by other
provisions of the Loan Documents relating thereto. Nothing contained in this
section shall (l) be deemed to be a waiver, release or impairment of the
indebtedness evidenced by this Note or the other obligations of Borrower under
the Loan Documents or the lien of the Loan Documents upon the Property, or (2)
preclude Lender from foreclosing the Loan Documents in case of any default
hereunder or under any of the Loan Documents or from enforcing any of the other
rights of Lender except as stated in this section, or under the Environmental
Indemnity Agreement of even date from Borrower to Lender, or (3) limit or impair
in any way whatsoever the Environmental Indemnity Agreement executed and
delivered in connection with the indebtedness evidenced by this Note or any
other indemnity or guaranty executed and delivered in connection with the
indebtedness evidenced by this Note, or release, relieve, reduce, waive or
impair in any way whatsoever, any obligation of any party to such Environmental
Indemnity Agreement or any other such indemnity or guaranty or agreement
relating hereto. Borrower agrees that Lender shall not be deemed to have waived
any right which Lender may have under Section 506(a), 506(b), 1111(b) or any
other provisions of the U.S. Bankruptcy Code to file a claim for the full amount
of the debt secured by the Security Instrument or to require that all collateral
shall continue to secure all of the debt owing to Lender in accordance with the
Loan Documents.

 

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1.08         Exceptions to Exculpation. Notwithstanding anything to the contrary
in this Note or any of the Loan Documents, the obligations of Borrower under
this Note and the other Loan Documents shall be fully recourse to Borrower in
the event that: (i) the full payment of interest accrued under this Note is not
paid when due no later than January 1, 2016; (ii) Borrower fails to maintain its
status as a single purpose entity, as required by, and in accordance with the
terms and provisions of, the Security Instrument; (iii) Borrower fails to obtain
Lender's prior written consent to any subordinate financing (including, without
limitation, any mezzanine financing) or other voluntary lien encumbering the
Property; (iv) Borrower fails to obtain Lender's prior written consent to any
assignment, transfer, or conveyance of the Property or any interest therein as
required by the Security Instrument; (v) a receiver, liquidator or trustee of
Borrower or of any guarantor or indemnitor shall be appointed or if Borrower or
any guarantor or indemnitor 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,
consented to, or acquiesced in by, Borrower or any guarantor or indemnitor or if
any proceeding for the dissolution or liquidation of Borrower or of any
guarantor shall be instituted by Borrower or any guarantor; (vi) Borrower or any
guarantor or indemnitor shall have colluded with other creditors to cause an
involuntary bankruptcy filing with respect to Borrower or any guarantor or
indemnitor; or (vii) Borrower defaults hereunder in any way and Borrower or any
guarantor or indemnitor, either before or after the occurrence of any such
default, contests or in any way interferes with, directly or indirectly, any
foreclosure action, Uniform Commercial Code sale and/or deed in lieu of
foreclosure transaction commenced by Lender or with any other enforcement of
Lender's rights, powers or remedies under any of the Loan Documents or under any
document evidencing, securing or otherwise relating to any of the Collateral (as
such term is defined in the Security Instrument) or any of the other Property
(whether by making any motion, bringing any counterclaim, claiming any defense,
seeking any injunction or other restraint, commencing any action, seeking to
consolidate any such foreclosure or other enforcement with any other action, or
otherwise).

 

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1.09         Delegation to Servicer. At the option of Lender, the Loan may be
serviced by a servicer or a trustee (together with their respective successors
and assigns, the "Servicer") selected by Lender and Lender may delegate all or
any portion of its rights and responsibilities under this Note and the other
Loan Documents to the Servicer pursuant to a servicing agreement between Lender
and Servicer.

 

1.10         GENERAL CONDITIONS

 

(a)            No Waiver; Amendment. No failure to accelerate the debt evidenced
hereby by reason of default hereunder, acceptance of a partial or past due
payment, 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 Lender
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 any applicable laws; and Borrower hereby expressly waives the
benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing. No extension of the time for the payment of this Note or any
installment due hereunder, made by agreement with any person or entity now or
hereafter liable for the payment of this Note shall operate to release,
discharge, modify, change or affect the original liability of Borrower under
this Note, either in whole or in part, unless Lender agrees otherwise in
writing. This Note may not be changed orally, but only by a definitive written
agreement signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought. Moreover, Borrower agrees that it shall not
rely on any other memoranda, written analysis, proposal or conversation or
action/inaction on the possibility that the Lender might ultimately agree to a
waiver of any term or provision of this Note or any other Loan Document. As
negotiations may be lengthy and complex, and may not produce a definitive
written agreement, the Borrower should not forego any opportunities to repay the
Note in reliance on any such negotiations or any proposed written agreement that
is not fully-executed.

 

(b)            Waivers. Presentment for payment, demand, protest and notice of
demand, protest and nonpayment and all other notices are hereby waived by
Borrower. Borrower hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any statute of limitations and
any moratorium, reinstatement, marshalling, forbearance, valuation, stay,
extension, redemption, appraisement, exemption and homestead now or hereafter
provided by the Constitution and laws of the United States of America and of
each state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement and collection of the obligations
evidenced by this Note or the other Loan Documents.

 

(c)            Limit of Validity. Notwithstanding anything to the contrary
contained in this Note or the Security Instrument, the Default Interest Rate
shall not at any time exceed the Maximum Rate. The term "Maximum Rate," as used
herein, shall mean, on any day, the highest non-usurious rate of interest (if
any) permitted by applicable law on such day.

 

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It is the intention of the parties hereto to comply with the usury laws of the
State of Massachusetts and the United States of America. The parties hereto do
not intend to contract for, charge or receive any interest or other charge which
is usurious, and by execution of this Note or the Security Instrument, Borrower
agrees that Lender has no such intent. This Note, the Security Instrument, the
other Loan Documents and all other agreements between Borrower and Lender or any
other holder hereof, which are now existing or hereafter arising, whether
written or oral, are hereby expressly limited so that in no event whatsoever,
whether by reason of acceleration of maturity hereof, or otherwise, shall the
amount paid, or agreed to be paid, to Lender or any other holder hereof for the
use, forbearance or detention of the money to be due hereunder or otherwise, or
for the payment or performance of any covenant or obligation contained herein or
in any other document evidencing, securing or pertaining to the Debt, exceed the
Maximum Rate. If from any circumstance whatsoever fulfillment of any provisions
hereof or other document, at the time performance of such provisions shall be
due, shall involve transcending the valid limits prescribed by law, then ipso
facto, the obligation to be fulfilled shall be reduced to the Maximum Rate, and
if from any such circumstance Lender or any other holder shall ever receive as
interest or otherwise an amount which will exceed the Maximum Rate, such amount
which would be excessive interest shall be applied to the reduction of the
principal amount owing hereunder (without prepayment premium or penalty) or on
account of any other principal indebtedness of Borrower to the holder and not to
the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal hereof and such other indebtedness, such excess shall be
refunded to Borrower. All sums paid and agreed to be paid to Lender or any other
holder for use, forbearance or detention of the indebtedness of Borrower shall,
to the extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the period until payment in full on the Note (or any
renewals, extensions and rearrangement thereof) so that the actual rate of
interest on account of the Debt is uniform throughout the term of this Note (and
all renewals, extensions and rearrangements hereof) and does not exceed the
Maximum Rate. The terms and provisions of this Section 1.10(c) shall control and
supersede any other provision of this Note or the other Loan Documents.

 

(d)            Borrower hereby warrants, represents and covenants that no funds
disbursed hereunder shall be used for personal, family or household purposes and
that amounts paid to Borrower hereunder shall be disbursed in accordance with
the related sources and uses statement prepared by Lender and executed by
Borrower on the date hereof. Borrower hereby acknowledges and confirms that its
execution of such sources and uses statement constitutes its irrevocable and
unconditional consent and authorization to the disbursement and use of the loan
proceeds as described therein.

 

(e)            Unconditional Payment. Borrower is and shall be obligated to pay
principal, interest, the Additional Interest (and interest thereon, if any) and
any and all other amounts which become payable hereunder or under the other Loan
Documents absolutely and unconditionally and without any abatement,
postponement, diminution or deduction and without any reduction for counterclaim
or setoff. In the event that at any time any payment received by Lender
hereunder shall be deemed by a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under any bankruptcy, insolvency or
other debtor relief law, then the obligation to make such payment shall survive
any cancellation or satisfaction of this Note or return thereof to Borrower and
shall not be discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand..

 

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(f)            Further Assurances. Borrower shall execute and acknowledge (or
cause to be executed and acknowledged) and deliver to Lender all documents, and
take all actions, reasonably required by Lender from time to time to confirm the
rights created under this Note and the other Loan Documents, to protect and
further the validity, priority and enforceability of this Note and the other
Loan Documents, to subject to the Loan Documents any property of Borrower
intended by the terms of any one or more of the Loan Documents to be encumbered
by the Loan Documents, to correct any error in any of the Loan Documents or any
error in the disbursement of any funds pursuant to the Loan Documents, or
otherwise carry out the purposes of the Loan Documents and the transactions
contemplated thereunder; provided, however, that no such further actions,
assurances and confirmations shall alter the exculpation provisions of this Note
(or the other Loan Documents) or increase Borrower's obligations under this
Note.

 

(g)            Submission to Jurisdiction; Waiver of Jury Trial.

 

BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, (A) SUBMITS TO
PERSONAL JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS OVER ANY SUIT, ACTION
OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS NOTE, (B) AGREES
THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION SITTING IN BOSTON, MASSACHUSETTS, (C) SUBMITS TO
THE JURISDICTION OF SUCH COURTS, AND (D) AGREES THAT BORROWER WILL NOT BRING ANY
ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM AND BORROWER FURTHER CONSENTS AND
AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE
PREPAID, TO BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED ON THE FIRST PAGE
HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY
RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE
VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY
LAW).

 

BORROWER, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY
AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES,
RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANYWAY RELATING TO THIS NOTE OR ANY
CONDUCT, ACT OR OMISSION OF LENDER, OR ANY OF THEIR DIRECTORS, OFFICERS,
PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH LENDER OR BORROWER BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THlS NOTE AND/OR THE LOAN EVIDENCED HEREBY, IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.

 

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(h)          Miscellaneous. This Note shall be interpreted, construed and
enforced according to the laws of the Commonwealth of Massachusetts and the
applicable laws of the United States of America. The terms and provisions hereof
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. To the extent any notice is provided hereunder or under any
other Loan Document and Borrower knows or has reason to believe that any of the
foregoing entities are acting as or on behalf of Lender hereunder, in addition
to Lender, Borrower shall provide such notice to such entity. As used herein,
the terms "Borrower" and "Lender" shall be deemed to include their respective
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. Subject to the limitations set forth in Section
1.07 above, if Borrower consists of more than one person or entity, each shall
be jointly and severally liable to perform the obligations of Borrower under
this Note. All personal pronouns used herein, whether used in the masculine,
feminine or neuter gender, shall include all other genders; the singular shall
include the plural and vice versa. Titles of articles and sections are for
convenience only and in no way define, limit, amplify or describe the scope or
intent of any provisions hereof. Capitalized terms used in this Note and not
otherwise defined herein shall have the meaning ascribed to them in the Security
Instrument or, if not therein defined, as defined in the other Loan Documents.
Time is of the essence with respect to all provisions of this Note, the Security
Instrument and the other Loan Documents. This Note and the other Loan Documents
contain the entire agreements between the parties hereto relating to the subject
matter hereof and thereof and all prior agreements relative hereto and thereto
which are not contained herein or therein are terminated.

 

IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has duly
executed this Note under seal as of the day and year first written above.

 

  THE RESIDENCES AT SHERBURNE   COMMONS, INC.       By: /s/ David D. Worth    
David D. Worth     President and Treasurer

 

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