Exhibit 10.14
Sovran Self Storage, Inc.
Promissory Note Between Locke Sovran II, LLC
and PNC Bank, National Association
Loan No. 94-0928992
PROMISSORY NOTE
$48,000,000.00
New York
February 12, 2002
     FOR VALUE RECEIVED, LOCKE SOVRAN II L.L.C., a New York limited liability
company (“Borrower”), having its principal place of business at 6467 Main
Street, Buffalo, New York 14221, promises to pay to the order of PNC Bank,
National Association (“Lender”), at the following address: 210 West 10th Street,
6th Floor, Kansas City, Missouri 64105, or such other place as the holder hereof
may from time to time designate in writing, the principal sum of FORTY EIGHT
MILLION AND NO/100 DOLLARS ($48,000,000.00) in lawful money of the United States
of America, with interest thereon to be computed from the date of disbursement
under this Promissory Note (this “Note”) at the Applicable Interest Rate
(hereinafter defined), and to be paid in installments as follows:
          A. A payment, on the date of disbursement, representing interest from
the date of disbursement through the last day of the calendar month in which
such disbursement is made;
          B. A constant payment of $345,093.99 (the “Monthly Debt Service
Payment Amount”) (based upon an amortization schedule assuming a 360 day year
consisting of 12 months of 30 days each) on the first day of April, 2002 and on
the first day of each calendar month thereafter up to and including the first
day of February, 2012; and
          C. The balance of said principal sum, all unpaid interest thereon and
all other amounts owed pursuant to this Note, the Security Instrument
(hereinafter defined), the Other Security Documents (hereinafter defined), or
otherwise in connection with the loan evidenced by this Note (the “Loan”) shall
be due and payable on the first day of March, 2012 (the “Maturity Date”).
All payments to be made by Borrower to Lender shall be deemed received by Lender
only upon Lender’s actual receipt of same.
     1. Applicable Interest Rate. Interest accruing on the principal sum of this
Note

 

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shall be calculated based upon a per annum interest rate divided by 360 days
resulting in a per diem interest amount that will accrue for each calendar day
in a year of 365 days (366 days in a leap year). The term “Applicable Interest
Rate” as used in this Note shall mean, from the date of this Note through and
including the Maturity Date, a rate of Seven and 19/100th percent (7.19%) per
annum (the “Initial Interest Rate”).
     2. Application. All payments on this Note shall be applied at any time and
from time to time in the following order: (i) the payment or reimbursement of
any expenses (including but not limited to late charges), costs or obligations
(other than the principal hereof and interest hereon) for which Borrower shall
be obligated or Lender entitled pursuant to the provisions hereof or of the
Security Instruments or the Other Security Documents, (ii) the payment of
accrued but unpaid interest thereon, (iii) the payment of unpaid escrow amounts
required herein, in the Security Instruments or in the Other Security Documents,
and (iv) the payment of all or any portion of the principal balance then
outstanding hereunder, in either the direct or inverse order of maturity, at
Lender’s option.
     3. Late Charge. If any part of the Debt (hereinafter defined) is not
actually received by Lender by close of business on the fifth (5th) day after
the date on which it was due, Borrower shall pay to Lender an amount (the “Late
Charge”) equal to the lesser of five percent (5%) of such unpaid portion of the
missed payment or the maximum amount permitted by applicable law, to defray the
expenses incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment. All
such Late Charges shall be automatically due and payable without notice or
demand and shall be secured by the Security Instruments and the Other Security
Documents.
     4. Security; Defined Terms; Incorporation by Reference. This Note is
secured by the Security Instrument and the Other Security Documents. The term
“Security Instrument” as used in this Note shall mean each of the eleven
(11) Mortgages, Security Agreements, Assignments of Leases and Rents and Fixture
Filings, and the one (1) Deed of Trust, Security Agreement Assignment of Leases
and Rents and Fixture Filing, and the two (2) Deeds to Secure Debt, Security
Agreements and Assignments of Leases and Rents executed and delivered by
Borrower contemporaneously with this Note and which secure the Debt (sometimes
referred to individually as an “Individual Security Instrument” and sometimes
referred to collectively as the “Security Instruments”). The term “Other
Security Documents” means all documents other than this Note or the Security
Instruments now or hereafter executed and/or delivered by Borrower and/or others
and to or in favor of Lender, which wholly or partially secure, evidence or
guarantee payment of the Debt, provide for any indemnity in favor of or payment
to Lender related to the Debt, this Note or the Mortgaged Property (as defined
in Paragraph 21(d) below), provide for any escrow/holdback arrangements or for
any actions to be completed by Borrower subsequent to the date hereof, or are
otherwise related to the loan evidenced by this Note, including, without
limitation, the Lockbox Agreement (as defined in Paragraph 21(a)(i) below). All
amounts due and payable under this Note, together with all sums due under the
Security Instruments and the Other

 

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Security Documents, including any applicable Prepayment Consideration
(hereinafter defined) and all applicable attorney fees and costs, are
collectively referred to herein as the “Debt.” Where appropriate, the singular
number shall include the plural, the plural shall include the singular, and the
words “Lender” and “Borrower” shall include their respective successors,
assigns, heirs, personal representatives, executors and administrators.
     5. Prepayment/Defeasance.
     (a) When Permitted. Prior to December 1, 2011 (the “Early Payment Date”),
Borrower shall not have the right to prepay all or any portion of the Debt at
any time during the term of this Note (except for any prepayment permitted under
the Security Instruments in the event of a casualty or condemnation). No
Prepayment Consideration (hereinafter defined) will be due from any prepayment
of this Note (in whole but not in part) on or after the Early Payment Date. In
the event of a prepayment on or after such date, Borrower shall pay, together
with the amount of such prepayment, an amount equal to (i) all accrued and
unpaid interest, and (ii) any other sums due under this Note, the Security
Instruments or any Other Security Document. Additionally, any such prepayment
not actually received by Lender before 5:00 p.m., central time, on the 5th day
of any calendar month must also include the interest which would have accrued on
the amount of such prepayment during the entire calendar month in which the
prepayment is made.
     (b) Notice. Borrower may give written notice to Lender specifying the date,
which date must be on or after the Early Payment Date, on which a full
prepayment of the Debt is to be made (the date of any prepayment hereunder,
whether pursuant to such notice or not, and whether voluntary or involuntary,
being herein called the “Prepayment Date”). The Prepayment Date so designated
must fall within the first ten (10) calendar days of a month during the term of
this Note. Lender shall receive this notice not more than sixty (60) days and
not less than thirty (30) days prior to the Prepayment Date. If any such notice
of prepayment is given, the entire Debt, including any applicable Prepayment
Consideration (as defined below), shall be due and payable on the Prepayment
Date.
     (c) Prepayment After Event of Default. If following the occurrence of any
Event of Default, Borrower shall tender payment of an amount sufficient to
satisfy the Debt at any time prior to or after a sale of the Mortgaged Property,
either through foreclosure or the exercise of the other remedies available to
Lender under the Security Instruments or the Other Security Documents, such
tender by Borrower shall be deemed to be a voluntary prepayment under this Note
in the amount tendered and in such case Borrower shall also pay to Lender, with
respect to the amount tendered, the applicable Prepayment Consideration set
forth in this Note, which Prepayment Consideration shall be immediately due and
payable. Lender shall not be obligated to accept any such prepayment of this
Note unless it is accompanied by an amount (the “Prepayment Consideration”)
equal to the greater of: (x) one percent (1%) of the outstanding principal
balance of this Note at the time of prepayment; or (y) the Yield Maintenance
Amount

 

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(hereinafter defined).
     Lender shall not be obligated to accept any such tender unless it is
accompanied by all Prepayment Consideration due in connection therewith.
Borrower acknowledges that the Prepayment Consideration is a bargained for
consideration and not a penalty, and Borrower recognizes that Lender would incur
substantial additional costs and expenses in the event of a prepayment of the
Debt and that the Prepayment Consideration compensates Lender for such costs and
expenses (including without limitation, the loss of lender’s investment
opportunity during the period from the date such tender is accepted until the
Maturity Date). Borrower agrees that Lender shall not, as a condition to
receiving the Prepayment Consideration, be obligated to actually reinvest the
amount prepaid in any treasury obligation or in any other manner whatsoever.
Except as otherwise set forth in the Security Instruments, no Prepayment
Consideration will be due for involuntary prepayments resulting from any
Casualty (as defined in each Security Instrument) or Condemnation (as defined in
each Security Instrument).
     Yield Maintenance Amount. The “Yield Maintenance Amount” shall mean the
present value, as of the Prepayment Date, of the remaining scheduled payments of
principal and interest from the Prepayment Date through the Maturity Date
(including any balloon payment) determined by discounting such payments at the
Discount Rate (hereinafter defined), less the amount of principal being prepaid.
The term “Discount Rate” shall mean the rate which, when compounded monthly, is
equivalent to the Treasury Rate (hereinafter defined) when compounded
semi-annually. The term “Treasury Rate” shall mean the yield calculated by the
linear interpolation of the yields, as reported in Federal Reserve Statistical
Release H.15-Selected Interest Rates under the heading U.S. Government
Securities/Treasury Constant Maturities for the week ending prior to the
Prepayment Date, of U.S. Treasury constant maturities with maturity dates (one
longer and one shorter) most nearly approximating the Maturity Date. (In the
event Release H.15 is no longer published, Lender shall select a comparable
publication to determine the Treasury Rate.) Lender shall notify Borrower of the
amount and the basis of determination of the required Prepayment Consideration.
     (d) Defeasance. Any provision hereof to the contrary notwithstanding, at
any time during the Defeasance Period (as defined below), Borrower may obtain a
release of the Mortgaged Property from the lien of the Security Instruments only
upon the satisfaction of the following conditions:
     (i) not less than thirty (30) days prior written notice shall be given to
Lender specifying a date (the “Defeasance Date”) on which the Defeasance
Collateral (as defined below) is to be delivered, such date being the first day
of the month;
     (ii) all accrued and unpaid interest and all other sums due under this
Note, the Security Instruments and the Other Security Documents up to the
Defeasance Date, including, without limitation, all reasonable costs and
expenses incurred by Lender or its agents in connection with such defeasance,
including, without limitation, any legal fees and expenses incurred in
connection with obtaining and reviewing the Defeasance

 

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Collateral, the preparation of the Defeasance Security Agreement (as defined
below) and related documentation, accountant fees, and investment advisor fees,
all of which shall be paid in full on or prior to the Defeasance Date;
     (iii) no Event of Default, and no event or condition that, with the giving
of notice or passage of time or both, would constitute an Event of Default,
shall exist either at the time Borrower gives notice of the Defeasance Date to
Lender or on the Defeasance Date;
     (iv) Borrower shall deliver to Lender on or before the Defeasance Date
direct, non-callable obligations of the United States of America in such form
and amount that provide for the payments prior, but as close as possible, to all
successive regularly scheduled monthly payment dates, including the Maturity
Date, with such payments being equal to or greater than the amount of the
corresponding monthly payment required to be paid under this Note (hereafter,
“Scheduled Defeasance Payments”) for the balance of the term hereof and the
amount required to be paid on the Maturity Date (such obligations are
collectively and singularly referred to herein as “Defeasance Collateral”) each
of which shall be duly endorsed by the holder thereof as directed by Lender or
accompanied by a written instrument of transfer in form and substance wholly
satisfactory to Lender (including, without limitation, such instrument as may be
required by the depository institution holding such securities or the issuer
thereof, as the case may be, to effectuate book-entry transfers and pledges
through the book-entry facilities of such institution) in order to perfect a
first priority security interest in such Defeasance Collateral in favor of
Lender. The Defeasance Collateral may be purchased by Lender on Borrower’s
behalf, in which case Borrower shall deposit with Lender at least three days
before the Defeasance Date a sum sufficient, in Lender’s sole and absolute
discretion, to purchase the Defeasance Collateral. Any sums in excess of the
amount necessary to purchase the Defeasance Collateral shall be remitted to
Borrower upon release of the Mortgaged Property.
     (v) Borrower shall deliver the following to Lender, at Borrower’s cost, on
or prior to the Defeasance Date:
          (A) a pledge and security agreement, in form and substance
satisfactory to Lender in its sole discretion, creating a first priority
security interest in favor of Lender in the Defeasance Collateral (the
“Defeasance Security Agreement”);
          (B) a certificate of Borrower certifying that all of the requirements
hereunder for a defeasance have been satisfied;
          (C) an opinion of counsel for Borrower in form and substance and
delivered by counsel satisfactory to Lender in its sole discretion stating,
among other things, (x) that Lender has a perfected first priority security
interest in the Defeasance Collateral, (y) that the Defeasance Security
Agreement is enforceable against Borrower in accordance with its terms and
(z) that the defeasance will not cause the entity which holds this Note to fail
to qualify as a “real estate mortgage investment conduit” (a

 

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“REMIC”), within the meaning of Section 860D of the Internal Revenue Code of
1986, as amended from time to time or any successor statute (the “Code”);
          (D) an opinion of an independent certified public accountant
acceptable to Lender representing and warranting to Lender that the Defeasance
Collateral will generate monthly amounts equal to or greater than the Scheduled
Defeasance Payments including the amount required to be paid on the Maturity
Date of this Note, and such other approvals required by Lender;
          (E) evidence in writing from each of the Rating Agencies (as defined
below) to the effect that such release will not result in a qualification,
downgrade or withdrawal of any rating in effect immediately prior to the
Defeasance Date for any securities or “Pass-Through Certificates” issued
pursuant to the terms of a trust and servicing agreement in the event that this
Note or any interest therein is included in a REMIC or other securitization
vehicle;
          (F) such other certificates, opinions, documents or instruments as
Lender may reasonably require; and
          (G) upon approval by Lender of the schedule of Defeasance Collateral
to be delivered to Lender, Borrower shall (i) pay Lender a nonrefundable fee, in
an amount reasonably determined by Lender, as compensation for the review,
analysis and processing of the defeasance request; and (ii) if required by
Lender, deposit with Lender an amount estimated by Lender to be sufficient to
fund all other fees, costs and expenses related to the defeasance, including
Lender’s reasonable attorneys’ fees and expenses and rating agency fees, if any
and expenses together with all expenses and costs associated with the release of
the lien on the Mortgaged Property. Borrower shall be responsible for all fees,
costs and expenses associated with the defeasance which, if not covered by the
above deposit, shall be paid to Lender no later than the Defeasance Date.
     Upon compliance with the foregoing requirements relating to the delivery of
the Defeasance Collateral, the Mortgaged Property shall be released from the
lien of the Security Instruments and the Defeasance Collateral shall constitute
collateral which shall secure this Note and the Debt.
     The “Defeasance Period” shall mean the period of time: (1) commencing on
the date which is the later to occur of: (A) two years after the “start-up day”,
within the meaning of Section 860(G)(a)(9) of the Code, of the REMIC that holds
this Note; and (B) three (3) years after the date of the first regularly
scheduled monthly payment due hereunder, and (2) ending on the Early Payment
Date. The “Rating Agencies” shall mean, collectively, Standard & Poor’s Ratings
Service, a division of The McGraw Hill Companies, Inc., Fitch IBCA, Inc.,
Moody’s Investors Service, Inc. or Duff and Phelps Credit Rating Co., and their
respective successors and assigns, to the extent each of the foregoing performed
credit rating services for the REMIC or other securitization vehicle which owns
this Note.

 

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     (e) Successor Borrower. In connection with a defeasance under this Section,
Borrower shall establish or designate a successor entity (the “Successor
Borrower”) which shall be a single purpose entity approved by Lender in its sole
discretion. Borrower shall transfer and assign all obligations, rights and
duties under and to this Note together with the Defeasance Collateral to such
Successor Borrower. Such Successor Borrower shall assume the obligations under
this Note and the Security Instrument and Borrower shall be relieved of its
obligations under such documents except for any such representations that
specifically survive the defeasance. Borrower shall pay $1,000 to any such
Successor Borrower as consideration for assuming the obligations under this Note
and the Security Instrument. Borrower shall pay all costs and expenses incurred
by Lender, including Lender’s attorneys’ fees and expenses, incurred in
connection with establishment of the Successor Borrower.
     (f) Defeasance Collateral Account. All cash from interest and principal
payments paid on the Defeasance Collateral shall be paid over to Lender for each
Scheduled Defeasance Payment and applied first to accrued and unpaid interest
and then to principal. Any cash from interest and principal paid on the
Defeasance Collateral not needed to pay accrued and unpaid interest or principal
shall be retained in a designated account established by Borrower or Successor
Borrower as the case may be, (the “Defeasance Collateral Account”) which shall
constitute additional collateral for the loan evidenced hereby. The Defeasance
Collateral Account shall contain only cash from interest and principal paid on
the Defeasance Collateral. Borrower or Successor Borrower, as applicable, shall
be the owner of the Defeasance Collateral Account and shall report all income
accrued thereon for federal, state and local income tax purposes and shall pay
all costs and expenses associated with opening and maintaining the account and
may pay all costs and expenses associated with maintaining the Successor
Borrower from such account. Lender shall have no responsibility to fund any
Scheduled Defeasance Payments and shall not be liable in any way by reason of
any insufficiency in the Defeasance Collateral Account. Upon an assumption by
Successor Borrower acceptable to Lender, Borrower shall be relieved of its
obligations under this Note and the Defeasance Security Agreement and, to the
extent such documents relate to the Mortgaged Property, the Other Security
Documents.
     (g) Release of Security Instruments Following Defeasance. Upon compliance
with the requirements hereunder for a defeasance, the Mortgaged Property shall
be released from the lien of each of the Security Instruments and the Other
Security Documents, and the Defeasance Collateral shall constitute collateral
securing this Note. Lender will, at Borrower’s expense, execute and deliver any
agreements reasonably requested by Borrower to release the lien of the Security
Instruments from the Mortgaged Property.
     (h) Purchase of Defeasance Collateral. In the event of purchase by Lender
of the Defeasance Collateral, such purchase may, in Lender’s sole and absolute
discretion be through an affiliate of Lender or a third party entity. Borrower
shall be responsible for the payment of any brokerage or other transaction fees
in connection with such purchase.

 

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     6. Default. An “Event of Default” shall occur if:
     (a) Borrower fails to make the full and punctual payment of any amount
payable hereunder or under any of the Security Instruments or Other Security
Documents on a monthly basis, which failure is not cured on or before the fifth
(5th) day after the date of written notice from Lender to Borrower of such
failure;
     (b) Borrower fails to pay the entire outstanding principal balance
hereunder, together with all accrued and unpaid interest, on the date when due,
whether on the Maturity Date, upon acceleration or prepayment or otherwise; or
     (c) an Event of Default (as defined in any of the Security Instruments or
any of the Other Security Documents) has occurred under any of the Security
Instruments and/or Other Security Documents.
     7. Acceleration. The whole of the Debt, including without limitation, the
principal sum of this Note, all accrued interest and all other sums due under
this Note, the Security Instruments and the Other Security Documents, together
with any applicable Prepayment Consideration, shall become immediately due and
payable at the option of Lender, without notice, at any time following the
occurrence of an Event of Default.
     8. Default Interest. Upon the occurrence of an Event of Default (including
without limitation, the failure of Borrower to pay the Debt in full on the
Maturity Date), Lender shall be entitled to receive and Borrower shall pay
interest on the entire unpaid principal balance at the rate (the “Default Rate”)
equal to the greater of: (a) four percent (4%) above the Applicable Interest
Rate; or (b) four percent (4%) above the Prime Rate (hereinafter defined) in
effect at the time of the occurrence of the Event of Default; provided, however,
that notwithstanding the foregoing, in no event shall the Default Rate exceed
the Maximum Rate (hereinafter defined). The term “Prime Rate” shall mean the
prime rate reported in the Money Rates section of The Wall Street Journal for
the date (the “Default Rate Calculation Date”) upon which the Event of Default
occurred, or if no publication occurs upon such date, then the date of
publication immediately preceding the date of the Event of Default. In the event
that The Wall Street Journal should cease or temporarily interrupt publication,
the term “Prime Rate” shall mean the daily average prime rate published upon the
Default Rate Calculation Date in another business newspaper, or business section
of a newspaper, of national standing chosen by Lender. In the event that a prime
rate is no longer generally published or is limited, regulated or administered
by a governmental or quasi-governmental body, then Lender shall select a
comparable interest rate index which is readily available and verifiable to
Borrower but is beyond Lender’s control. The Default Rate shall be computed from
the occurrence of the Event of Default until the actual payment in full of the
Debt. This charge shall be added to the Debt, and shall be deemed secured by the
Security Instruments. This clause, however, shall not be construed as an
agreement or privilege to extend the Maturity Date, nor as a waiver of any other
right or remedy accruing to Lender by reason of the occurrence of any Event of
Default.

 

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     9. Attorney Fees. In the event that Lender employs attorney(s) to collect
the Debt, to enforce the provisions of this Note or to protect or foreclose the
security herefor, Borrower agrees to pay Lender’s attorney fees and
disbursements, whether or not suit be brought. Such fees shall be immediately
due and payable.
     10. Limit of Validity. This Note is subject to the express condition that
at no time shall Borrower be obligated or required to pay interest or other
charges on the Debt at a rate which may subject Lender to civil or criminal
liability as a result of such rate exceeding the maximum interest rate which
Borrower is permitted to pay by applicable law (the “Maximum Rate”). If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest or other charges on the Debt at a rate in excess of the Maximum Rate,
the rate of interest due under this Note shall be deemed to be immediately
reduced to the Maximum Rate and any previous payments in excess of the Maximum
Rate shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder.
     11. No Oral Amendments. This Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Borrower or Lender, but only by an agreement in writing
signed by the party against whom enforcement of any modification, amendment,
waiver, extension, change, discharge or termination is sought.
     12. Exculpation. Subject to the provisions of this Section, Borrower’s
liability under this Note, the Security Instruments or the Other Security
Documents shall only extend to the Mortgaged Property and other collateral given
to secure the Debt, and Lender shall not enforce such liability against any
other asset, property or funds of Borrower or any person or entity constituting
Borrower; provided, however, the foregoing shall not: (a) impair the right of
lender to bring suit and obtain personal, recourse judgment against any person
or entity (including Borrower or any person or entity constituting Borrower)
relating to any losses sustained by Lender in connection with any fraud,
intentional misrepresentation, waste, or misappropriation of tenant security
deposits or rents collected more than one (1) month in advance by Borrower;
(b) impair the right of Lender to name, and obtain a judgment against any person
or entity (including Borrower or any person or entity constituting Borrower) to
the extent required by law to either obtain a judgment of specific performance
with respect to any of the provisions of this Note, the Security Instruments or
any of the Other Security Documents, or to foreclose the Security Instruments
and obtain title to the Mortgaged Property and other collateral given to secure
the Debt; (c) affect the validity or enforceability of, or impair the right of
Lender to bring suit and obtain personal, recourse judgment against any person
or entity (including Borrower or any person or entity constituting Borrower) to
enforce any guaranty, indemnity or release of liability made by such person or
entity (whether made in this Note, the Security Instruments, any of the Other
Security Documents or in any other separate agreement); (d) impair the right of
Lender to obtain the appointment of a receiver; (e) impair the enforcement of
any Assignment of Leases and Rents executed in connection herewith; or
(f) affect the validity or enforceability of, or impair the right of Lender to
bring suit and obtain personal, recourse judgment against

 

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any person or entity (including Borrower or any person or entity constituting
Borrower) relating to any losses sustained by Lender in connection with any of
the provisions of this Note, the Security Instruments or any of the Other
Security Documents requiring that: (i) any person or entity maintain any
insurance over any of the Mortgaged Property, or (ii) any insurance proceeds or
condemnation awards be paid to Lender; or (g) impair the right of Lender to
bring suit and obtain personal, recourse judgment against any person or entity
(including Borrower or any person or entity constituting Borrower) for the full
amount of the Debt if the Mortgaged Property or any part thereof shall become an
asset in: (i) a voluntary bankruptcy or insolvency proceeding, or (ii) an
involuntary bankruptcy or insolvency proceeding: (A) which is commenced by any
person or entity controlling, controlled by or under common control with
borrower (the “Borrowing Group”) or (B) in which any member of the Borrowing
Group objects to a motion by Lender for relief from any stay or injunction from
the foreclosure of the Security Instruments or any other remedial action
permitted under this Note, the Security Instruments or any of the Other Security
Documents. Items (a) through (g) above are collectively the “Non-Recourse
Exceptions”. Borrower’s liability under the Non-Recourse Exceptions, excepting
item (g), shall be limited to the amount of any losses or damages sustained by
Lender in connection with such Non-Recourse Exceptions. Nothing herein shall be
deemed to be a waiver of any right which Lender may have under Sections 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 Instruments or to
require that all of the Mortgaged Property and other collateral given to secure
the Debt shall continue to secure all of the Debt.
     13. Assignment. This Note may be freely transferred and assigned by Lender,
its successors, endorsees and assigns. Borrower’s right to transfer its rights
and obligations with respect to the Debt, and to be released from liability
under this Note, shall be governed by the Security Instruments.
     14. Applicable Law, Jurisdiction. This Note shall be governed and construed
in accordance with the laws of the state in which the real property encumbered
by the Security Instrument is located. Borrower hereby submits to personal
jurisdiction in the state courts located in said state and the federal courts of
the United States of America located in said state for the enforcement of
Borrower’s obligations hereunder and waives any and all personal rights under
the law of any other state to object to jurisdiction within such state for the
purposes of any action, suit, proceeding or litigation to enforce such
obligations of Borrower.
     15. Joint and Several Liability. If Borrower consists of more than one
person or entity, the obligations and liabilities of each such person or entity
shall be joint and several.
     16. Waiver of Presentment, Etc. Borrower and all others who may become
liable for the payment of all or any part of the Debt do hereby severally waive
presentment and demand for payment, notice of dishonor, protest, notice of
protest, and notice of intent to accelerate the maturity hereof (and of such
acceleration), except to the extent that specific

 

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notices are required by this Note, the Security Instruments or the Other
Security Documents.
     17. No Waiver. Any failure by Lender to insist upon strict performance by
Borrower of any of the provisions of this Note, the Security Instruments or the
Other Security Documents shall not be deemed to be a waiver of any of the terms
or provisions of this Note, the Security Instruments or the Other Security
Documents, and Lender shall have the right thereafter to insist upon strict
performance by Borrower of any and all of the terms and provisions of this Note,
the Security Instruments or the Other Security Documents.
     18. Notices. Except as otherwise specified herein, any notice, consent,
request or other communication required or permitted to be given hereunder shall
be in writing, addressed to the other party as set forth below (or to such other
address or person as either party or person entitled to notice may by notice to
the other party specify), and shall be: (a) personally delivered; (b) delivered
by Federal Express or other comparable overnight delivery service; or (c)
transmitted by United States certified mail, return receipt requested with
postage prepaid; to:

         
 
  Lender:   PNC Bank, National Association
210 West 10th Street, 6th Floor
Kansas City, Missouri 64105
 
       
 
  Borrower:   Locke Sovran II L.L.C.
6467 Main Street
Buffalo, New York 14221

Unless otherwise specified, all notices and other communications shall be deemed
to have been duly given on the first to occur of actual receipt of the same or:
(i) the date of delivery if personally delivered; (ii) one (1) business day
after depositing the same with the delivery service if by overnight delivery
service; and (iii) three (3) days following posting if transmitted by mail.
Borrower must prominently display Lender’s Loan Number on all notices or
communications to Lender.
     19. Severability. If any term, covenant or condition of this Note is held
to be invalid, illegal or unenforceable in any respect, this Note shall be
construed without such provision.
     20. Time of the Essence. Time shall be of the essence in the performance of
all obligations of Borrower hereunder.
     21. Additional Terms and Provisions. Certain additional and supplemental
terms and provisions of this Note are set forth in this paragraph. The terms and
provisions of this paragraph control and supersede any conflicting terms and
provisions contained in this Note.

 

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          (a) Anything herein to the contrary notwithstanding, if Lender
determines, in its sole discretion, at any time during the calendar month
immediately preceding the Maturity Date that the Loan will not be paid as
required on the Maturity Date, Lender shall have the option to forbear from
exercising its rights under this Note, the Security Instruments and the Other
Security Documents to foreclose upon the Mortgaged Property (an “Optional Lender
Forbearance”). In such event, Lender shall notify Borrower of such decision and
the following shall occur:
     (i) On the first day of the month immediately following the Maturity Date
and on the first day of each calendar month thereafter, Borrower shall pay to
Lender an amount (each a “Property Cash Flow Payment Amount”) equal to the
greater of (a) the Monthly Debt Service Payment Amount and (b) Gross Income (as
defined in the Security Agreement and Lockbox Agreement (the “Lockbox
Agreement”) executed contemporaneously herewith) received by it in connection
with the Mortgaged Property.
     (ii) Each Property Cash Flow Payment Amount paid after the Maturity Date
shall be applied in accordance with the Lockbox Agreement. Interest accrued at
the Adjusted Interest Rate and not paid shall be deferred and added to the
indebtedness evidenced by this Note.
     (iii) Lender’s decision to forbear from exercising its rights under this
Note, the Security Instruments and the Other Security Documents shall be
revocable at any time by Lender without notice to Borrower. Upon any such
revocation, Lender shall be entitled to pursue any and all remedies available to
it under this Note, the Security Instruments, the Other Security Documents, at
law or in equity.
     (iv) Anything herein to the contrary notwithstanding, Borrower shall have
the right to pay the Loan in full on the Maturity Date.
          (b) Paragraph 1 is amended to add the following at the end of said
paragraph: “In the case of an Optional Lender Forbearance as provided herein,
the term “Applicable Interest Rate” shall mean the Adjusted Interest Rate from
and after the Maturity Date through and including the date this Note is paid in
full. The term “Adjusted Interest Rate” shall mean the greater of (x) the
Initial Interest Rate plus four percent (4.0%); or (y) the Yield Rate on the
then-current on-the-run 10-year U.S. Treasury Obligation (the “Specified U.S.
Treasury Security”) plus four percent (4.0%). The term “Yield Rate” shall mean
the yield rate for the Specified U.S. Treasury Security as such yield rate is
reported in the Wall Street Journal on the fifth (5th) business day preceding
the Maturity Date. In the event that no such yield rate is published for the
Specified U.S. Treasury Security, then the nearest equivalent U.S. Treasury
Security shall be selected at Lender’s sole discretion, and the yield rate
therefor shall be the “Yield Rate”. If the publication of such yield rates in
the Wall Street Journal is discontinued, Lender shall determine such yield rates
from another source selected by Lender.”

 

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          (c) Paragraph 2 is amended to insert the following at the beginning of
the first sentence: “Except as set forth in the Lockbox Agreement (as defined in
Paragraph 21(a)(i) below).”
          (d) For purposes hereof the term “Mortgaged Property” shall mean the
“Mortgaged Property” (as defined in the Security Instruments taken
collectively), and the term “Individual Property” shall mean each “Mortgaged
Property” (as defined in each “Individual Security Instrument”). With respect to
Borrower and the Mortgaged Property, nothing contained herein or in any of the
Security Instruments or the other Security Documents shall be construed as
requiring Lender to resort to any Individual Property for the satisfaction of
any of the Debt in preference or priority to any other Individual Property, and
Lender may seek satisfaction out of all of the Mortgaged Property or any part
thereof, in its absolute discretion in respect of the Debt. In addition, Lender
shall have the right from time to time to partially foreclose the Security
Instrument in any manner and for any amounts secured by the Security Instruments
then due and payable as determined by Lender in its sole discretion including,
without limitation, the following circumstances: (i) in the event Borrower
defaults beyond any applicable grace period in the payment of one or more
scheduled payments of principal and interest, Lender may foreclose one or more
of the Security Instruments to recover such delinquent payments, or (ii) in the
event Lender elects to accelerate less than the entire outstanding principal
balance of the Loan, Lender may foreclose one or more of the Security
Instruments to recover so much of the principal balance of the Loan as Lender
may accelerate and such other sums secured by one or more of the Security
Instruments as Lender may elect. Notwithstanding one or more partial
foreclosures, the Mortgaged Property shall remain subject to the Security
Instruments to secure payment of sums secured by the Security Instruments and
not previously recovered.
          (e) Borrower acknowledges that Lender has made the Loan to Borrower
upon the security of its collective interest in the Mortgaged Property and in
reliance upon the aggregate of each Individual Property constituting the
Mortgaged Property taken together being of greater value as collateral security
than the sum of each Individual Property constituting the Mortgaged Property
taken separately. Borrower agrees that: (i) an Event of Default under any of the
Security Instruments shall constitute an Event of Default under this Note and
under each of the other Individual Security Instruments; (ii) an Event of
Default under this Note or the Other Security Documents shall constitute an
Event of Default under each Security Instrument; (iii) each Individual Security
Instrument shall constitute security for the Note as if a single blanket lien
were placed on all of the Mortgaged Property as security for the Note; and
(iv) such cross-defaulting shall in no event be deemed to constitute a
fraudulent conveyance.
          (f) Anything herein to the contrary notwithstanding, Borrower shall
not have the right to obtain the release of any Individual Property from the
lien of any Security Instrument or the Other Security Documents pursuant to
Paragraph 5(d) unless Borrower simultaneously obtains the release of all of the
Mortgaged Property.
          (g) The first sentence of Paragraph 14 is amended to read as follows:
“This

 

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Note shall be governed and constructed in accordance with the internal laws of
the State of New York without regard to principles of conflicts of laws.”
          (h) The following sentence is added as the fourth sentence of
Paragraph 8: “The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate charged by banks including, without
limitation, Lender.”
     BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THE LOAN EVIDENCED BY THIS NOTE OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE, THE SECURITY INSTRUMENTS OR ANY OF THE OTHER SECURITY DOCUMENTS, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN)
OR ACTION OF BORROWER OR LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER’S MAKING OF THE LOAN SECURED BY THE SECURITY INSTRUMENTS AND THE OTHER
SECURITY DOCUMENTS.
     IN WITNESS WHEREOF, Borrower has duly executed this Promissory Note as a
sealed instrument to be effective the day and year first above written.

              “BORROWER”
 
            LOCKE SOVRAN II L.L.C., a New York limited
liability company, by its Manager
 
            By: LOCKE SOVRAN II MANAGER, INC., a
Delaware corporation
 
       
 
  By:    
 
       
 
      Michael J. Rogers, Vice President

 

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ACKNOWLEDGMENT (IN NEW YORK STATE)

     
THE STATE OF NEW YORK
  :
 
  :
COUNTY OF ERIE
  :

     On the 12th day of February, in the year 2002, before me, the undersigned,
a Notary Public in and for said State, personally appeared MICHAEL J. ROGERS
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity as Vice President
of Locke Sovran II Manager, Inc., a Delaware corporation, the Manager of Locke
Sovran II L.L.C., a New York limited liability company, on behalf of said
corporation and limited liability company, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.

     
 
   
 
  (Signature and Office of Individual
 
  Taking Acknowledgment)

 

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Pay to the order of
                                                            , without recourse.

            PNC BANK, NATIONAL ASSOCIATION
      By:             Jeannette Butler, Vice President