U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 0-9136
ANGELES PARTNERS VIII
California 95-3264317
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Units
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. X
State issuer's revenues for its most recent fiscal year: $ 4,541,450
State the aggregate market value of the voting stock held by nonaffiliated
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within the past 60 days. Market value
information for Registrant's Partnership Interests is not available. Should a
trading market develop for these Interests, it is management's belief that such
trading would not exceed $25 million.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Description of Business
Angeles Partners VIII (the "Partnership" or "Registrant") is a publicly-held
limited partnership organized under the California Uniform Limited Partnership
Act pursuant to a Certificate and Agreement of Limited Partnership (hereinafter
referred to as the "Agreement") dated August 7, 1978. The general partner of
the Partnership is Angeles Realty Corporation, a California corporation
(hereinafter referred to as the "General Partner" or "ARC"). The General
Partner was formerly a wholly-owned subsidiary of Angeles Real Estate
Corporation, a wholly-owned subsidiary of Angeles Corporation, and is engaged in
providing similar services to other partnerships.
The General Partner of the Partnership intends to maximize the operating
results and, ultimately, the net realizable value of each of the Partnership's
properties in order to achieve the best possible return for the investors. Such
results may best be achieved through property sales, refinancings, debt
restructurings or relinquishment of the assets. The Partnership intends to
evaluate each of its holdings periodically to determine the most appropriate
strategy for each of the assets.
The Registrant has no employees. Management and administrative services are
performed by affiliates of Insignia Financial Group, Inc. ("Insignia"). The
property manager is responsible for the day-to-day operations of each property.
The General Partner has also selected affiliates of Insignia to provide real
estate advisory and asset management services to the Partnership. As advisor,
these affiliates provide all partnership accounting and administrative services,
investment management, and supervisory services over property management and
leasing.
The business in which the Partnership is engaged is highly competitive, and
the Partnership is not a significant factor in its industry. Each of its
apartment properties is located in or near a major urban area and, accordingly,
competes for rentals not only with similar apartment projects in its immediate
area but with hundreds of similar apartments throughout the urban area. Such
competition is primarily on the basis of location, rents, services and
amenities. In addition, the Partnership competes with significant numbers of
individuals and organizations (including similar partnerships, real estate
investment trusts and financial institutions) with respect to the sale of
improved real properties, primarily on the basis of the prices and terms of such
transactions.
Item 2. Description of Properties
The following table sets forth the Registrant's investments in properties:
Date of
Property Purchase Type of Ownership Use
Bercado Shores 05/31/79 100% Apartment -
234 units
Brittany Point 12/31/79 100% Apartment -
431 units
Schedule of Properties:
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
<S> <C> <C> <C> <C> <C>
Bercado Shores $ 4,716,571 $3,108,243 5-25 yrs S/L $1,899,160
Brittany Point 9,357,931 6,064,372 5-25 yrs S/L 4,092,707
$14,074,502 $9,172,615 $5,991,867
</TABLE>
See Note B of the financial statements included in Item 7 for a description
of the Partnership's depreciation policy.
Schedule of Mortgages:
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Bercado Shores
1st mortgage $ 4,136,792 (1) 30 yrs 6/2000 $3,894,054
2nd mortgage,
(in default) 1,350,000 12.50% (2) 6/1995(3) 1,350,000
Brittany Point
1st mortgage 9,367,887 (4) (4) (4) (4)
2nd mortgage 1,570,386 12.50% (2) (5) 1,570,386
Total $16,425,065
</TABLE>
(1) Based on the one-year Treasury Constant Maturities rate plus 3%; 9.25%
as of December 31, 1995.
(2) Interest only payments.
(3) In March 1993, the Partnership defaulted on payments on the second trust
deed from Angeles Mortgage Investment Trust ("AMIT") on Bercado Shores.
(4) The Brittany Point first mortgage was refinanced January 18, 1996, with
the existing lender. The new debt amount is $9,800,000 with a stated
interest rate of 7.875%. Payments will be interest only through
December 31, 1996, after which payments will be amortized over 20 years
with a maturity date of February 1, 2001. The principal balance at
maturity will be $8,850,242.
(5) An agreement with AMIT was reached January 18, 1996, which extended the
maturity date of the note from June 1, 1995, to December 31, 2000.
Schedule of Rental Rates and Occupancy:
Average Annual Average
Rental Rates Occupancy
Property 1995 1994 1995 1994
Bercado Shores $6,062/unit $5,959/unit 95% 93%
Brittany Point 5,869/unit 5,704/unit 90% 88%
As noted under Item 1. Description of Business, the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes. The General Partner
believes that all of the properties are adequately insured. The multi-family
residential tenants' lease terms are for one year or less. No individual
residential tenant leases 10% or more of the available rental space.
Real estate taxes and rates in 1995 for each property were:
1995 1995
Taxes Rate
Bercado Shores * $302,175 11.53%
Brittany Point 126,530 5.80%
* Represents estimate for 1995 taxes and rate. Actual billings have not been
received as of the date of this filing.
Item 3. Legal Proceedings
The Registrant is unaware of any pending or outstanding litigation that is
not of a routine nature. The General Partner of the Registrant believes that
all such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
The Unit holders of the Partnership did not vote on any matter during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for the Partnership's Common Equity and Related Security Holder
Matters
The Partnership, a publicly-held limited partnership, sold 12,000 Limited
Partnership Units during its offering period ended September 13, 1979, and
currently has 1,331 Limited Partners of record. During the year ended December
31, 1994, the number of Partnership units decreased by 15 due to limited
partners abandoning their units. In abandoning his or her partnership units, a
limited partner relinquishes all right, title and interest in the Partnership as
of the date of abandonment. There is no intention to sell additional Limited
Partnership Units nor is there an established market for these units.
The Partnership has discontinued making cash distributions from operations
until and unless the financial condition of the Partnership and other relevant
factors warrant resumption of distributions.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
The Partnership realized net income of $14,861 for the year ended December
31, 1995, compared to a net loss of $1,078,914 for the year ended December 31,
1994. Total revenue increased for the year ended December 31, 1995, compared to
the year ended December 31, 1994, due to the tax recovery recognized in 1995.
The tax recovery resulted from the settlement of a tax appeal for the 1990,
1991, and 1992 property taxes for Bercado Shores (See further discussion in Note
H of the Notes to Financial Statements). Other income decreased for the year
ended December 31, 1995, compared to December 31, 1994, due to decreases since
1994 in cleaning and damage fees and deposit forfeitures at both properties.
These decreases resulted from increased occupancy levels and fewer move outs.
Total expenses decreased for the year ended December 31, 1995, compared to
the year ended December 31, 1994, due to decreases in maintenance and property
tax expenses. The decrease in maintenance expense was due to decreased carpet
cleaning expense and exterior lighting repairs of approximately $42,000 at
Bercado Shores and decreased contract trash removal and other miscellaneous
repairs of approximately $40,000 at Brittany Point. Property tax expense
decreased for the year ended December 31, 1995, as a result of successful tax
appeals at both properties which reduced the assessed values for the taxing
authorities.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation- related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
The Partnership's primary source of cash has been from property operations
and is utilized for the paydown of existing debt on the investment properties,
capital expenditures and daily operational expenses. It is the Partnership's
policy to commit capital resources for the continuing improvement and
maintenance of its properties.
Net cash provided by operating activities decreased in 1995 primarily due to
increased deposits to escrows for taxes and increased payments of accrued
property taxes related to the property tax settlement noted above. Net cash
used in investing activities increased in 1995 due to increased deposits to
restricted escrows required by the new Brittany Point first mortgage. Net cash
used in financing activities increased from 1994 due to loan costs related to
the refinancing of the Brittany Point first mortgage. The Partnership held
unrestricted cash of $330,146 for the year ended December 31, 1995, compared to
unrestricted cash of $421,522 for the year ended December 31, 1994.
No distributions were made by the Partnership during 1994 or 1995.
Since 1992, the nominal cash generated by the properties has been
insufficient to pay the capital expenditures and scheduled debt service. The
Partnership has incurred recurring operating losses and is in default on a
portion of its mortgage notes payable. The Partnership's first mortgage in the
amount of $4,136,792 secured by Bercado Shores Apartments was previously in
default due to nonpayment of 1993 property taxes. The property is now current
on payment of property taxes and the first mortgage is no longer in default.
However, the second mortgage to AMIT in the amount of $1,350,000, secured by the
Bercado Shores Apartments, has been in default since March 1993 due to
nonpayment of interest. Since the default in March of 1993, the lender has not
indicated its intent to pursue its available remedies under the mortgage
agreement, however, the Partnership's properties remain subject to foreclosure
under the terms of the second mortgage agreement. The General Partner
anticipates sufficient cash flow to be generated by the property over the next
twelve months to meet all non debt related operating expenses. Should the
lender initiate foreclosure proceedings, the General Partner will attempt to
negotiate refinancing.
The first mortgage indebtedness of $9,367,887 for Brittany Point matured in
June 1995. This first mortgage was refinanced on January 18, 1996, with the
existing lender for a principal amount of $9,800,000, a stated interest rate of
7.875%, and a maturity date of February 1, 2001. To facilitate the
refinancing, the property has been transferred to a lower tier partnership known
as Brittany Point AP VIII, L.P. in which the Partnership is the 99% limited
partner. Although legal ownership of this asset was transferred to a new
entity, the Partnership retained control and substantially all economic benefits
of the property. Also, a workout proposal with AMIT on the second mortgage of
Brittany Point was finalized subsequent to December 31, 1995, so that the second
mortgage is no longer in default. The workout proposal with AMIT provides for
interest payments only through December 31, 1996, after which cash flow payments
will be amortized over 20 years with a maturity date of February 1, 2001.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership which now controls the working capital loan previously provided by
Angeles Capital Investment, Inc. ("ACII"), was organized. Angeles Corporation
("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives,
Inc.("AAD"), an affiliate of the General Partner, was, until April 14, 1995, the
1% general partner of AAP. On April 14, 1995, as part of a settlement of claims
between affiliates of the General Partner and Angeles, AAD resigned as general
partner of AAP and simultaneously received a .5% limited partner interest in
AAP. An affiliate of Angeles now serves as the general partner of AAP. This
working capital loan funded the Partnership's operating deficits in prior
years. Total indebtedness, which is included as a note payable, was $370,719 at
December 31, 1995 and December 31, 1994, with monthly interest only payments at
prime plus 0.75% (8.75% for 1995). Principal is to be paid the earlier of i)
the availability of funds, ii) the sale of one or more properties owned by the
Partnership, or iii) November 25, 1997. Total interest expense for this loan
was $36,558 and $29,580 in 1995 and 1994, respectively, of which $91,088 was
accrued at December 31, 1995.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to
AMIT an option to acquire the Class B shares. This option can be exercised at
the end of 10 years or when all loans made by AMIT to partnerships affiliated
with MAE GP as of November 9, 1994, (which is the date of execution of a
definitive Settlement Agreement) have been paid in full, but in no event prior
to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at
closing, which occurred April 14, 1995, as payment for the option. Upon
exercise of the option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an
irrevocable proxy in favor of AMIT, the result of which is MAE GP will be able
to vote the Class B shares on all matters except those involving transactions
between AMIT and MAE GP affiliated borrowers or the election of any MAE GP
affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to
the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to
the Class B shares instructing such trustees to vote said Class B shares in
accordance with the vote of the majority of the Class A shares voting to be
determined without consideration of the votes of "Excess Class A Shares" as
defined in Section 6.13 of the Declaration of Trust of AMIT.
ITEM 7. FINANCIAL STATEMENTS
ANGELES PARTNERS VIII
LIST OF FINANCIAL STATEMENTS
Report of Independent Auditors
Balance Sheet - December 31, 1995
Statements of Operations - Years ended December 31, 1995 and 1994
Statements of Changes in Partner's Deficit - Years ended December 31,
1995 and 1994
Statements of Cash Flows - Years ended December 31, 1995 and 1994
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Angeles Partners VIII
We have audited the accompanying balance sheet of Angeles Partners VIII as of
December 31, 1995, and the related statements of operations, changes in
partners deficit and cash flows for each of the two years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Partnership s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership s management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Angeles Partners VIII as of
December 31, 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Angeles
Partners VIII will continue as a going concern. As more fully described in
Note A, the Partnership incurred recurring operating losses, is in default on
certain indebtedness and does not generate sufficient cash flows to meet current
operating requirements. These conditions raise substantial doubt about the
Partnership s ability to continue as a going concern. Managements plans in
regard to these matters are also described in Note A. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
/S/ ERNST & YOUNG LLP
Greenville, South Carolina
January 27, 1996
ANGELES PARTNERS VIII
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1995
<S> <C> <C>
Assets
Cash:
Unrestricted $ 330,146
Restricted--tenant security deposits 54,577
Accounts receivable 11,172
Escrows for taxes 61,998
Restricted escrows 196,000
Other assets (Note B) 95,631
Investment properties: (Notes C, E and F)
Land $ 543,070
Buildings and related personal property 13,531,432
14,074,502
Less accumulated depreciation (9,172,615) 4,901,887
$ 5,651,411
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 39,587
Tenant security deposits 54,129
Accrued taxes 334,929
Accrued interest 845,663
Other liabilities 128,959
Note payable to an affiliate (Note E) 370,719
Mortgage notes payable, $1,350,000 in default 16,425,065
(Notes A, C, E and F)
Partners' Deficit
General partner $ (160,017)
Limited partners (11,985 units
issued and outstanding) (12,387,623) (12,547,640)
$ 5,651,411
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES PARTNERS VIII
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Revenues:
Rental income $3,532,923 $ 3,409,082
Other income 206,588 238,373
Tax recovery (Note H) 801,939 --
Total revenues 4,541,450 3,647,455
Expenses:
Operating 990,783 935,511
General and administrative 112,803 101,054
Property management fees 186,922 181,961
Maintenance 368,935 450,984
Depreciation 593,536 595,938
Interest 1,850,232 1,851,685
Property taxes 423,378 608,875
Total expenses 4,526,589 4,726,008
Loss on disposal of property -- (361)
Net income (loss) (Note D) $ 14,861 $(1,078,914)
Net income (loss) allocated to general partner (1%) $ 149 $ (10,789)
Net income (loss) allocated to limited partners(99%) 14,712 (1,068,125)
$ 14,861 $(1,078,914)
Net income (loss) per limited partnership unit $ 1.23 $ (89.12)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES PARTNERS VIII
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 12,000 $ 121,000 $ 12,000,000 $ 12,121,000
Partners' deficit at
December 31, 1993 12,000 $(149,377) $(11,334,210) $(11,483,587)
Abandonment of limited
partnership units (Note G) (15) -- -- --
Net loss for the year ended
December 31, 1994 -- (10,789) (1,068,125) (1,078,914)
Partners' deficit at
December 31, 1994 11,985 (160,166) (12,402,335) (12,562,501)
Net income for the year ended
December 31, 1995 -- 149 14,712 14,861
Partners' deficit at
December 31, 1995 11,985 $(160,017) $(12,387,623) $(12,547,640)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES PARTNERS VIII
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 14,861 $(1,078,914)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation 593,536 595,938
Amortization of loan costs 50,376 113,093
Loss on disposal of property -- 361
Change in accounts:
Restricted cash 1,614 (1,767)
Accounts receivable (1,320) 8,371
Escrows for taxes (36,187) (2,566)
Other assets -- 667
Accounts payable (78,313) 57,766
Tenant security deposits (3,384) (774)
Accrued taxes (672,975) 358,548
Accrued interest 493,239 442,665
Other liabilities 28,719 5,562
Net cash provided by operating
activities 390,166 498,950
Cash flows from investing activities:
Property improvements and replacements (141,101) (195,545)
Deposits to restricted escrows (196,000) --
Net cash used in investing activities (337,101) (195,545)
Cash flows from financing activities:
Payments on mortgage notes payable (133,901) (134,524)
Loan costs (10,540) --
Net cash used in financing activities (144,441) (134,524)
Net (decrease) increase in cash (91,376) 168,881
Cash at beginning of year 421,522 252,641
Cash at end of year $ 330,146 $ 421,522
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,306,617 $ 1,295,928
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
ANGELES PARTNERS VIII
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Accrued Interest
Mortgage notes payable were increased by $320,387 at December 31, 1995, in
connection with the capitalization of accrued interest on the second mortgage of
Brittany Point Apartments.
ANGELES PARTNERS VIII
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
Note A - Going Concern
The accompanying financial statements have been prepared assuming Angeles
Partners VIII, (the "Partnership" or "Registrant") will continue as a going
concern. The Partnership has incurred recurring operating losses, is in
default on a portion of its mortgage notes payable and does not generate
sufficient cash flows to meet current operating requirements. The second
mortgage to AMIT in the amount of $1,350,000 secured by Bercado Shores
Apartments, is in default due to nonpayment of interest. This indebtedness
is recourse to the Partnership and the estimated fair value of this property is
less than the total of its first and second mortgages. Since the default in
March of 1993, the lender has not indicated its intent to pursue its available
remedies under the mortgage agreement, however, the Partnership's properties
remain subject to foreclosure under the terms of the second mortgage agreement.
The Partnership's second mortgage to Angeles Mortgage Investment Trust ("AMIT")
in the amount of $1,570,386 secured by Brittany Point Apartments was in default
due to nonpayment of interest. This default also created a default in the
Brittany Point first mortgage due to certain cross-default provisions in the
first mortgage which matured in June 1995. This first mortgage was refinanced
on January 18, 1996, with the existing lender, lowering the interest rate from
10.125% to 7.875%. A workout proposal with AMIT on Brittany Point was finalized
subsequent to December 31, 1995. This workout extended the maturity date from
June 1995 to December 2000.
The Partnership's first mortgage in the amount of $4,136,792 secured by Bercado
Shores Apartments was previously in default due to delinquent 1993 property
taxes; however, during 1995 these taxes were paid and the first mortgage of
Bercado Shores is no longer in default (See Note H). The General Partner
anticipates sufficient cash flow to be generated by the property over the next
twelve months to meet all non debt related operating expenses. Should the
lender initiate foreclosure proceedings, the General Partner will attempt to
negotiate refinancing.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or amounts and
classification of liabilities that may result from this uncertainty.
Note B Organization and Significant Accounting Policies
Organization
Angeles Partners VIII ("Partnership") is a California limited partnership
organized on August 7, 1978, to acquire and operate residential and commercial
real estate properties. The Partnership's General Partner is Angeles Realty
Corporation ("ARC"), an affiliate of Insignia Financial Group, Inc.
("Insignia"). As of December 31, 1995, the Partnership operates residential
properties in Mishawaka, Indiana and Huntsville, Alabama.
Note B - Organization and Significant Accounting Policies (continued)
Allocations and Distributions to Partners
Net income and losses (excluding those arising from the occurrence of sales or
dispositions) of the Partnership will be allocated 1% to the General Partner and
99% to the Limited Partners on an annual basis.
In accordance with the Partnership Agreement, any gain from the sale or other
disposition of Partnership assets will be allocated first to the General Partner
to the extent of the amount of the Ten Percent Distribution (as defined in the
Partnership Agreement) to which the General Partner is entitled. Any gain
remaining after said allocation will be allocated to the General Partner and
Limited Partners in proportion to their interests in the Partnership.
Distributions of available cash, except as discussed below, are allocated among
the Limited Partners and General Partner in accordance with the Agreement of
Limited Partnership.
Upon the sale, other disposition or refinancing, of any asset of the Partnership
other than in connection with the dissolution of the Partnership, the net
proceeds thereof which the General Partner determines can reasonably be
distributed to the Partners and are not required for support of the operations
of the Partnership or for investment in additional real properties, if any, must
be distributed 1% to the General Partner and 99% to the Limited Partners until
such time as the Partners have received cumulative distributions from the
Partnership equal to the amount of their original capital contributions to the
Partnership plus a cumulative return of 12% per annum (simple interest) on the
Limited Partners' Adjusted Capital Investment, as defined in the Agreement.
Thereafter, 10% of such proceeds will be distributed to the General Partner and
the remaining 90% of such proceeds will be distributed 1% to the General Partner
and 99% to the Limited Partners.
Depreciation
Depreciation is computed on an accelerated method over estimated useful lives of
10 to 25 years for buildings and improvements and 3 to 5 years for furnishings
and equipment until such time as the expense is exceeded by depreciation as
computed on the straight line method. Assets placed in service after 1987 are
depreciated over estimated useful lives of 10-15 years for buildings and
improvements and 5 years for furnishings and equipment using the straight-line
method. For Federal income tax purposes, the accelerated cost recovery method
is used (1) for real property over 18 years for additions after March 15, 1984,
and before May 9, 1985, and 19 years for additions after May 8, 1985, and before
January 1, 1987, and (2) for personal property over 5 years for additions prior
to January 1, 1987. As a result of the Tax Reform Act of 1986, for additions
after December 31, 1986, the alternative depreciation system is used for
depreciation of (1) real property additions over 40 years, and (2) personal
property additions from 6-20 years.
Note B - Organization and Significant Accounting Policies (continued)
Cash
The Partnership considers only unrestricted cash to be cash. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Investment Properties
Prior to the fourth quarter of 1995, investment properties were carried at the
lower of cost or estimated fair value, which was determined using the higher of
the property's non-recourse debt amount, when applicable, or the net operating
income of the investment property capitalized at a rate deemed reasonable for
the type of property. During the fourth quarter of 1995 the Partnership adopted
FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. The impairment loss is
measured by comparing the fair value of the asset to its carrying amount. The
effect of adoption was not material.
Loan Costs
Loan costs of $196,703 included in other assets are being amortized on a
straight-line basis over the life of the loans. Accumulated amortization is
$103,262 at December 31, 1995. The amortization expense is classified as
interest expense.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less.
Tenant Security Deposits
The Partnership requires security deposits from all apartment lessees for the
duration of the lease. Deposits are refunded when the tenant vacates the
apartment if there has been no damage to the unit.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 1994 balances to conform to the
1995 presentation.
Note B - Organization and Significant Accounting Policies (continued)
Fair Value
In 1995, the Partnership implemented Statement of Financial Accounting Standards
No. 107, "Disclosure about Fair Value of Financial Instruments," which requires
disclosure of fair value information about financial instruments for which it is
practicable to estimate that value. The carrying amount of the Partnership's
cash and cash equivalents approximates fair value due to short-term maturities.
The Partnership estimates the fair value of its fixed rate mortgages by
discounted cash flow analysis, based on estimated borrowing rates currently
available to the Partnership. The carrying amounts of variable-rate mortgages
approximate fair value due to frequent re-pricing.
Note C Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1995 Interest Rate Date Maturity
<S> <C> <C> <C> <C> <C>
Bercado Shores
1st mortgage $ 4,136,792 $35,613 (1) 6/2000 $3,894,054
2nd mortgage,
(in default, Note E) 1,350,000 (2) 12.50% 6/1995(3) 1,350,000
Brittany Point
1st mortgage 9,367,887 (4) (4) (4) (4)
2nd mortgage 1,570,386 (2) 12.50% (5) 1,570,386
Totals $16,425,065
</TABLE>
(1) Based on the one-year Treasury Constant Maturities rate plus 3%; 10.125%
as of December 31, 1995.
(2) Interest only payments.
(3) In March 1993, the Partnership defaulted on payments on the second trust
deed from Angeles Mortgage Investment Trust ("AMIT") on Bercado Shores.
(4) The Brittany Point first mortgage was refinanced January 18, 1996, with
the existing lender. The new debt amount is $9,800,000 with a stated
interest rate of 7.875%. Payments will be interest only through December
31, 1996, after which payments will be amortized over 20 years with a
maturity date of February 1, 2001. The principal balance at maturity will
be $8,850,242.
(5) An agreement with AMIT was reached January 18, 1996 which extended the
maturity date of the note from June 1, 1995 to December 31, 2000.
Note C - Mortgage Notes Payable (continued)
The carrying value of the Partnership's aggregate first mortgages approximates
their estimated fair value.
The General Partner believes that it is not appropriate to use the Partnership's
incremental borrowing rate for the second mortgages and the note payable to an
affiliate (Note E) as there is currently no market in which the Partnership
could obtain similar financing. Therefore, the General Partner considers
estimation of fair value to be impracticable for this indebtedness.
The mortgage notes payable are secured by certain of the Partnership s
investment properties and by pledge of revenues from the respective investment
properties.
Scheduled principal payments of mortgage notes payable subsequent to December 31
are as follows:
1996 $ 1,396,649
1997 243,249
1998 282,031
1999 305,894
2000 5,756,134
Thereafter 8,441,108
$16,425,065
Note D - Income Taxes
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
Differences between the net loss as reported and Federal taxable loss result
primarily from (1) depreciation over different methods and lives and on
differing cost bases of apartment properties, (2) change in rental income
received in advance. The following is a reconciliation of reported net loss and
Federal taxable loss:
Note D - Income Taxes (continued)
1995 1994
Net income (loss) as reported $ 14,861 $(1,078,914)
Add (deduct):
Depreciation differences 45,484 59,708
Unearned income 39,789 12,001
Other (40,258) 41,286
Accruals and prepaids (12,750) (12,250)
Federal taxable income (loss) $ 47,126 $ (978,169)
Federal taxable income (loss)
per limited partnership unit $ 3.89 $ (80.80)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
Net deficiency as reported $(12,547,640)
Land and buildings 1,683,927
Accumulated depreciation (593,947)
Syndication and distribution costs 1,318,471
Other 108,957
Net deficiency - Federal tax basis $(10,030,232)
Note E Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the general partner and its
affiliates for the management and administration of all Partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following payments were made to the General Partner and
affiliates in 1995 and 1994:
1995 1994
Property management fees $186,922 $181,961
Reimbursement for services of affiliates 63,795 47,051
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligation is not significant.
In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited
partnership which now controls the working capital loan previously provided by
Angeles Capital Investment, Inc. ("ACII"), was organized. Angeles Corporation
("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives,
Inc.("AAD"), an affiliate of the General Partner, was, until April 14, 1995, the
1% general partner of AAP. On April 14, 1995, as part of a settlement of claims
between affiliates of the General Partner and Angeles, AAD resigned as general
partner of AAP and simultaneously received a .5% limited partner interest in
AAP. An affiliate of Angeles now serves as the general partner of AAP. This
working capital loan funded the Partnership's operating deficits in prior years.
Total indebtedness, which is included as a note payable, was $370,719 at
December 31, 1995 and December 31, 1994, with monthly interest only payments at
prime plus 0.75% (8.75% for 1995). Principal is to be paid the earlier of i)
the availability of funds, ii) the sale of one or more properties covered by
the Partnership, or iii) November 25, 1997. Total interest expense for this
loan was $36,558 and $29,580 in 1995 and 1994, respectively, of which $91,088
was accrued at December 31, 1995.
Note E - Transactions with Affiliated Parties (continued)
AMIT currently provides secondary financing on the Partnership's investment
properties. Total indebtedness was $2,920,386 at December 31, 1995, of which
$1,350,000 was in default at December 31, 1995 (See Notes A and C). Total
interest expense related to this debt was $451,824 and $447,817 in 1995 and
1994, respectively. Accrued interest was $722,688 and $591,251 at December 31,
1995 and December 31, 1994, respectively.
MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns
1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class
B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A
Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to
receive 1.2% of the distributions of net cash distributed by AMIT. These Class
B Shares also entitle MAE GP to vote on the same basis as Class A Shares which
allows MAE GP to vote approximately 37% of the total shares (unless and until
converted to Class A Shares at which time the percentage of the vote controlled
represented by the shares held by MAE GP would approximate 1.2% of the vote).
Between the date of acquisition of these shares (November 24, 1992) and March
31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted
its shares at the 1995 annual meeting in connection with the election of
trustees and other matters. MAE GP has not exerted, and continues to decline to
exert, any management control over or participate in the management of AMIT.
MAE GP may choose to vote these shares as it deems appropriate in the future.
In addition, Liquidity Assistance, LLC, ("LAC"), an affiliate of the General
Partner and an affiliate of Insignia Financial Group, Inc., which provides
property management and partnership administration services to the Partnership,
owns 63,200 Class A Shares of AMIT. These Class A Shares entitle LAC to vote
approximately 1.5% of the total shares.
As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an
option to acquire the Class B shares. This option can be exercised at the end
of 10 years or when all loans made by AMIT to partnerships affiliated with MAE
GP as of November 9, 1994, (which is the date of execution of a definitive
Settlement Agreement) have been paid in full, but in no event prior to November
9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which
occurred April 14, 1995, as payment for the option. Upon exercise of the
option, AMIT would remit to MAE GP an additional $94,000.
Simultaneously with the execution of the option, MAE GP executed an irrevocable
proxy in favor of AMIT, the result of which is MAE GP will be able to vote the
Class B shares on all matters except those involving transactions between AMIT
and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an
officer or trustee of AMIT.
On those matters, MAE GP granted to the AMIT trustees, in their capacity as
trustees of AMIT, proxies with regard to the Class B shares instructing such
trustees to vote said Class B shares in accordance with the vote of the majority
of the Class A shares voting to be determined without consideration of the votes
of "Excess Class A Shares" as defined in Section 6.13 of the Declaration of
Trust of AMIT.
Note F - Investment Properties and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Buildings Cost
and Related Capitalized
Personal Subsequent
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Investment Properties
Bercado Shores $ 5,486,792 $211,744 $ 4,048,256 $ 456,571
Brittany Point 10,938,273 331,326 7,931,674 1,094,931
Totals 16,425,065 $543,070 $11,979,930 $1,551,502
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1995
Buildings
And Related
Personal Accumulated Date of Date Useful
Description Land Property Total Depreciation Construction Acquired Life
<S> <C> <C> <C> <C> <C> <C> <C>
Bercado Shores $211,744 $ 4,504,827 $ 4,716,571 $3,108,243 1974 05/31/79 5-25
Brittany Point 331,326 9,026,605 9,357,931 6,064,372 1977 12/31/79 5-25
Totals $543,070 $13,531,432 $14,074,502 $9,172,615
</TABLE>
The useful lives included above are for the buildings and related personal
property. The depreciable lives for related personal property are for 5 to 7
years.
Note F - Investment Properties and Accumulated Depreciation (continued)
Reconciliation of Investment Properties and Accumulated Depreciation:"
Years Ended December 31,
1995 1994
Investment Properties
Balance at beginning of year $13,963,814 $13,781,290
Property improvements 141,101 195,545
Write-offs due to replacements (30,413) (13,021)
Balance at end of year $14,074,502 $13,963,814
Accumulated Depreciation
Balance at beginning of year $ 8,609,492 $ 8,026,214
Current year expense 593,536 595,938
Write-offs due to replacements (30,413) (12,660)
Balance at end of year $ 9,172,615 $ 8,609,492
The aggregate cost of the investment properties for Federal income tax purposes
at December 31, 1995 and 1994 was $15,758,429 and $15,481,608, respectively.
The accumulated depreciation for Federal income tax purposes at December 31,
1995 and 1994 was $9,766,562 and $9,218,511, respectively.
Note G - Limited Partnership Units
In 1994, the number of Limited Partnership Units decreased by 15 units due
to limited partners abandoning their units. In abandoning his or her Limited
Partnership Unit, a limited partner relinquishes all right, title and interest
in the Partnership as of the date of abandonment. The loss per limited
partnership unit in the accompanying statements of operations is calculated
based on the number of units outstanding at the end of the year.
Note H - Tax Recovery
The Partnership's ongoing property tax appeal of Bercado Shores' 1990, 1991 and
1992 property taxes was successfully completed in 1995 with the Partnership
recognizing $801,939 of tax recovery income in the current year. The
Partnership had paid property taxes for the 1990, 1991, and 1992 tax years but
withheld payment of the 1993 taxes during the appeal. Upon completion of the
appeal in 1995, the tax authority reimbursed the property for overpayments of
the 1990, 1991, and 1992 taxes totalling $545,394, of which the tax authority
applied $321,163 of the refund to pay the 1993 taxes. In addition, property tax
accruals have been reduced by approximately $256,000 in the fourth quarter to
reflect the newly assessed property value. The first mortgage was previously in
default due to the nonpayment of the 1993 taxes. Since the property taxes are
now current, the first mortgage is no longer in default.
Item 8. Changes in and Disagreements with Accountant on Accounting and Financial
Disclosures
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
The names of the directors and executive officers of Angeles Realty
Corporation ("ARC"), the Partnership's General Partner as of December 31, 1995,
their age and the nature of all positions with ARC presently held by them are as
follows:
Name Age Position
Carroll D. Vinson 55 President
Robert D. Long, Jr. 28 Controller and Principal
Accounting Officer
William H. Jarrard, Jr. 49 Vice President
John K. Lines 36 Secretary
Kelley M. Buechler 38 Assistant Secretary
Carroll D. Vinson has been President of Metropolitan Asset Enhancement, L.P.,
and subsidiaries since August of 1994. Prior to that, during 1993 to August
1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (regional CPA firm) and
engaged in various other investment and consulting activities. Briefly, in
early 1993, Mr. Vinson served as President and Chief Executive Officer of
Angeles Corporation, a real estate investment firm. From 1991 to 1993, Mr.
Vinson was employed by Insignia in various capacities including Managing
Director-President during 1991. From 1986 to 1990, Mr. Vinson was President and
a Director of U.S. Shelter Corporation, a real estate services company, which
sold substantially all of its assets to Insignia in December 1990.
Robert D. Long, Jr. is Controller and Principal Accounting Officer. Prior to
joining Metropolitan Asset Enhancement, L.P., and subsidiaries, he was an
auditor for the State of Tennessee and was associated with the accounting firm
of Harshman Lewis and Associates. He is a graduate of the University of
Memphis.
William H. Jarrard, Jr. is Managing Director - Partnership Administration of
Insignia. During the five years prior to joining Insignia in 1991, he served in
a similar capacity for U.S. Shelter.
John K. Lines has been General Counsel of Insignia since June 1994 and General
Counsel and Secretary since July 1994. From May 1993 until June 1994, Mr. Lines
was the Assistant General Counsel and Vice President of Oewen Financial
Corporation in West Palm Beach, Florida. From October 1991 until April 1993,
Mr. Lines was a Senior Attorney with Banc One Corporation in Columbus, Ohio.
From May 1984 until October 1991, Mr. Lines was employed as an Associate
Attorney with Squire Sanders & Dempsey in Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of Insignia. During the five years
prior to joining Insignia in 1991, she served in a similar capacity for U.S.
Shelter. Ms. Buechler is a graduate of the University of North Carolina.
Item 10. Executive Compensation
None of the directors and officers of the General Partner received any
remuneration from the Registrant.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1995, no person was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant.
The Partnership knows of no contractual arrangements, the operation of the
terms of which may at a subsequent date result in a change in control of the
Partnership, except as follows: Article 12.1 of the Agreement, which provides
that upon a vote of the Limited Partners holding more than 50% of the then
outstanding Limited Partnership Units the General Partner may be expelled from
the Partnership upon 90 days written notice. In the event that a successor
general partner has been elected by Limited Partners holding more than 50% of
the then outstanding Limited Partnership Units and if said Limited Partners
elect to continue the business of the Partnership, the Partnership is required
to pay in cash to the expelled General Partner an amount equal to the accrued
and unpaid management fee described in Article 10 of the Agreement and to
purchase the General Partner's interest in the Partnership on the effective date
of the expulsion, which shall be an amount equal to the difference between (i)
the balance of the General Partner's capital account and (ii) the fair market
value of the share of Distributable Net Proceeds to which the General Partner
would be entitled. Determination of the fair market value of the share of
Distributable Net Proceeds is defined in Article 12.2(b) of the Agreement.
Item 12. Certain Relationships and Related Transactions
No transactions have occurred between the Partnership and any officer or
director of ARC.
During the years ended December 31, 1995 and December 31, 1994, the
transactions that occurred between the Partnership and ARC and affiliates of ARC
pursuant to the terms of the Agreement are disclosed under Note E of the
Partnerships' Financial Statements included under Item 7, which is hereby
incorporated by reference.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits: see Exhibit Index contained herein.
(b) No Reports on Form 8-K were filed during the fourth quarter of 1995.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ANGELES PARTNERS VIII
(A California Limited Partnership)
(Registrant)
By: Angeles Realty Corporation
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
Date: March 7, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities on the date
indicated.
/s/Carroll D. Vinson President March 7, 1996
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller and Principal March 7, 1996
Robert D. Long, Jr. Accounting Officer
Exhibit Index
Exhibit
3.1 Amended Certificate and Agreement of the Limited Partnership
filed as exhibit 3.1 in Form 10K dated October 31, 1979 and is
incorporated herein by reference.
10.1 Property Management Agreement between the Partnership and Angeles
Real Estate Management Company, filed as exhibit 10.1 in Form 10K
dated October 31, 1980 and is incorporated herein by reference.
10.2 First Trust Deed Mortgage - Bercado Shores, filed as an exhibit
10.8 in Form 10-K dated March 28, 1991 and is incorporated herein
by reference.
10.3 First Trust Deed Mortgage - Devonshire Apartments, filed as an
exhibit 10.9 in Form 10-K dated March 28, 1991 and is
incorporated herein by reference.
10.4 Promissory Note Secured by Mortgage and Other Security -
Breckenridge, filed as an exhibit 10.10 in Form 10-K dated March
28, 1991 and is incorporated herein by reference.
10.5 Promissory Note Secured by Mortgage and Other Security -
Devonshire, filed as an exhibit 10.11 in Form 10-K dated March
28, 1991 and is incorporated herein by reference.
10.6 Promissory Note Secured by Mortgage and Other Security - Brittany
Point, filed as an exhibit 10.12 in Form 10-K dated March 28,
1991 and is incorporated herein by reference.
10.7 Agreement to Purchase and Sale of Real Property between Angeles
Partners VIII and New Plan Realty Trust, dated January 29, 1992
which was filed as exhibit I to the Trust's Form 8-K filed
February 28, 1992 and is incorporated herein by reference.
10.8 Stock Purchase Agreement dated November 24, 1992 showing the
purchase of 100% of the outstanding stock of Angeles Realty
Corporation by IAP GP Corporation, a subsidiary of MAE GP
Corporation, filed in Form 8-K dated December 31, 1992, which is
incorporated herein by reference.
10.9 Promissory Note Secured by Mortgage and Other Security dated
January 18, 1996 - Brittany Point AP VIII, L.P.
10.10 Mortgage, Assignment of Rents and Security Agreement dated
January 18, 1996 - Brittany Point AP VIII, L.P.
16 Letter from the Registrant's former accountant regarding its
concurrence with the statements made by the Registrant is
incorporated by reference to the exhibit filed with Form 8-K
dated August 30, 1993.
27 Financial Data Schedule
PROMISSORY NOTE
$9,800,000.00
January 18, 1996
1. Promise to Pay. For Value Received, the undersigned, BRITTANY POINT
AP VIII, L.P., a South Carolina limited partnership ("Maker"), hereby promises
to pay to the order of JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY (together with
any subsequent holder of this note being referred to herein as the "holder," or
the "Holder") at its Home Office, John Hancock Place, Post Office Box 111,
Boston, Massachusetts, 02117, or at such other place, or to such other party or
parties, as the holder of this note ("Note") may from time to time designate,
the principal sum of NINE MILLION EIGHT HUNDRED THOUSAND AND 00/100
($9,800,000.00) Dollars, with interest to be computed from January 18, 1996, at
the interest rate of 7.875 per centum per annum, payable upon all principal
remaining from time to time unpaid; to be paid in installments as follows:
$64,312.50 per month beginning on March 1, 1996, and continuing on
the first day of each successive month thereafter for the first twelve months
following the date of this Note; such installments being payments of interest
only accruing on the principal balance of this Note; and
$81,210.39 per month, beginning on March 1, 1997, and continuing on
the first day of each successive month thereafter to February 1, 2001 inclusive;
such installments being payments of interest and principal due under this Note
to be applied first to payment of interest and any remaining amount to
principal;
provided, however, that the amount of the final payment aforesaid shall be for
the amount of principal and interest then remaining unpaid. If the proceeds of
the indebtedness evidenced by this Note are not disbursed on the first day of a
month, then interest only, at the 7.875% interest rate specified above, from and
including the date of disbursement of such proceeds to the first day of the
month following such disbursement, shall be due and payable in advance on the
date of such disbursement.
2. Security. This Note is secured, among other things, by a Mortgage,
Assignment of Rents and Security Agreement ("Mortgage") covering certain real
and personal property located in Madison County, City of Huntsville, Alabama
(this Note, the Mortgage and other documents, instruments and materials now or
hereafter executed, issued or delivered in connection therewith, being herein
collectively referred to as the "Loan Documents" or singularly as a "Loan
Document").
3. Acceleration. Reference is made to the Mortgage securing this Note
for provisions regarding acceleration upon default.
4. Default. The entire unpaid principal balance of, and all accrued
interest on this Note, shall immediately be due and payable at the option of
Holder upon the occurrence of any one or more of the following events ("Events
of Default"), time being of the essence in the payment of this indebtedness:
a. Default shall be made by the Maker in the payment of any installment of
principal and interest as and when the same become due and payable in accordance
with the terms hereof.
b. If default shall be made in the observance or performance of any other of
the covenants, agreements and conditions on the part of Maker contained in the
Loan Documents executed in connection with or securing the payment of this Note
or under this Note.
c. If the Maker shall be involuntarily adjudicated a bankrupt or insolvent by a
court of competent jurisdiction or shall file a petition to be adjudicated
bankrupt, or by petition, answer or consent, in any action or proceeding shall
seek relief under the provisions of any bankruptcy or debtors relief law now or
hereafter prevailing, or shall make an assignment for the benefit of creditors,
or if any order shall be made appointing a receiver of all or any substantial
portion of the assets or property of the Maker, and such order shall not have
been stayed or dismissed and shall have remained in full force and effect for at
least sixty (60) days.
d. The Maker should become insolvent or unable to pay its debts when they
become due and payable.
From and following the maturity of this Note, or while any default exists in the
making of any of said payments or in the performance or observance of any of the
covenants or agreements of this Note, the Loan Documents or of any instrument
now or hereafter evidencing or securing the indebtedness evidenced hereby, the
undersigned further promises to pay, on each date aforesaid, additional interest
on the principal balance of this Note then outstanding at the rate of 14.875 per
centum per annum, but in no event greater than the highest interest rate
permitted under the laws of the State of Alabama ("Default Interest Rate");
provided that any additional interest which has accrued shall be paid at the
time of and as a condition precedent to the curing of any default. Upon any
such default the holder of this Note may apply payments received on any amounts
due hereunder or under the terms of any instrument now or hereafter evidencing
or securing said indebtedness as said holder may determine and, if the holder of
this Note so elects, notice of election being expressly waived, the principal
remaining unpaid with accrued interest shall at once become due and payable.
5. Waiver by Maker. The undersigned waives presentment, protest and
demand, notice of protest, demand and dishonor and non-payment of this Note and
agrees to pay all costs of collection when incurred, including reasonable
attorneys' fees, and to perform and comply with each of the covenants,
conditions, provisions and agreements of any of the undersigned contained in
every instrument now evidencing or securing said indebtedness. No extension of
the time for the payment of this Note or any installment hereof made by
agreement with any person now or hereafter liable for the payment of this Note
shall operate to release, discharge, modify, change or affect the original
liability under this Note, either in whole or in part, of any of the undersigned
not a party to such agreement. Notwithstanding any provision herein or in any
instrument now or hereafter securing said indebtedness, the total liability for
payments in the nature of interest shall not exceed the limits now imposed by
the usury laws of the State of Alabama.
6. Prepayment. Except as hereinafter provided, the undersigned shall
not have the right to prepay the indebtedness evidenced by this Note. On or
after fourth loan year January 18, 2000, and upon giving to Holder not less than
thirty (30) nor more than ninety (90) days' prior written notice, the
undersigned may prepay the entire principal balance of this Note by paying such
balance together with all interest and other costs or charges which have accrued
hereunder or under any instrument securing this Note to the date of prepayment,
plus a prepayment premium equal to the greater of:
a. The product obtained by multiplying (i) the then outstanding principal
balance due by the difference obtained by subtracting the yield rate on publicly
traded United States Treasury Securities (as published in the Wall Street
Journal or other business publication of general circulation five business days
prior to the date of said payment) having the closest matching maturity date to
the maturity date of this Note from the interest rate on this Note adjusted to
its semi annual equivalent rate of 8.005%, times (ii) the number of scheduled
monthly payments remaining, divided by twelve; or
b. 1% of the then outstanding principal balance due under this Note.
If the maturity of this Note shall be accelerated by the holder hereof for
any reason, then a tender of payment by the undersigned or anyone on behalf of
the undersigned of all sums due hereunder shall constitute an evasion of the
aforementioned prepayment provisions of this Note and any such payment shall
require, to the extent permitted by the laws of the State of Alabama, the
concurrent payment of an amount (the "Default Acceleration Prepayment Premium")
equal to the greater of:
(a) The product obtained by multiplying (i) the then outstanding principal
balance due by the difference obtained by subtracting the yield rate on publicly
traded United States Treasury Securities (as published in the Wall Street
Journal or other business publication of general circulation five business days
prior to the date of said payment) having the closest matching maturity date to
the maturity date of this Note from the interest rate on this Note adjusted to
its semi annual equivalent rate of 8.005%, times (ii) the number of scheduled
monthly payments remaining, divided by twelve; or
(b) 10% of the outstanding principal balance due under this Note.
In the event that no yield rate is obtainable on the above U.S. Treasury
Securities, then the nearest equivalent issue shall be selected by Holder in its
sole discretion. Partial prepayment of this Note shall not be allowed.
Notwithstanding anything herein to the contrary, no prepayment premium will be
due for a prepayment of the indebtedness remaining unpaid in full, if made
during the last ninety (90) days of the term of this Note, provided that the
written notice of prepayment required above shall be given.
7. Compliance with Law. If, from any circumstances whatsoever,
fulfillment of any provision hereof or of the Mortgage, Loan Documents or any
other instrument securing this Note or all or any part of the indebtedness
evidenced hereby, at the time performance of such provision shall be due, shall
involve exceeding the interest limitation validly prescribed by law which a
court of competent jurisdiction may deem applicable hereto, then, ipso facto,
the obligation to be fulfilled shall be reduced to an amount computed at the
highest rate of interest permissible under such applicable law.
8. Personal Liability. In any action brought to enforce the obligation
of the undersigned, or the partners, heirs, or successors or assigns of the
undersigned, to pay the indebtedness evidenced by this Note or to enforce the
obligation of the undersigned to pay any indebtedness or obligation created or
arising under the Mortgage or any other Loan Document, the judgment or decree
shall be enforceable against such parties only to the extent of their interests
in the property subject to said Mortgage or other Loan Document, and any such
judgment shall not be subject to execution on, nor be a lien on, the assets of
such parties other than to the extent of their interests in the property subject
to the Mortgage or other Loan Document. Further, such parties shall in no event
be liable for a money judgment in any such action, whether by any action brought
upon this Note or any agreement or instrument securing this Note, or action
brought for a deficiency judgment against any of such parties.
Notwithstanding anything in the Loan Documents limiting or negating Maker's
or its General Partner's personal liability, Maker and its General Partner agree
that such limitations on personal liability, including the foregoing limitation
of liability, shall not apply to any of the following:
(a) Fraud or misrepresentation on the part of the Maker or any of its
partners, or any waste of the property securing this Note.
(b) Any rents, issues or profits securing this Note collected more than
one (1) month in advance of their due dates.
(c) Any misapplication of proceeds, rents, issues or profits, security
deposits, and any other payments from tenants or occupancy (including, without
limitation, lease termination fees), insurance proceeds, condemnation awards, or
other sums of a similar nature.
(d) Maker or any of its partners otherwise committing any wrongful act,
the apparent purpose or intent of which is to deprive Holder of any of its
security for the Note.
(e) Liability under any environmental covenants, conditions, and
indemnity contained in the Loan Documents and in any separate environmental
indemnity agreement executed by Maker.
(f) Rents or other income not properly applied to any portion then due of
the indebtedness evidenced by the Note or the normal operating expenses incurred
or accrued.
(g) Personalty or fixtures removed or allowed to be removed from the real
property securing this Note and described in the Mortgage by or on behalf of
Maker or any of its partners and not replaced by items of equal or greater value
than the personalty or fixtures so removed; however, this provision shall not
apply to those items destroyed in the ordinary course of business or those items
removed in the ordinary course of business and not intended to deprive Holder of
any of its security for the Note.
(h) An amount equal to the sum of all payments made by Maker to any
junior lienholders during any period in which a monetary default exists under
the Note, the Mortgage or any Loan Document.
(i) Failure to pay any taxes or assessments pertaining to the property
securing this Note prior to delinquency, or to pay charges for labor, materials
or other charges which can create liens on any portion of such property, and any
sums expended by Holder in the performance of or compliance with the obligations
of Maker or any of its partners under any Loan Document, including, without
limitation, sums expended to pay taxes or assessments or hazard insurance
premiums, capital improvement expenditures, bills for utilities or other service
or products for the benefit of the property securing this Note.
(j) The cost of compliance with all federal, state and local laws and
regulations, as well as the cost of investigating any action or charge
thereunder, and/or damages suffered by Holder as a result of the failure of
Maker or any of its partners to pay or comply with any of the foregoing.
(k) Tortious or other acts or omissions giving rise to claims against
Holder, including, without limitation, claims by tenants of any property
securing this Note for damages or offsets.
(l) Attorneys' fees, court costs and other expenses incurred by Holder in
connection with the Holder's enforcement of Maker's personal liability as set
forth herein.
9. Entire Agreement. This Note and the Loan Documents constitute the
entire agreement and understanding of the parties with respect to this Note and
supersede all other and prior negotiations, agreements, representations and
statements of the parties hereto. No provision of this Note may be modified
except by a writing signed by both Holder and Maker.
10. Waiver of Jury Trial. MAKER AND HOLDER WAIVE THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION UNDER THIS PROMISSORY NOTE OR ANY OTHER LOAN DOCUMENT OR ANY
OTHER ACTION ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR ACTIONS.
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Promissory Note by its duly authorized representative, under seal, on
, 1995.
BRITTANY POINT AP VIII, L.P.
a South Carolina limited partnership
By Brittany Point GP, Limited Partnership,
a South Carolina limited partnership
Its General Partner
By GP Services VI, Inc.,
a South Carolina corporation
Its General Partner
By /s/Robert D. Long, Jr. (SEAL)
Robert D. Long, Jr.
Its Controller/CAO
STATE OF
COUNTY OF
I, the undersigned, a Notary Public in and for said State and County,
hereby certify that Robert D. Long, Jr. whose name as Controller/CAO of
GP Services VI, Inc., as General Partner of Brittany Point GP, Limited
Partnership, as General Partner of Brittany Point AP VIII, L.P., is signed to
the foregoing instrument, and who is known to me, acknowledged before me on this
day that, being informed of the contents of the instrument, he, as such officer
and with full authority, executed the same voluntarily for and as the act of
said corporation.
Given under my hand and official notarial seal this day of
, 1995.
Notary Public, State of
My Commission Expires:
MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT
This Mortgage, Assignment of Rents and Security Agreement is made this 18th
day of January, 1996, by and between BRITTANY POINT AP VIII, L.P., a South
Carolina limited partnership (Mortgagor), and JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY (Mortgagee) whose principal place of business is in Boston,
Massachusetts;
WITNESSETH:
For good and valuable consideration, including the indebtedness herein
recited, the receipt of which is hereby acknowledged, Mortgagor hereby GRANTS,
BARGAINS, SELLS and CONVEYS that certain real property described on Exhibit A
attached hereto and incorporated herein by this reference, and transfers and
assigns to Mortgagee, its successors and assigns, all of its estate, right,
title and interest in, to and under and grants to Mortgagee a security interest
in any and all of the following described personal property which is (except
where the context otherwise requires) herein collectively called the "Mortgaged
Property", whether now owned or held or hereafter acquired, the Mortgaged
Property consisting of:
A. That certain real property, being a 431 unit garden apartment complex
generally known as Brittany Point Apartments and located in the City of
Huntsville and County of Madison, State of Alabama, such property being more
particularly described on Exhibit A attached hereto and incorporated herein by
this reference, together with all of the easements, rights, privileges,
franchises and appurtenances thereunto belonging or in anywise appertaining
(hereinafter referred to as the "Premises"), and all of the estate, right,
title, interest, claim and demand whatsoever of Mortgagor therein or thereto,
either in law or in equity, in possession or in expectancy, now or hereafter
acquired (Said Exhibit A is initialed by the Mortgagor for purposes of
identification);
B. All structures, buildings and improvements of every kind and
description now or at any time hereafter located on the Premises (hereinafter
referred to as the "Improvements") including all equipment, apparatus,
machinery, fixtures, fittings, and appliances and any additions to,
substitutions for, changes in or replacements of the whole or any part thereof,
including such of the foregoing as may be used in connection with the generating
or distributing of air, water, heat, electricity, light, fuel or refrigeration
or for ventilating or sanitary purposes or for the exclusion of vermin or
insects, or for the removal of dust, refuse or garbage now or at any time
hereafter affixed to, attached to, placed upon or used in any way in connection
with the use, enjoyment, occupancy or operation of the Premises or any portion
thereof;
C. All easements, rights-of-way, licenses and permits pertaining to the
ownership and operation of any of the Mortgaged Property;
D. All articles of personal property and any additions to, substitutions
for, changes in or replacements of the whole or any part thereof (hereinafter
referred to as the "Personal Property"), including without limitation all wall-
beds, wall-safes, built-in furniture and installations, shelving, partitions,
door-tops, vaults, elevators, dumb-waiters, awnings, window shades, venetian
blinds, light fixtures, fire hoses and brackets and boxes for the same, fire
sprinklers, alarm systems, drapery rods and brackets, screens, linoleum,
carpets, plumbing, laundry tubs and trays, iceboxes, refrigerators, heating
units, stoves, ovens, water heaters, incinerators, furniture and furnishings,
communication systems, elevators, all specifically designed installations and
furnishings and all of said articles of property, the specific enumerations
herein not excluding the general, now or at any time hereafter affixed to,
attached to, placed upon or used in any way in connection with the use,
enjoyment, occupancy or operation of the Premises or the Improvements or any
portion thereof and owned by Mortgagor or in which Mortgagor now has or
hereafter acquires an interest, and all building materials and equipment now or
hereafter delivered to the Premises and intended to be installed or placed in or
about the Improvements, provided that nothing contained in this paragraph D
shall be construed to convert any real property to personal property for the
purposes hereof;
E. All right, title and interest of Mortgagor in and to all streets,
roads and public places, opened or proposed, and all easements and rights of
way, public or private, tenements, hereditaments, rights and appurtenances, now
or hereafter used in connection with, belonging or appertaining to, the
Premises;
F. All of the tenant leases and all of the rents, royalties, issues,
profits, revenue, income and other benefits of the Mortgaged Property, or
arising from the use or enjoyment of all or any portion thereof or from any
lease or agreement pertaining thereto (the "Rents and Profits"), and all right,
title and interest of Mortgagor in and to all leases of the Mortgaged Property
now or hereafter entered into and all right, title and interest of Mortgagor
thereunder (the "Tenant Leases"), including, without limitation, cash or
securities deposited thereunder to secure performance by the lessees of their
obligations thereunder, whether said cash or securities are to be held until the
expiration of the terms of said leases or applied to one or more of the
installments of rent coming due immediately prior to the expiration of said
terms; subject to, however, the provisions contained in Section 1.09 hereof;
G. All proceeds (including claims and demands therefor) of the
conversion, voluntary or involuntary, of any of the foregoing into cash or
liquidated claims, including, without limitation, proceeds of insurance and
condemnation awards;
H. All general intangibles of Mortgagor relating to the use and enjoyment
of the Mortgaged Property, including all rights against any parties providing
warranties to the Mortgagor in relation thereto.
FOR THE PURPOSE OF SECURING:
(1) Due, prompt and complete observance, performance and discharge of
each and every obligation, covenant and agreement contained in that certain
promissory note (hereinafter referred to as the "Note") of even date herewith in
the face amount of $9,800,000.00, executed by Mortgagor to the order of
Mortgagee and any and all modifications, extensions, or renewals thereof,
whether hereafter evidenced by the Note or otherwise;
(2) Payment of all other sums, with interest thereon at the rate of
interest provided in the Note becoming due or payable under the provisions
hereof;
(3) Payment of such additional sums and interest thereon which may
hereafter be loaned to Mortgagor, or its successors or assigns, by Mortgagee,
when evidenced by a promissory note or notes reciting that they are secured by
this Mortgage together with an appropriate instrument modifying this Mortgage
accordingly;
(4) Due, prompt and complete observance, performance and discharge of
each and every obligation, covenant and agreement of Mortgagor contained herein,
or in any other debt or security instrument heretofore or hereafter executed by
Mortgagor having reference to or arising out of the indebtedness represented by
the Note including any loan agreement, debt instrument, security instrument or
commitment letter executed in conjunction herewith; and
(5) Due, prompt and complete observance, performance and discharge of each
and every obligation contained in any debt or security instrument heretofore or
hereafter executed by Mortgagor having reference to indebtedness other than that
represented by the Note, when such debt or security instrument by its own terms
shall provide that performance thereunder shall be secured by this Mortgage.
It is the intent hereof to secure payment of the Note and the indebtedness
evidenced thereby whether the entire amount shall have been advanced to
Mortgagor at the date hereof, or at a later date, and to secure any other amount
or amounts that may be added to the mortgaged indebtedness under the terms of
this instrument (all of which are collectively referred to herein as the
"Secured Indebtedness").
ARTICLE I
COVENANTS OF MORTGAGOR
To protect the security of this Mortgage, Mortgagor covenants, warrants and
agrees to and with Mortgagee as follows:
1.01 Payment of Indebtedness. Mortgagor will pay the principal and
interest and all other sums becoming due with respect to the Note at the time
and place and in the manner specified in the Note, according to the terms
thereof.
1.02 Title of Mortgagor. Mortgagor has good and marketable title to the
Mortgaged Property subject to no security interest, lien, charge or encumbrance
except such as are set forth on Exhibit B attached hereto; Mortgagor owns, or
upon acquisition thereof, will own the Personal Property free and clear of liens
and claims and is or will be, in its own right or through those holding under
it, in peaceable possession of the Mortgaged Property; and this Mortgage is and
will remain a valid and enforceable lien on the Mortgaged Property subject only
to the exceptions referred to above. Mortgagor has full power and lawful
authority to grant, assign, transfer and mortgage its interest in the Mortgaged
Property in the manner and form hereby done or intended. Mortgagor will
preserve its interest in and title to the Mortgaged Property and will forever
warrant and defend the same to Mortgagee and will forever warrant and defend the
validity and priority of the lien hereof against the claims of all persons and
parties whomsoever. Mortgagor shall promptly and completely observe, perform,
and discharge each and every obligation, covenant and agreement affecting the
Mortgaged Property whether the same is prior and superior or subject and
subordinate hereto.
1.03 Further Assurances.
(a) Mortgagor will, at its own cost and without expense to Mortgagee, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages, assignments, notices of assignments, transfers and
assurances as Mortgagee shall from time to time require, for the better assuring
conveying, assigning, transferring and confirming unto Mortgagee the property
and rights hereby conveyed or assigned or intended now or hereafter so to be, or
which Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance of
the terms of this Mortgage, or for filing, registering or recording this
Mortgage and, on demand, Mortgagor will execute and deliver, and hereby
authorizes Mortgagee to execute in the name of Mortgagor to the extent Mortgagor
may lawfully do so, one or more financing statements and security instruments,
to evidence more effectively the lien hereof upon the Personal Property.
(b) Mortgagor forthwith upon the execution and delivery of this Mortgage,
and thereafter from time to time, will cause this Mortgage, and any security
instrument creating a lien or evidencing the lien hereof upon the Personal
Property and each instrument of further assurance, to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and to fully protect the lien hereof
upon, and the security interest of Mortgagee in, the Mortgaged Property.
1.04 Required Insurance. Mortgagor will keep the Mortgaged Property
insured against loss or damage by fire with extended coverage against any other
risks or hazards which, in the opinion of Mortgagee, should be insured against
provided the same are casualties or risks ordinarily and customarily insured
against in Madison County, Alabama, to the amount of the full insurable value
thereof on a replacement cost basis (or less in the discretion of Mortgagee)
with a company or companies and in such form and with such endorsements as may
be approved or required by Mortgagee. Loss under said insurance shall be
payable to Mortgagee and shall be applied in the same manner as provided in
Section 1.05 hereof, and said insurance policies shall be endorsed with a
standard non-contributory mortgagee clause, and may only be cancelled or
modified upon not less than thirty (30) days' prior written notice to
Mortgagee. In addition, until the Secured Indebtedness is fully paid, Mortgagor
shall maintain the following insurance on a fully paid basis: (i) if the
Premises or any part thereof is located within a Special Flood Hazard Area,
flood insurance acceptable to Mortgagee, pursuant to the provisions of the
Flood Disaster Protection Act of 1973, 12 CFR, Part 22; (ii) public liability
insurance in an amount not less than $1,000,000.00 per single occurrence; (iii)
Worker's Compensation insurance as required by law; and (iv) rent loss
insurance. The policy or policies evidencing all insurance referred to in this
paragraph or certificates of such insurance satisfactory to Mortgagee, together
with receipts for the payment of premiums thereon, shall be delivered to and
held by Mortgagee. Mortgagee shall not by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any insurance, incur any
liability for the form or legal sufficiency of insurance contracts, solvency of
insurance companies, or payment of lawsuits, and Mortgagor hereby expressly
assumes full responsibility therefor and liability if any, thereunder. The
insurance required under this Section 1.04 may be provided by a blanket policy
of insurance covering the Mortgaged Property and other properties owned by the
Mortgagor, provided that such blanket policy shall meet all requirements set
forth in this Section 1.04.
1.05 Condemnation, Casualty. Mortgagor, immediately upon obtaining
knowledge of the institution of any proceedings for the condemnation of the
Premises or Improvements, or any portion thereof, will notify the Mortgagee of
the pendency of such proceedings. Mortgagee may participate in any such
proceedings and Mortgagor from time to time will deliver to Mortgagee all
instruments requested by Mortgagee to permit such participation. In the event
of such condemnation proceedings, the award or compensation payable is hereby
assigned to and shall be paid to Mortgagee. Mortgagor will further notify
Mortgagee in writing promptly after loss or damage caused by fire or other
casualty to the Premises or the Improvements, or any portion thereof, and prior
to the making of any repairs thereto. All proceeds of insurance with respect to
any loss or damage caused by fire or other casualty are hereby assigned to
Mortgagee. In the event of any insured loss, Mortgagee shall have the right to
participate in any claim relating thereto, and the payment for any such loss or
damage shall be made directly to Mortgagee, and, at Mortgagee's option, may be
either used to effect restoration of the loss or damage applied to the Secured
Indebtedness in such order or manner as Mortgagee shall determine or be paid
directly to Mortgagor.
1.06 Taxes, Insurance and Assessments; Care of Premises.
(a) Mortgagor, from time to time when the same shall become due, will pay
and discharge all taxes of every kind and nature, including real and personal
property taxes and income, franchise, withholding, profits and gross receipts
taxes, all general and special assessments, including assessments on appurtenant
water stock, levies, permits, inspection and license fees, all water and sewer
rents and charges, all utilities, and all other public charges whether of a like
or different nature, imposed upon or assessed against Mortgagor or the Mortgaged
Property or any part thereof or upon the revenues, rents, issues, income and
profits of the Mortgaged Property, or arising in respect of the occupancy, use
or possession thereof. Mortgagor will, upon the request of Mortgagee, deliver
to Mortgagee receipts evidencing the payment of all such taxes, assessments,
levies, fees, rents and other public charges imposed upon or assessed against
Mortgagor or the Mortgaged Property or the revenues, rents, issues, income or
profits thereof.
(b) Mortgagor shall pay all rents under any ground leases pertaining to the
Mortgaged Property and discharge all obligations thereunder, and Mortgagor will
pay, from time to time when the same shall become due, all lawful claims and
demands of mechanics, materialmen, laborers, and others which, if unpaid, might
result in or permit the creation of a lien on the Mortgaged Property or any part
thereof, or on the revenues, rents, issues, income and profits arising
therefrom, and in general will do or cause to be done everything necessary so
that the lien hereof shall be fully preserved, at the sole cost of Mortgagor,
without expense to Mortgagee.
(c) Upon request by Mortgagee, Mortgagor shall deposit with Mortgagee an
amount sufficient for Mortgagee to create and maintain a reserve fund from which
Mortgagee may discharge the obligations under Sections 1.04 and 1.06(a) and (b)
hereof before they become due. The determination of the amount to be deposited
with Mortgagee, so that the amount of such deposit shall be sufficient for this
purpose, shall be made by Mortgagee in its sole discretion. Mortgagee, at its
option, may request that Mortgagor deposit with Mortgagee additional funds, at
the time of each payment of an installment of interest or principal under the
Note, sufficient to discharge the obligations of Mortgagor referenced above
before they become due, and the amount of such deposits shall be determined in
the Mortgagee's sole discretion. Said deposited amounts shall be held by
Mortgagee without interest and applied to the payment of the obligations in
respect of which said amounts were deposited in such order or priority as
Mortgagee shall determine, on or before the respective dates on which the same
or any of them would become delinquent. If one (1) month prior to the due date
of any of the aforementioned obligations the amount then on deposit therefor
shall be insufficient for the payment of such obligation in full, Mortgagor
within ten (10) days after demand shall deposit the amount of the deficiency
with Mortgagee. Nothing herein contained shall be deemed to affect any right or
remedy of Mortgagee under any other provision of this Mortgage or under any
statute or rule of law to pay any such amount and to add the amount so paid
together with interest at the "Default Interest Rate" which shall mean the rate
of 14.875% per annum to the indebtedness hereby secured.
(d) That if the Mortgagor shall neglect or refuse to keep in good repair
the Mortgaged Property, to replace the same as therein agreed, to maintain and
pay the premiums for insurance which may be required hereunder, or to pay and
discharge all taxes of whatsoever nature, assessments and charges of every
nature and to whomever assessed, as provided for hereunder, or to pay the sums
required by it to be paid to prevent the creation of or to discharge other
liens, the Mortgagee may, at its election, cause such repairs or replacements to
be made, obtain such insurance or pay said taxes, assessments, charges and sums
and any amounts paid as a result thereof, together with interest thereon at the
Default Interest Rate of 14.875% per annum from the date of payment, shall be
immediately due and payable by the Mortgagor to the Mortgagee, and until paid
shall be added to and become a part of the principal debt secured hereby, and
the same may be collected as a part of said principal debt in any suit thereon
or upon the Note; or the Mortgagee, by the payment of any tax, assessment or
charge, may, if it sees fit, be thereby subrogated to the rights of the State,
County, City and all political or governmental subdivisions, but no such advance
shall be deemed to relieve the Mortgagor from any default hereunder nor impair
any right or remedy consequent thereon.
1.07 After Acquired Property. All right, title and interest of Mortgagor
in and to all extensions, improvements, betterments, renewals, substitutes and
replacements of, and all additions and appurtenances to the Mortgaged Property,
hereafter acquired by, or released to, Mortgagor, or constructed, assembled or
placed by Mortgagor or caused to be placed by Mortgagor on the Premises, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, conveyance,
assignment or other act by Mortgagor, shall become subject to the lien of this
Mortgage as fully and as completely, and with the same effect, as though now
owned by Mortgagor and specifically described in the granting clause hereof, but
at any and all times Mortgagor will execute and deliver to Mortgagee any and all
such further assurances, mortgages, modifications of this Mortgage, conveyances
or assignments thereof as Mortgagee may reasonably require for the purpose of
expressly and specifically subjecting the same to the lien of this Mortgage.
1.08 Security Agreement. This Mortgage shall be self-operative and shall
constitute a Security Agreement with respect to the Personal Property; provided,
however, Mortgagor hereby agrees to execute and deliver on demand and hereby
irrevocably constitutes and appoints Mortgagee the attorney-in-fact of
Mortgagor, to execute, deliver and, if appropriate, to file with the appropriate
filing officer or office such security agreement, financing statement or other
instruments as Mortgagee may request or require in order to impose or perfect
the lien or security interest hereof more specifically thereon.
1.09 Rents and Profits.
(a) All Tenant Leases together with the Rents and Profits are hereby
absolutely and unconditionally assigned, transferred, conveyed and set over to
Mortgagee to be applied by Mortgagee in payment of the principal and interest
and all other sums payable on the Note, and of all other sums due and payable
under this Mortgage. Prior to the happening of any Event of Default as set
forth in Article II hereof, Mortgagor shall collect and receive all Rents and
Profits as trustee for the benefit of Mortgagee and shall apply the amount so
collected first to the payment of the principal and interest and all other sums
due and payable on the Note and to the payment of all other sums payable under
this Mortgage. Thereafter, so long as no Event of Default has occurred, the
balance shall be distributed to the account of Mortgagor. Nothing contained in
this Section 1.09(a) or elsewhere in this Mortgage shall be construed to make
Mortgagee a mortgagee in possession unless and until Mortgagee actually takes
possession of the Mortgaged Property either in person or through an agent or
receiver.
(b) Mortgagor will not without Mortgagee's prior written consent (i)
execute an assignment of any of its right, title or interest in the Tenant
Leases or Rents and Profits, or (ii) in any other manner materially impair the
value of the Mortgaged Property or the security of this Mortgage.
(c) Mortgagor will not execute any lease of all or a substantial portion
of the Mortgaged Property, except for actual occupancy by the lessee thereunder,
and will at all times promptly and faithfully perform, or cause to be performed,
all of the covenants, conditions and agreements contained in all leases of the
Mortgaged Property or any portion thereof now or hereafter existing, on the part
of the lessor thereunder to be kept and performed.
(d) Mortgagor shall furnish to Mortgagee, within thirty (30) days after a
request by Mortgagee to do so, a written statement containing the names of all
lessees of the Mortgaged Property, the terms of their respective leases, the
spaces occupied and the rentals payable thereunder and a copy of each such
lease.
1.10 Attornment. To the extent not provided by applicable law, each lease
of the Mortgaged Property or any part thereof made or renewed after the date
hereof, shall provide that, in the event of the enforcement by Mortgagee of the
remedies provided for by law or by this Mortgage, the lessee thereunder will, if
requested by Mortgagee or by any person succeeding to the interest of Mortgagee
as the result of said enforcement, automatically become the lessee of any such
successor in interest, without any change in the terms or other provisions of
the respective lease; provided, however, that said successor in interest shall
not be bound by any payment of rent or additional rent for more than one (1)
month in advance, except prepayments in the nature of security for the
performance by said lessee of its obligations under said lease. Each lease
shall also provide that, upon request by said successor in interest, the lessee
shall execute and deliver an instrument or instruments confirming its
attornment.
1.11 Subordinate Mortgages. Without the prior written consent of
Mortgagee being first had and obtained, Mortgagor will not create, suffer to
exist, execute or deliver any lien against the Mortgaged Property, or any
pledge, security agreement, mortgage, deed of trust or other security covering
all or any portion of the Mortgaged Property.
Notwithstanding the foregoing, Mortgagee acknowledges that Mortgagor has
obtained certain secondary financing that is secured by all or a portion of the
Mortgaged Property, but is subordinate and subject to the security of this
Mortgage; it being the intent of the parties hereto that this Mortgage shall be
a first lien on the Mortgaged Property securing the Secured Indebtedness.
Mortgagor represents and covenants with Mortgagee that Exhibit B which is
attached hereto, made a part hereof, and incorporated herein by this reference,
lists all persons, firms or entities that have a security interest in, or lien
upon, any portion of the Mortgaged Property, and states the extent of such
security interests or liens. Mortgagee hereby expressly consents to the
subordinated security interests and liens set forth on Exhibit B attached
hereto; provided however, that nothing herein shall be construed in a manner
that would permit the Mortgagor to further mortgage or hypothecate the Mortgaged
Property except as set forth in this Mortgage, and nothing herein shall be
construed in a manner that would permit the Mortgagor to increase the extent of
the security interests or liens upon the Mortgaged Property as set forth on
Exhibit B, or to increase the indebtedness which is secured by the security
interests and liens set forth thereon, absent the express written consent of the
Mortgagee.
Should Mortgagor violate the provisions of this Section 1.11, Mortgagee
may, at its option, declare the entire unpaid principal balance and all interest
accrued thereon, secured by this Mortgage, immediately due and payable, and
Mortgagor shall pay to Mortgagee in addition thereto a Default and Acceleration
Prepayment Premium in an amount determined in accord with the formula set out in
Section 3.18 below.
1.12 Waste, Alteration, Hazardous Use. Mortgagor will not commit any
waste on the Premises or make any change in the use of the Mortgaged Property
which will in any way increase any ordinary fire or other hazard arising out of
construction or operation, nor will Mortgagor make any application to any
federal, state or local governmental authority ("Governmental Authority") for a
change in zoning or a change in any other law, ordinance, statute, rule, order,
decree, directive or regulation (collectively, the "Laws") affecting the
Mortgaged Property, nor will Mortgagor consent to any such change without the
written consent of Mortgagee. Mortgagor will at all times comply with all Laws
of any Governmental Authority having or exercising jurisdiction over the
Mortgaged Property or any portion thereof and maintain and keep the Improvements
in good operating order and condition and will promptly make, from time to time,
all repairs, replacements, additions and improvements in connection therewith
which are needful or desirable to that end. The Improvements shall not be
removed, demolished or substantially altered, nor shall any of the Personal
Property be removed, without the prior written consent of Mortgagee except where
appropriate replacements free of superior title, liens and claims are
immediately made having a value at least equal to the value of the Personal
Property so removed; provided, however, that the Mortgagor may contest any such
change in zoning or Law and such noncompliance shall not be an Event of Default
hereunder as long as such contest is permitted by law, and shall be diligently
prosecuted in good faith and Mortgagor shall have provided the Mortgagee with
such security as Mortgagee shall reasonably require in the event the contest is
unsuccessful.
1.13 Partnership Existence. Mortgagor, will, so long as it is the owner
of the Mortgaged Property, do all things necessary to preserve and keep in full
force and effect its existence, rights and privileges as a limited partnership
formed under the laws of the state of South Carolina or such other state or
states as may have jurisdiction over such existence, and will comply with all
Laws of any Governmental Authority or court applicable to Mortgagor or the
Mortgaged Property or any part thereof, and in the event of any act or
circumstance which might operate as an involuntary dissolution will take all
such measures necessary to reconstitute the partnership.
1.14 Financial Statements.
(a) Mortgagor will keep adequate records and books of account in
accordance with generally accepted accounting principles and will permit
Mortgagee, or its agents, accountants and attorneys, to visit and inspect the
Mortgaged Property and examine Mortgagor's records and books of account and to
discuss Mortgagor's affairs, finances and accounts with the officers of
Mortgagor at such reasonable times as may be requested by Mortgagee.
(b) Mortgagor will deliver to Mortgagee within ninety (90) days after the
close of its fiscal year balance sheets and statements of profit, loss, income
and expenses setting forth in each case, in comparative form, figures for the
preceding year pertaining to Mortgagor and the operation of the Mortgaged
Property, such statements to be in detail satisfactory to Mortgagee. Throughout
the term of this Mortgage, Mortgagor will deliver to Mortgagee with reasonable
promptness such other information with respect to Mortgagor and/or the Mortgaged
Property as Mortgagee may reasonably request from time to time. All financial
statements of Mortgagor shall be accompanied by the certificate of a certified
public accountant who is a member of the American Institute of Certified Public
Accountants or, at the option of Mortgagee, by a principal financial or
accounting officer of Mortgagor who is responsible for the preparation of such
annual financial statements, dated within five (5) days of the delivery of such
statements to Mortgagee. If such statements are from one other than an
independent certified public accountant, they shall contain a certificate
stating that he knows of no default hereunder, nor of any event which after
notice or lapse of time, or both, would constitute a default hereunder, which
has occurred and is continuing, or, if any such default has occurred and is
continuing, specifying the nature and period of existence thereof and what
action Mortgagor has taken or proposes to take with respect thereto, and, except
as otherwise specified, stating that Mortgagor has fulfilled all of its
obligations under this Mortgage which are required to be fulfilled on or prior
to the date of such certificate.
(c) Mortgagor, within ten (10) days upon request in person or within
fifteen (15) days upon request by mail, will furnish a written statement duly
acknowledged of the amount due on the Note, whether for principal or interest,
and stating whether any offsets or defenses exist against the indebtedness
secured hereby.
1.15 Subrogation Rights of Mortgagee. Mortgagee shall be subrogated,
notwithstanding their release of record, to any mechanic's or vendor's lien or
liens, superior titles, mortgages, deeds of trust, liens, encumbrances, rights,
equities and charges of all kinds heretofore or hereafter existing on the
Mortgaged Property to the extent that the same are paid for or discharged from
the proceeds of the loan indebtedness evidenced by the Note.
1.16 Substitution of Note. Mortgagor will, if the Note is mutilated,
destroyed, lost or stolen, deliver to Mortgagee, in substitution therefor, a new
promissory note containing the same terms and conditions as the Note with a
notation thereon of the unpaid principal and accrued but unpaid interest.
Mortgagor shall be furnished with satisfactory evidence of the mutilation,
destruction, loss or theft of the Note, and also such security or indemnity as
may be reasonably requested by Mortgagor; provided, however, that if the
original Mortgagee named herein is the then mortgagee under this Mortgage, an
unqualified indemnity from the original mortgagee named herein shall be deemed
to be satisfactory security or indemnification.
1.17 Right of Mortgagee to Release Obligors and Collateral. Without
affecting the liability of Mortgagor, or of any other person who is or shall
become bound by the terms of this Mortgage or who is or shall become liable for
the performance of any obligation secured hereby, Mortgagee may, in such manner,
upon such terms and at such times as it deems best and without notice or demand,
release any party now or hereafter liable for the performance of any such
obligation, extend the time for such performance, accept additional security
therefor, and alter, substitute or release any property securing such
performance. No exercise or non-exercise by Mortgagee of any of its rights
under this Mortgage, no dealing by Mortgagee with any person, firm or entity and
no change, impairment, loss or suspension of any right or remedy of Mortgagee
shall in any way affect any of the obligations of Mortgagor hereunder or any
security furnished by Mortgagor, or give Mortgagor any recourse against
Mortgagee.
1.18 Use of Premises. The Mortgagor will at all times use and operate the
Premises as a community apartment complex and for no other purpose, and
Mortgagor will not acquire any fixtures, equipment or appliances subject to any
security interest, conditional sale, title retention arrangement or other charge
or lien taking precedence over the lien hereof.
1.19 Prohibitions on Use of Proceeds. Mortgagor agrees that no part of
the proceeds of the loan indebtedness secured hereby will be used for the
purpose (whether immediate, incidental or ultimate) of purchasing or carrying
any "margin stock", as such term is defined in Regulation G (12 CFR part 207) of
the Board of Governors of the Federal Reserve System or for the purpose of
reducing or retiring any indebtedness which was originally incurred for any such
purpose.
1.20 Environmental Warranties
(a) Mortgagor warrants and represents that:
(1) to the best of Mortgagor's knowledge, there have been no
releases at, upon, under, or within, nor past or ongoing migration from
neighboring lands to, the Premises or the Improvements thereon, of hazardous
materials; and
(2) Mortgagor has not received any notice from any Governmental
Authority or from any tenant or other occupant or from any other person with
respect to any release of hazardous materials at, upon, under, or within the
Premises or the Improvements thereon; and
(3) to the best of Mortgagor's knowledge, except as otherwise
disclosed in the Report of Preliminary Environmental Site Assessment prepared by
Law Engineering and Environmental Services, Inc., dated October 25, 1995, there
is no asbestos or asbestos-containing materials, PCB's, radon gas, or urea
formaldehyde foam insulation at or within the Premises or the Improvements
thereon; and
(b) Mortgagor covenants that:
(1) Mortgagor has not been, is not, and will not become involved in
operations at the Premises which could lead to the imposition on Mortgagor of
liability under RCRA, CERCLA, or any similar applicable federal or state laws or
regulations including those governing underground storage tanks in the State of
Alabama;
(2) Mortgagor will strictly comply with the requirements of RCRA,
CERCLA, The Alabama Underground Storage Tank Act and all similar applicable
federal and state laws and regulations, and of all federal and state laws and
regulations relating to asbestos and asbestos-containing materials, PCB's, radon
gas, and urea formaldehyde foam insulation, and will notify Mortgagee of any
release of hazardous materials at, upon, under, or within the Premises or the
Improvements thereon involving Mortgagor, or of the presence of asbestos or
asbestos-containing materials PCB's, radon gas, or urea formaldehyde foam
insulation at the Premises or on or within the Improvements thereon, or of the
receipt by Mortgagor of any notice from any governmental agency or authority or
from any tenant or other occupant or from any other person with respect to any
alleged such release or presence, promptly upon discovery of such release or
presence or receipt of such notice, and will send Mortgagee copies of all
results of tests of underground storage tanks at the Premises; and
(c) Notwithstanding the provisions in this Mortgage or in the Note
of any debt instrument, which this Mortgage secures, limiting or negating
Mortgagor's and/or its general partner's personal liability, Mortgagor and its
general partner do hereby indemnify and agree to hold Mortgagee harmless from
and against any and all liability, loss, cost, damage, and expense, including
attorneys' fees, suffered or incurred by Mortgagee in connection with
Mortgagee's loan to Mortgagor of the indebtedness secured hereby, at any time,
whether before, during or after enforcement of its rights and remedies upon
default, on account of any release of hazardous materials at, upon, under, or
within the Premises or the Improvements thereon, or resulting from the presence
of asbestos or asbestos-containing materials, PCB's, radon gas, or urea
formaldehyde foam insulation at the Premises or the Improvements thereon,
including with respect to (i) the imposition by any Governmental Authority of
any lien or so-called "super priority lien" upon the Premises or the
Improvements thereon, (ii) clean-up cost, (iii) liability for personal injury or
property damage or damage to the environment, and (iv) fines, penalties, and
punitive damages.
(d) At any time while the indebtedness secured hereby is
outstanding, Mortgagee may (but will not be obliged to) enter the Premises and
the Improvements thereon to make reasonable inspections of its condition,
including but not limited to soil and groundwater sampling and monitoring, and
including but not limited to inspections for hazardous waste, asbestos or
asbestos-containing materials, PCB's, radon gas, and/or urea formaldehyde foam
insulation. Mortgagor warrants and represents that all of the answers on the
Environmental Certificate furnished Mortgagee in the application for the loan of
the indebtedness secured hereby are true and complete. Mortgagor covenants that
it will notify Mortgagee in writing immediately upon learning that any of the
answers on the said Environmental Certificate either were not true when made or
are no longer true; and, upon the occurrence of any event which causes any of
the answers on the said Environmental Certificate to be no longer true, or upon
Mortgagee's learning that any of the answers on the Environmental Certificate
were not true when made, if the change is in Mortgagee's sole determination
adverse, the same shall constitute a default under this Mortgage, giving
Mortgagee all the rights and remedies available to it upon an Event of Default
by Mortgagor hereunder.
1.21 Condominium or Cooperative. Mortgagor represents, warrants and
covenants that it shall not file a declaration of condominium, map or any other
document having the effect of subjecting any of the Mortgaged Property to the
condominium or cooperative form of ownership.
1.22 Subsequent Fees. Mortgagor agrees that Mortgagee may charge
administrative fees and be reimbursed for all costs and expenses, including
attorneys' fees, associated with reviewing and processing any requests by
Mortgagor concerning the Mortgaged Property, the Secured Indebtedness or any
interest of Mortgagee therein, including, without limitation, any request for
Mortgagee's written approval or consent with respect thereto.
1.23 Disclosure. Mortgagor hereby represents and warrants that it has
fully disclosed to Mortgagee all facts material to the Mortgaged Property, the
Secured Indebtedness, any guarantor of the Secured Indebtedness, the Mortgagor
and the Mortgagor's business operations, and any misrepresentation or breach of
any warranty by Mortgagor in any loan commitment executed by Mortgagor in
connection with the Secured Indebtedness shall constitute an Event of Default
hereunder.
ARTICLE II
EVENTS OF DEFAULT
The following shall constitute events of default ("Events of Default")
hereunder:
2.01 Failure to Make Payment. The failure to make any payment of interest
on the Note, or to make any payment of an installment of principal, when and as
the same shall become due and payable, or the failure to make any other payments
required under the Note, when and as the same shall become due and payable,
whether at maturity or by acceleration or as part of any prepayment or
otherwise, in each case, as is provided in the Note and in this Mortgage, or the
failure to make the payment of any insurance premium, tax or payment required by
Sections 1.04 and 1.06(a) and (b) to be paid, or the failure to make the
deposits required by Section 1.06(c).
2.02 Non Performance of Covenants and Obligations. A default by Mortgagor
in the due, prompt, and complete observance and performance of any obligation,
covenant or agreement contained in this Mortgage (other than those described in
Section 2.01 above).
2.03 Cross Default. A default by Mortgagor in the due, prompt and
complete observance and performance of the provisions of any other debt or
security instrument or agreement executed by Mortgagor with respect to the
Secured Indebtedness, including without limitation any loan application or
agreement.
2.04 Appointment of a Receiver. The appointment pursuant to an order of a
court of competent jurisdiction of a trustee, receiver or liquidator of
Mortgagor or of the Mortgaged Property or any part thereof, and such receiver
shall not have been discharged within 60 consecutive days after his or her
appointment.
2.05 Voluntary Bankruptcy. The filing by Mortgagor of a petition in
bankruptcy or a petition for an arrangement or a reorganization pursuant to the
Bankruptcy Code or any similar law, federal or state, or the adjudication of
Mortgagor as a bankrupt or as insolvent by a decree of a court of competent
jurisdiction, or the making of an assignment for the benefit of creditors, or
the admission by Mortgagor in writing of its inability to pay its debts
generally as they become due, or the giving of consent by Mortgagor to the
appointment of a receiver or receivers of all or any part of its property.
2.06 Involuntary Bankruptcy. The filing by any of the creditors of
Mortgagor of a petition in bankruptcy against Mortgagor or a petition for
reorganization of Mortgagor pursuant to the Bankruptcy Code or any similar law,
federal or state and said petition shall not be dismissed within sixty (60)
consecutive days after filing.
2.07 Mortgage Tax. The imposition of a tax, other than a state or federal
income tax, on or payable by Mortgagee by reason of its ownership of the Note or
this Mortgage, and Mortgagor has not paid said tax, or it would be illegal for
Mortgagor to pay said tax, or if the payment of said tax by Mortgagor would
result in the violation of any applicable usury laws.
2.08 Sale of Mortgaged Property. Subject to the provisions of section 4.08
below, the sale, transfer or conveyance by Mortgagor of all or any portion of
the Mortgaged Property, without the written consent of Mortgagee, whether such
sale is voluntary or by operation of law.
ARTICLE III
REMEDIES
Upon the occurrence of any Event of Default, Mortgagee has the following
rights and remedies:
3.01 Acceleration. Mortgagee may declare the entire principal of the Note
then outstanding (if not then due and payable), and accrued but unpaid interest
thereon, to be due and payable immediately, and notwithstanding the stated
maturity in the Note or any other term or provision of the Note or this Mortgage
to the contrary, the principal amount of the Note and the accrued but unpaid
interest thereon shall become and be immediately due and payable, and to the
extent permitted by law, Mortgagee shall be entitled to receive in addition to
all other sums secured or due hereunder, a Default and Acceleration Prepayment
Premium computed in accord with the formula contained in Section 3.18 below.
3.02 Right of Mortgagee to Possession. Irrespective of whether Mortgagee
exercises the option provided in Section 3.01 above, Mortgagee in person or by
agent may, without any obligation hereunder: (i) make any payment or do any act
which Mortgagor has failed to make or do; (ii) enter upon, take possession of,
manage and operate the Mortgaged Property or any part thereof; (iii) make or
enforce, or if the same be subject to modification or cancellation, modify or
cancel leases upon such terms or conditions as Mortgagee deems proper; (iv)
obtain and evict tenants, and fix or modify rents, make repairs and alterations
and do any acts which Mortgagee deems proper to protect the security hereof; and
(v) with or without taking possession, in its own name or in the name of the
Mortgagor, sue for or otherwise collect and receive rents, royalties, issues,
profits, revenue, income and other benefits, including those past due and
unpaid, and apply the same less costs and expenses of operation and collection,
including reasonable attorneys' fees, upon any indebtedness secured hereby, and
in such order as Mortgagee may determine. Upon request of Mortgagee, Mortgagor
shall assemble and make available to Mortgagee at the Premises any of the
Mortgaged Property which has been removed therefrom. The entering upon and
taking possession of the Mortgaged Property, the collection of any rents,
royalties, issues, profits, revenue, income or other benefits and the
application thereof as aforesaid shall not cure or waive any default theretofore
or thereafter occurring or affect any notice of default hereunder or invalidate
any act done pursuant to any such notice; and, notwithstanding continuance in
possession of the Mortgaged Property, or any part thereof, by Mortgagee, or a
receiver, and the collection, receipt and application of rents, royalties,
issues, profits, revenue, income or other benefits, Mortgagee shall be entitled
to exercise every right provided for in this Mortgage or by law upon or after
the occurrence of a default, including the right to exercise the power of sale.
Any of the actions referred to in this Section 3.02 may be taken by Mortgagee,
either in person or by agent, with or without bringing any action or proceeding,
or by receiver appointed by a court, and any such action may also be taken
irrespective of whether any notice of default or election to sell has been given
hereunder and without regard to the adequacy of the security for the
indebtedness hereby secured. Further, Mortgagee, at the expense of Mortgagor,
either by purchase, repair or construction, may from time to time maintain and
restore the Mortgaged Property or any part thereof and complete construction of
the Improvements uncompleted as of the date thereof and in the course of such
completion may make such changes in the contemplated Improvements as Mortgagee
may deem desirable and may insure the same.
3.03 Application for Appointment of a Receiver. Mortgagee shall be
entitled, without notice and to the full extent provided by law, to the
appointment by a court having jurisdiction of a receiver to take possession of
and protect the Mortgaged Property or any part thereof, and operate the same and
collect the Rents and Profits.
3.04 Judicial Foreclosure. Mortgagee may bring an action in any court of
competent jurisdiction to foreclose this Mortgage or to enforce any of the
covenants and agreements hereof.
3.05 Foreclosure; Sale Under the Power. Mortgagee may elect to cause the
Mortgaged Property or any part thereof to be sold as follows:
(a) Mortgagee may proceed as if all of the Mortgaged Property were real
property in accordance with subparagraph (d) below, or Mortgagee may elect to
treat any of the Mortgaged Property which consists of a right in action or which
is property that can be severed from the Premises or the Improvements without
causing structural damage thereto as if the same were personal property, and
dispose of the same in accordance with subparagraph (c) below, separate and
apart from the sale of real property, the remainder of the Mortgaged Property
being treated as real property.
(b) Mortgagee may cause any such sale or other disposition to be
conducted immediately following the acceleration of the indebtedness hereby
secured (or immediately upon the expiration of any redemption or reinstatement
period required by law) or Mortgagee may delay any such sale or other
disposition for such period of time as Mortgagee deems to be in its best
interest. Should Mortgagee desire that more than one (1) such sale or other
disposition be conducted, Mortgagee may, at its option, cause the same to be
conducted simultaneously, or successively, on the same day, or on such different
days or times and in such order as Mortgagee may deem to be in its best
interest.
(c) Should Mortgagee elect to cause any of the Mortgaged Property to be
disposed of as personal property as permitted by subparagraph (a) above, it may
dispose of any part thereof in any manner now or hereafter permitted by the
Uniform Commercial Code of the State of Alabama or in accordance with any other
remedy provided by law. Any such disposition may be conducted by an employee or
agent of Mortgagee. Both Mortgagor and Mortgagee shall be eligible to
purchase any part or all of such property at any such disposition. Any such
disposition may be either public or private as Mortgagee may elect, subject to
the provisions of the Uniform Commercial Code of the State of Alabama.
Mortgagee shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code of the State of Alabama. Expenses of retaking, holding,
preparing for sale, selling or the like shall include Mortgagee's reasonable
attorneys' fees and legal expenses, and upon such default, Mortgagor, upon
demand of Mortgagee, shall assemble such personal property and make it available
to Mortgagee at the Premises, a place which is hereby deemed reasonably
convenient to Mortgagee and Mortgagor.
(d) Should Mortgagee elect to sell the Mortgaged Property or any part
thereof which is real property or which Mortgagee has elected to treat as real
property, upon such election, Mortgagee shall give such notice of default and
election to sell as may then be required by law. Thereafter, upon the
expiration of such time and the giving of such notice of sale as may then be
required by law, and without the necessity of any demand on Mortgagor,
Mortgagee, at the time and place specified in the notice of sale, shall sell the
Mortgaged Property or any portion thereof specified by Mortgagee, at public
auction to the highest bidder for cash in lawful money of the United States,
subject, however, to the provisions of Section 3.07 hereinbelow. Mortgagee may
from time to time postpone the sale by public announcement thereof at the time
and place noticed therefor. Any person, including Mortgagor or Mortgagee, may
purchase at the sale. Upon any sale, Mortgagee shall execute and deliver to the
purchaser or purchasers a deed or deeds conveying the property so sold, but
without any covenant or warranty whatsoever, express or implied, whereupon such
purchaser or purchasers shall be let into immediate possession.
(e) In the event of a sale or other disposition of the Mortgaged
Property, or any part thereof, and the execution of a deed or other conveyance
or assignment pursuant thereto, the recitals therein of facts, such as default,
the giving of notice of default and notice of sale, demand that such sale should
be made, postponement of sale, terms of sale, sale, purchase, payment of
purchase money and other facts affecting the regularity or validity of such sale
or disposition, shall be conclusive proof of the truth of such facts; and any
such deed or other conveyance or assignment shall be conclusive against all
persons as to such facts recited therein.
(f) The acknowledgment of the receipt of the purchase money, contained in
any deed or other conveyance or assignment executed as aforesaid, shall be
sufficient discharge to the grantee or transferee of all obligations to see to
the proper application of the consideration therefor as hereinafter provided.
The purchaser at any trustee's or foreclosure sale hereunder may disaffirm any
easement granted or rental or service, management or lease contract made in
violation of any provision of this Mortgage and may take immediate possession of
the Mortgaged Property free from, and despite the terms of, such grant of
easement or rental or service, management or lease contract.
(g) Upon the completion of any sale or sales made by Mortgagee, under or
by virtue of this Article III, Mortgagee or any officer of any court empowered
to do so, shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold. Mortgagee is hereby appointed irrevocably the true
and lawful attorney-in-fact of Mortgagor in its name and stead to make all
necessary conveyances, assignments, transfers and deliveries of the Mortgaged
Property or any part thereof and the rights so sold and for that purpose
Mortgagee may execute all necessary instruments of conveyance, assignment and
transfer, and may substitute one or more persons with like power, Mortgagor
hereby ratifying and confirming all that its said attorney or any substitute or
substitutes shall lawfully do by virtue hereof. Nevertheless, Mortgagor, if so
requested by Mortgagee, shall ratify and confirm any such sale or sales by
executing and delivering to Mortgagee or to such purchaser or purchasers all
such instruments as may be advisable in the judgment of Mortgagee, for the
purposes as may be designated in such request. Any such sale or sales made
under or by virtue of this Article III, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale, shall operate to divest all of the estate,
right, title, interest, claim and demand whatsoever, whether at law or in
equity, of Mortgagor in and to the properties and rights so sold, and shall be a
perpetual bar, both at law and in equity, against Mortgagor and any and all
persons claiming or who may claim the same, or any part thereof, from, through
or under Mortgagor; subject, however, to any right of redemption that may be
available to Mortgagee under applicable law to the extent such right of
redemption may not be waived, extinguished or barred by the provisions of this
Mortgage.
(h) Mortgagor hereby expressly waives any right which it may have to
direct the order in which any of the Mortgaged Property shall be sold in the
event of any sale or sales pursuant hereto.
(i) All such sales, contemplated hereunder, if conducted under the powers
granted herein, shall be held at the front door of the courthouse in the county
where the Mortgaged Property is located. If the same be a sale of real property
then, as to such real property, notice shall be deemed sufficient if the time,
place and terms of such sale be contained in a notice published in a newspaper
of general circulation in the county where the Mortgaged Property is located,
such notice to appear by publication once a week for three consecutive weeks
prior to said sale.
3.06 Proceeds of Sale. The purchase money, proceeds or avails of any sale
made under or by virtue of this Article III, together with all other sums which
may then be held by Mortgagee under this Mortgage, whether under the provisions
of this Article III, or otherwise, shall be applied as follows:
FIRST: To the payment of the costs and expenses of the sale, including
reasonable compensation to Mortgagee, its agent and counsel, and of any judicial
proceedings wherein the same may be made and to the payment of all expenses,
liabilities and advances made or incurred by Mortgagee under this Mortgage,
together with interest at the rate specified in the Note on all advances made by
Mortgagee and all taxes or assessments, except for any taxes, assessments or
other charges subject to which the Mortgaged Property shall have been sold, and
further including all costs of publishing, recording, mailing and posting
notice, the cost of any search and/or other evidence of title procured in
connection therewith and the cost of any revenue stamps on or recording of any
deed of conveyance.
SECOND: To the payment of any and all sums expended under the terms
hereof, not then repaid with accrued interest at the Default Interest Rate and
all other sums required to be paid by Mortgagor pursuant to any provision of
this Mortgage, of the Note or of any loan agreement executed by Mortgagor in
connection with the Secured Indebtedness, including without limitation all
expenses, liabilities and advances made or incurred by Mortgagee under this
Mortgage or in connection with the enforcement hereof, together with interest at
the Default Interest Rate on all advances.
THIRD: To the payment of the principal and interest then due, owing and
unpaid upon the Note, together with interest on the unpaid principal at the
Default Interest Rate from the due date of any such payment of principal until
the same is paid, and the Default and Acceleration Prepayment Premium provided
in section 3.01 above.
FOURTH: The remainder, if any, to the person or persons legally entitled
thereto.
3.07 Right of Mortgagee to Bid. Upon any sale or sales made under or by
virtue of this Article III, whether made under the power of sale herein granted
or under or by virtue of judicial proceedings or of a judgment or decree of
foreclosure and sale, Mortgagee may bid for and acquire the Mortgaged Property
or any part thereof and, in lieu of paying cash therefor, may make settlement
for the purchase price by crediting upon the indebtedness or other sums secured
by this Mortgage the net sales price after deducting therefrom the expenses of
sale and the costs of the judicial proceedings, if any, and any other sums which
Mortgagee is authorized to deduct under this Mortgage, and, in such event, this
Mortgage, the Note and documents evidencing expenditures secured hereby shall be
presented to the person or persons conducting the sale in order that the amount
so used or applied may be credited upon said indebtedness as having been paid.
3.08 Acceleration of Indebtedness and Rights of Mortgagee to Collect.
(a) Upon the occurrence of any Event of Default and upon written demand
by Mortgagee, Mortgagor will pay to Mortgagee the entire principal of the Note
then outstanding, and all accrued and unpaid interest thereon, and, after the
happening of said Event of Default, will also pay to Mortgagee interest at the
Default Interest Rate specified in the Note on the then unpaid balance of the
Note, and Mortgagor will further pay the sums required to be paid by Mortgagor
pursuant to any provision of this Mortgage, and in addition thereto such further
amount as shall be sufficient to cover the costs and expenses of collection,
including reasonable compensation to Mortgagee hereunder. Additionally, and to
the extent permitted by law, Mortgagee shall be entitled to receive in addition
to all other sums secured or due hereunder, the Default and Acceleration
Prepayment Premium as described in Section 3.01 above and 3.18 below.
In the event Mortgagor shall fail forthwith to pay such amounts upon such
demand, Mortgagee shall be entitled and empowered to institute such action or
proceedings at law or in equity as may be advised by its counsel for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgment or
final decree against Mortgagor and collect, out of the Mortgaged Property, in
any manner provided by law, moneys adjudged or decreed to be payable.
(b) Mortgagee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement of
the provisions of this Mortgage, and the right of Mortgagee to recover such
judgment shall not be affected by any entry or sale hereunder, or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this Mortgage, or the foreclosure of the lien hereof. In case of
proceedings against Mortgagor in insolvency or bankruptcy or any proceedings for
its reorganization or involving the liquidation of its assets, Mortgagee shall
be entitled to prove the whole amount of principal and interest due upon the
Note to the full amount thereof, and all other payments, charges and costs due
under this Mortgage, without deducting therefrom any proceeds obtained from the
sale of the whole or any part of the Mortgaged Property; provided, however, that
in no case shall Mortgagee receive a greater amount than such principal and
interest and such other payments, charges and costs from the aggregate amount of
the proceeds of the sale of the Mortgaged Property and the distribution from the
estate of Mortgagor.
(c) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Mortgaged Property or upon any other property or
Mortgagor shall affect, in any manner or to any extent, the lien of this
Mortgage upon the Mortgaged Property or any part thereof, or any liens, rights,
powers or remedies of Mortgagee hereunder, but such liens, rights, powers and
remedies of Mortgagee shall continue unimpaired as before.
(d) Any moneys thus collected by Mortgagee under this Section 3.08 shall
be applied by Mortgagee in accordance with the provisions of Section 3.06
above.
3.09 Right to the Appointment of a Receiver. After an Event of Default
and upon the commencement of any action, suit or other legal proceeding by
Mortgagee to obtain judgment for the principal of, or interest on, the Note and
other sums required to be paid by Mortgagor pursuant to any provision of this
Mortgage, or of any other nature in aid of the enforcement of the Note or of
this Mortgage, Mortgagor, to the fullest extent permitted by law, will and does
hereby, if required by Mortgagee, consent to the appointment of a receiver or
receivers of the Mortgaged Property, including without limitation the Premises
and Rents and Profits. After the happening of any Event of Default, or upon the
commencement of any proceedings to foreclose this Mortgage or to enforce the
specific performance hereof or in aid thereof or upon the commencement of any
other judicial proceedings to enforce any right of Mortgagee, Mortgagee shall be
entitled forthwith, as a matter of right, if it shall so elect, without the
giving of notice to any other party and without regard to the adequacy of the
security of the Mortgaged Property, either before or after declaring the unpaid
principal of the Note to be due and payable, to the appointment of such a
receiver or receivers.
3.10 Right of Mortgagee to Exclusive Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of Mortgagor, or of any of
its property, or of the Mortgaged Property or any part thereof, Mortgagee shall
be entitled to obtain possession, following an Event of Default hereunder, upon
demand, of all property now or hereafter held under this Mortgage, including,
but not limited to, the Rents and Profits.
3.11 Remedies Cumulative. No remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other remedy given herein or by law
provided, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute. No delay or omission of Mortgagee to exercise any right or power
accruing upon any Event of Default shall impair any right or power or shall be
construed to be a waiver of any Event of Default or any acquiescence therein;
and every power and remedy given by this Mortgage to Mortgagee may be exercised
from time to time as often as may be deemed expedient by Mortgagee. If there
exists additional security for the performance of the obligations secured
hereby, the holder of the Note, at its sole option, and without limiting or
affecting any of the rights or remedies hereunder, may exercise any of the
rights and remedies to which it may be entitled hereunder either concurrently
with whatever rights it may have in connection with such other security or in
such order as it may determine. Nothing in this Mortgage or in the Note shall
affect the obligation of Mortgagor to pay the principal of, and interest on, the
Note in the manner and at the time and place therein respectively expressed.
3.12 Relinquishment of Rights. To the fullest extent permitted by
applicable law, Mortgagor will not at any time insist upon, or plead, or in any
manner whatever claim or take any benefit or advantage of any stay or extension
or moratorium law or law pertaining to the marshaling of assets, the
administration of estates of decedents, any exemption from execution or sale of
the Mortgaged Property or any part thereof, including exemption of homestead,
wherever enacted, now or at any time hereafter in force, which may affect the
covenants and terms of performance of this Mortgage, nor claim, take or insist
upon any benefit or advantage of any law now or hereafter in force providing for
the valuation or appraisal of the Mortgaged Property, or for any part thereof,
prior to any sale or sales thereof which may be made pursuant to any provision
herein, or pursuant to the decree, judgment or order of any court of competent
jurisdiction; nor after any such sale or sales, claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the property so sold
or any part thereof, and Mortgagor hereby expressly waives all benefit or
advantage of any such law or laws, and covenants not to hinder, delay or impede
the execution of any power herein granted or delegated to Mortgagee, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. Mortgagor, for itself and all who claim under it, hereby
waives, to the extent that it lawfully may, all right to have the Mortgaged
Property marshaled upon any sale or foreclosure hereunder.
3.13 Surrender of Possession. Upon the occurrence of any Event of Default
and pending the exercise by Mortgagee or its agents or attorneys of their right
to exclude Mortgagor from all or any part of the Mortgaged Property, Mortgagor
agrees, upon demand by Mortgagee, to vacate and surrender possession of the
Mortgaged Property to Mortgagee, or to a receiver, if any, and in default
thereof may be evicted by any summary action or proceeding for the recovery of
possession of leased premises for non-payment of rent, however designated.
3.14 Successors in Interest. In the event ownership of the Mortgaged
Property or any portion thereof becomes vested in a person other than the
Mortgagor herein named, Mortgagee may, without notice to the Mortgagor herein
named, regardless of whether or not Mortgagee has given written consent to such
change in ownership, deal with such successor or successors in interest with
reference to this Mortgage and the indebtedness secured hereby, and in the same
manner as with the Mortgagor herein named, without in any way vitiating or
discharging Mortgagor's liability hereunder or for the indebtedness hereby
secured.
3.15 Successors to Surrender Possession. In the event that there be a
foreclosure sale hereunder and if at the time of such sale Mortgagor, or its
successors, heirs, executors, administrators, or assigns, be occupying the
Premises and Improvements or any part thereof so sold, each and all shall
immediately become the tenant of the purchaser at such sale, which tenancy shall
be a tenancy from day to day, terminable at the will of either tenant or
landlord, at a reasonable rental per day based upon the value of the Premises
and Improvements, such rental to be due daily to the purchaser. An action of
unlawful detainer shall lie if the tenant holds over after a demand in writing
for possession of said Premises and Improvements; and this agreement and the
Mortgagee's deed shall constitute a lease and agreement under which any such
tenant's possession arose and continued.
3.16 Right to Enter and Inspect. Upon the Mortgagee's declaration,
pursuant to this Article III, that the entire indebtedness secured hereby is due
and payable, and so long as an Event of Default upon which such declaration is
based shall exist, the Mortgagee shall have the right to enter the Premises and
make such tests or examinations of the Premises or the Improvements thereon as
it determines reasonable, including, but not limited to, tests for the presence
of environmental contamination. All costs incurred by the Mortgagee in making
such tests or examinations, together with interest thereon at the Default
Interest Rate of 14.875% per annum, shall be immediately due and payable by the
Mortgagor to the Mortgagee, and until paid shall be added to and become a part
of the principal debt secured hereby, and the same may be collected as a part of
said principal debt in any suit hereon or upon the Note.
3.17 Costs of Litigation. That if any action or proceeding be commenced,
excepting an action to foreclose this Mortgage or to collect the debt hereby
secured, to which action or proceeding the holder of this Mortgage is made a
party by reason of the execution of this Mortgage or the Note which it secures,
or in which it becomes necessary to defend the lien of this Mortgage, all sums
paid by the Mortgagee for the expense of any litigation to prosecute, defend or
uphold the rights and lien created hereby, shall be paid by the Mortgagor,
together with interest thereon from date of payment at the Default Interest Rate
of 14.875% per annum, and any such sum and the interest thereon shall be
immediately due and payable and be secured hereby, having the benefit of the
lien hereby created, as a part thereof, and of its priority.
3.18 Default and Acceleration Prepayment Premium.
Mortgagor acknowledges that the Mortgagee has extended the credit secured
hereunder on the basis and assumption that Mortgagee would receive the payments
of principal and interest set forth in the Note for its full term. Therefore,
whenever the maturity of the Note has been accelerated by reason of a default
under this Mortgage, the Note or any other loan agreement executed by Mortgagor
in connection with the Secured Indebtedness, which default occurs prior to the
time period, if any, in which prepayment is allowed and prior to the date on
which the full amount of the balance of principal and interest then remaining
unpaid shall be due, including an acceleration by reason of sale, conveyance,
further encumbrance or other default (which acceleration shall be at Mortgagee's
sole option), there shall be due, in addition to the outstanding principal
balance, accrued interest and other sums due under the loan documents, a premium
equal to the greater of:
(a) The sum obtained by multiplying the then outstanding principal
balance due under the Note by the difference obtained by subtracting the yield
rate on publicly traded United States Treasury Securities (as published in the
Wall Street Journal or other business publication of general circulation five
business days prior to the date of said payment) having the closest matching
maturity date to the maturity date of the Note from the interest rate on the
Note adjusted to its semi-annual equivalent rate (8.005%), times the number of
scheduled monthly payments remaining under the Note term, divided by twelve; or
(b) An amount equal to 10% of the then outstanding principal balance due
under the Note.
In the event default occurs on or after the date on which prepayment is
permitted, then in lieu of the above premium, payment of a premium calculated in
the manner set forth in section 4.10 below shall be required.
In the event that the yield rate on publicly traded United States Treasury
Securities is not obtainable then the nearest equivalent issue or index shall be
selected, at Mortgagee's reasonable determination, and used to calculate the
prepayment premium.
A tender of the amount necessary to satisfy the entire indebtedness secured
hereby, paid at any time following such default or acceleration, including at a
foreclosure sale, shall be deemed a voluntary prepayment, and, at Mortgagee's
option, such payment shall include a premium as described above.
ARTICLE IV
MISCELLANEOUS
4.01 Severability. In the event any one or more of the provisions
contained in this Mortgage or in the Note shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Mortgage, but this
Mortgage shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein or therein.
4.02 Usury. All agreements between Mortgagor and Mortgagee are expressly
limited so that in no contingency or event whatsoever whether by reason of
advancement of the principal amount of the Note, acceleration of maturity of the
unpaid principal balance thereof, or otherwise, or advancement of any sums under
the provisions of this Mortgage shall the amount paid or agreed to be paid to
the holder of the Note for the use, forebearance or detention of the money to be
advanced thereunder or hereunder exceed the highest lawful rate permissible.
If, from any circumstances whatsoever, fulfillment of any provision of this
Mortgage or the Note or any other agreement referred to herein, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law which a court of competent jurisdiction may deem
applicable thereto or hereto, then, ipso facto, the obligations to be fulfilled
shall be reduced to the limit of such validity, and if from any circumstance the
holder of the Note or Mortgage shall ever receive as interest an amount which
would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance due
hereunder and not to the payment of interest or, if such excessive interest
exceeds the unpaid principal balance due hereunder, the excess shall be refunded
to Mortgagor or its heirs, successors or assigns. This provision shall control
every other provision of all agreements between Mortgagor and Mortgagee.
4.03. Notices. All written notices expressly provided hereunder to be
given by Mortgagee to Mortgagor and all notices and demands of any kind or
nature whatsoever which Mortgagor may be required or may desire to give to or
serve on Mortgagee shall be in writing and shall be served by registered or
certified mail. Any such notice or demand so served by registered or certified
mail shall be deposited in the United States mail, with postage thereon fully
prepaid and addressed to the party so to be served at its address stated on the
cover of this Mortgage, or at such other address of which it shall have
notified, in writing, the person charged with giving such notice. Service of
any such notice or demand so made shall be deemed completed on the day of actual
delivery as shown by the addressee's registry or certification receipt or on the
expiration of the third day after the date of mailing, whichever is earlier in
time.
4.04 Notice of Foreclosure. Mortgagor hereby requests that a copy of any
notice of default and notice of sale as may be required by law be mailed to it
at its address herein contained.
4.05 Non Waiver. The granting of consent by Mortgagee to any transaction
as required by the terms hereunder shall not be deemed a waiver of the right to
require consent to future or successive transactions.
4.06 Covenants to Run with Land. All of the grants, obligations,
covenants, agreements, terms, provisions and conditions herein shall run with
the land and shall apply to, bind and inure to the benefit of the heirs,
personal representatives, successors and assigns of Mortgagor, and the
endorsees, transferees, successors and assigns of Mortgagee. In the event
Mortgagor is composed of more than one party, the obligations, covenants,
agreements and warranties contained herein as well as the obligations arising
therefrom are and shall be joint and several as to each such party. Time is of
the essence in the performance of all obligations of Mortgagor hereunder.
4.07 Governing Law. This Mortgage, Assignment of Rents and Security
Agreement is executed and delivered in, and its terms and provisions are to be
governed by, the laws of the State of Alabama.
4.08 Transfer of the Property; Due on Sale. If all or any part of the
Mortgaged Property or any interest therein is sold or transferred by Mortgagor
whether voluntarily or by operation of law, without Mortgagee's prior written
consent, or if Mortgagor enters into a contract for sale of all or any part of
the Mortgaged Property without Mortgagee's prior written consent, then Mortgagee
may, at Mortgagee's option, declare all of the sums secured by this Mortgage to
be immediately due and payable and accelerate the indebtedness secured
hereunder, in which instance Mortgagee shall be entitled to receive in addition
to all other sums due hereunder the Default and Acceleration Prepayment Premium
computed as provided in Section 3.18 above; provided, however, that the
Mortgagor may transfer all or a portion of the Mortgaged Property one time
during the term of this Mortgage, subject to the right of Mortgagee to approve
the proposed purchaser's financial capacity, credit-worthiness, proven ability
to manage property of the type and nature of the Mortgaged Property, and the
proposed purchaser's general reputation in the community, if each of the
following conditions have been satisfied:
(a) There is no default under this Mortgage, the Note or any other loan
agreement executed by Mortgagor in connection with the Secured Indebtedness.
(b) There is no junior financing in connection with the transfer of the
Mortgaged Property or any portion thereof.
(c) Mortgagee receives a written request for approval from the Mortgagor
at least sixty (60) days prior to the proposed transfer (including a description
of the proposed terms of the transfer), together with a diagram showing the
structure of the proposed purchaser entity and all of its constituent entities
after the contemplated transfer and a list of the names, types of interests and
ownership percentages of all persons to have an ownership interest in the
purchaser entity or any constituent entity, financial statements for all such
entities and an administrative fee of $5,000.00 which shall be deemed fully
earned on the date of receipt and shall be retained by Mortgagee regardless of
whether or not the transfer occurs and whether or not approval is given.
(d) The proposed purchaser executes and delivers to Mortgagee an
assumption agreement, a separate environmental indemnity agreement, and such
other documentation as Mortgagee may require, in form and substance satisfactory
to Mortgagee, provided such documents shall be in substantially the same form as
the comparable documents executed by Mortgagor in connection with the Secured
Indebtedness.
(e) Mortgagee and its counsel receives certification from Mortgagor and
the proposed purchaser that the proposed terms of the transfer described in
subparagraph (c) above are the actual terms of the transfer, evidence of
casualty insurance, all corporate, partnership or other entity documents,
certificates, legal opinions, title materials and other documents which
Mortgagee may require, all in form and substance satisfactory to Mortgagee, at
least thirty (30) days prior to the proposed transfer.
(f) Mortgagee be provided satisfactory evidence concerning the effect of
any change in the real estate taxes to result from the sale and the effect of
such change on the ability of the Mortgaged Property to generate a cash flow
sufficient to pay the debt service on the indebtedness secured hereby and to
maintain a debt service coverage ratio satisfactory to Mortgagee.
(g) Mortgagee be provided with evidence that there are no sovereign
immunity issues with respect to the proposed purchaser.
(h) Mortgagee receives a transfer fee of one percent (1%) of the then
outstanding Note balance payable at or prior to the closing of the sale of any
portion of the Mortgaged Property (against which the administrative fee
specified in subparagraph (c) above shall be credited), provided this transfer
fee shall not be imposed on a transfer to an entity controlled by any affiliate
of Insignia Financial Group, Inc.
(i) Mortgagee is provided with a title insurance policy or endorsement in
form and substance from a company satisfactory to Mortgagee and with a copy of
the recorded deed promptly after transfer.
(j) All fees and costs in connection with the transaction, including
without limitation, Mortgagee's attorneys' fees, shall be paid by the Mortgagor.
A request for such approval must be submitted in writing to Mortgagee
together with all information reasonably required by Mortgagee to make the
determination as to the approval. Notwithstanding the approved sale and
transfer of any of the Mortgaged Property, all other terms and conditions of the
Note, Mortgage and other loan agreements between Mortgagor and Mortgagee shall
remain in effect.
To the extent permitted by law, should Mortgagee exercise its option to
accelerate because of an unapproved transfer as described herein, the Mortgagee
shall be entitled to receive from Mortgagor and Mortgagor shall pay to
Mortgagee, in addition to all of the sums secured by this Mortgage or due
hereunder, a premium payment equal to ten per cent (10%) of the amount of the
outstanding principal balance of the Note at the time of such acceleration.
4.09 Captions. The captions or headings at the beginning of each Section
hereof are for the convenience of the parties and not a part of the Mortgage.
4.10 Prepayment Privilege. Except as provided hereinbelow, Mortgagee may
not prepay the indebtedness secured hereby in whole or in part.
On or after the commencement date of the 4th Loan Year, and subject to
giving Mortgagee not less than thirty (30) nor more than ninety (90) days' prior
written notice, Mortgagor may prepay the principal amount together with any and
all accrued interest and other sums due which are secured hereunder and subject
to payment of a prepayment premium equal to the greater of:
(a) The sum obtained by multiplying the then outstanding principal
balance due by the difference obtained by subtracting the yield rate on publicly
traded United States Treasury Securities (as published in the Wall Street
Journal or other business publication of general circulation five business days
prior to the date of said payment) having the closest matching maturity date to
the maturity date of the Note from the interest rate on the Note adjusted to its
semi-annual equivalent rate (8.005%), times the number of scheduled monthly
payments remaining under the Note term, divided by twelve; or
(b) An amount equal to 1% of the then outstanding principal balance due
under the Note.
In the event that the yield rate on publicly traded United States Treasury
Securities is not obtainable, then the nearest equivalent issue or index shall
be selected, at Mortgagee's reasonable determination, and used to calculate the
prepayment premium.
No partial prepayment shall be allowed.
The Loan Year is defined as any twelve month period commencing with the
date on which the first monthly installment is due under the Note or any
anniversary thereof.
Notwithstanding anything contained in this provision of this Mortgage, the
indebtedness secured hereby shall be open to prepayment without a prepayment
premium during the last ninety (90) days of the term of the Note, provided
Mortgagor gives the Mortgagee not less than thirty (30) nor more than ninety
(90) days' prior written notice of its intent to prepay such indebtedness, and
provided that such prepayment is made in full, as no partial prepayment shall be
allowed.
4.11. Exculpation. Notwithstanding anything in this Mortgage, the Note or
any other security instrument securing the Note, in order to affirm the absence
of personal liability on the part of Mortgagor, Mortgagee agrees that in any
action brought to enforce the obligation of Mortgagor to pay or perform any
indebtedness or obligation created or arising under the Note or this Mortgage,
the judgment or decree shall be enforceable against Mortgagor only to the extent
of the joint and several interests of Mortgagor in the Mortgaged Property, and
any such judgment shall not be subject to execution on, nor be a lien on, assets
of Mortgagor other than the joint and several interests in the Mortgaged
Property. The foregoing limitation of liability of the Mortgagor or its general
partner shall not apply, however, to any of the following:
(a) Fraud or misrepresentation on the part of the Mortgagor or any of its
partners, or any waste of the Mortgaged Property.
(b) Any rents, issues or profits collected more than one (1) month in
advance of their due dates.
(c) Any misapplication of proceeds, rents, issues or profits, security
deposits, and any other payments from tenants or occupancy (including, without
limitation, lease termination fees), insurance proceeds, condemnation awards, or
other sums of a similar nature.
(d) Mortgagor's or any of its partners otherwise committing any wrongful
act, the apparent purpose or intent of which is to deprive Mortgagee of any of
its security for the Secured Indebtedness.
(e) Liability under any environmental covenants, conditions, and
indemnity contained in this Mortgage and in any separate environmental indemnity
agreement executed by Mortgagor.
(f) Rents or other income not properly applied to any portion then due of
the Secured Indebtedness or the normal operating expenses incurred or accrued.
(g) Personalty or fixtures removed or allowed to be removed by or on
behalf of Mortgagor or any of its partners and not replaced by items of equal or
greater value than the personalty or fixtures so removed; however, this
provision shall not apply to those items destroyed in the ordinary course of
business or those items removed in the ordinary course of business and not
intended to deprive Mortgagee of any of its security for the Secured
Indebtedness.
(h) An amount equal to the sum of all payments made by Mortgagor to any
junior lienholders during any period in which a monetary default exists under
the Note, this Mortgage or any loan agreement executed by Mortgagor in
connection with the Secured Indebtedness.
(i) Failure to pay any taxes or assessments prior to delinquency, or to
pay charges for labor, materials or other charges which can create liens on any
portion of the Mortgaged Property and any sums expended by Mortgagee in the
performance of or compliance with the obligations of Mortgagor or any of its
partners under any loan agreement executed by Mortgagor in connection with the
Secured Indebtedness, including, without limitation, sums expended to pay taxes
or assessments or hazard insurance premiums, capital improvement expenditures,
bills for utilities or other service or products for the benefit of the
Mortgaged Property.
(j) The cost of compliance with all federal, state and local laws and
regulations, as well as the cost of investigating any action or charge
thereunder, and/or damages suffered by Mortgagee as a result of the failure of
Mortgagor or any of its partners to pay or comply with any of the foregoing.
(k) Tortious or other acts or omissions giving rise to claims against
Mortgagee, including, without limitation, claims by tenants for damages or
offsets.
(l) Attorneys' fees, court costs and other expenses incurred by Mortgagee
in connection with the Mortgagee's enforcement of Mortgagor's personal liability
as set forth herein.
In addition to the foregoing, nothing contained in this Section shall in
any manner limit the liability of Mortgagor to pay over to Mortgagee any of the
Rents and Profits or proceeds of the Mortgaged Property, if the same are
received or held by Mortgagor after Mortgagor is made aware, by written notice
from Mortgagee or otherwise, of the occurrence of an Event of Default, as
hereinbefore defined.
IN WITNESS WHEREOF, the undersigned has executed or caused this Mortgage,
Assignment of Rents and Security Agreement to be executed by its duly authorized
representative, under seal, on the day and year first hereinabove written.
BRITTANY POINT AP VIII, L.P.
a South Carolina limited partnership
By Brittany Point GP, Limited Partnership,
a South Carolina limited partnership
Its General Partner
By GP Services VI, Inc.,
a South Carolina corporation
Its General Partner
By /s/Robert D. Long, Jr. (SEAL)
Robert D. Long, Jr.
Its Controller/CAO
STATE OF
COUNTY OF
I, the undersigned, a Notary Public in and for said State and County,
hereby certify that Robert D. Long, Jr. whose name as Controller/CAO of
GP Services VI, Inc., as General Partner of Brittany Point GP, Limited
Partnership, as General Partner of Brittany Point AP VIII, L.P., is signed to
the foregoing instrument, and who is known to me, acknowledged before me on this
day that, being informed of the contents of the instrument, he, as such officer
and with full authority, executed the same voluntarily for and as the act of
said corporation.
Given under my hand and official notarial seal this day of
, 1995.
Notary Public, State of
My Commission Expires:
MORTGAGE, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
MORTGAGOR: BRITTANY POINT AP VIII, L.P.
MORTGAGEE: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
AMOUNT: $9,800,000.00
DATE: January 18 , 1996
THIS INSTRUMENT PREPARED BY:
I. DAVID CHERNIAK
JOHNSTONE, ADAMS, BAILEY, GORDON & HARRIS, L.L.C.
P.0. BOX 1988
MOBILE, AL 36633
Mortgagee's Address is:
John Hancock Mutual Life Insurance Company
Attention: Mortgage Investment Department T-53
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
Mortgagor's Address is:
Brittany Point AP VIII, L.P.
c/o Insignia Financial Group, Inc.
One Insignia Financial Plaza
P. O. Box 1089
Greenville, South Carolina 29602
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Partners VIII Limited Partnership's 1995 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000276779
<NAME> ANGELES PARTNERS VIII
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 330,146
<SECURITIES> 0
<RECEIVABLES> 11,172
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 749,524
<PP&E> 14,074,502
<DEPRECIATION> (9,172,615)
<TOTAL-ASSETS> 5,651,411
<CURRENT-LIABILITIES> 1,403,267
<BONDS> 16,795,784
0
0
<COMMON> 0
<OTHER-SE> (12,547,640)
<TOTAL-LIABILITY-AND-EQUITY> 5,651,411
<SALES> 0
<TOTAL-REVENUES> 4,541,450
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,526,589
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,850,232
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,861
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 0
</TABLE>
