FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-11934
CENTURY PROPERTIES FUND XVIII
(Exact name of small business issuer as specified in its charter)
California 94-2834149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(864) 239-1000
(Issuer's telephone number)
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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
CENTURY PROPERTIES FUND XVIII
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1997
Assets
Cash
Unrestricted $ 2,272
Restricted - tenant security deposits 86
Accounts receivable 12
Escrow for taxes 77
Restricted escrows 101
Other assets 267
Investment properties:
Land $ 7,296
Buildings and related personal property 19,504
26,800
Less accumulated depreciation (9,605) 17,195
$ 20,010
Liabilities and Partners' Capital
Liabilities
Other liabilities $ 135
Accrued taxes 286
Tenant security deposit liabilities 86
Mortgage notes payable 18,588
Partners' (deficit) capital
General partner $ (6,364)
Limited partners (75,000 units issued
and outstanding) 7,279 915
$ 20,010
See Accompanying Notes to Consolidated Financial Statements
b) CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 1,155 $ 1,107 $ 3,438 $ 3,297
Other income 78 80 240 251
Total revenues 1,233 1,187 3,678 3,548
Expenses:
Operating 332 295 932 933
General and administrative 50 55 155 224
Maintenance 98 188 304 412
Depreciation 175 170 515 506
Interest 428 348 1,114 1,049
Property tax 95 82 290 251
Total expenses 1,178 1,138 3,310 3,375
Income before extraordinary item 55 49 368 173
Extraordinary item - gain on
extinguishment of debt (Note C) 108 -- 108 --
Net income $ 163 $ 49 $ 476 $ 173
Net income allocated to
general partner (9.9%) $ 16 $ 5 $ 47 $ 17
Net income allocated to
limited partners (90.1%) 147 44 429 156
Net income $ 163 $ 49 $ 476 $ 173
Per limited partnership unit:
Income before extraordinary item $ .66 $ .59 $ 4.42 $ 2.08
Extraordinary item 1.30 -- 1.30 --
Net income $ 1.96 $ .59 $ 5.72 $ 2.08
See Accompanying Notes To Consolidated Financial Statements
c) CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 75,000 $ -- $ 75,000 $ 75,000
Partners' (deficit) capital
at December 31, 1996 75,000 $ (6,411) $ 6,850 $ 439
Net income for the nine months
ended September 30, 1997 -- 47 429 476
Partners' (deficit) capital
at September 30, 1997 75,000 $ (6,364) $ 7,279 $ 915
See Accompanying Notes to Consolidated Financial Statements
d) CENTURY PROPERTIES FUND XVIII
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 476 $ 173
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 515 506
Amortization of loan costs 33 32
Extraordinary item - gain on extinguishment of debt (108) --
Change in accounts:
Other assets 353 (52)
Accrued expenses and other liabilities (84) 98
Net cash provided by operating activities 1,185 757
Cash flows used in investing activities:
Property improvements and replacements (99) (164)
Cash flows from financing activities:
Proceeds from mortgage note payable 10,600 --
Repayment of mortgage notes payable (10,132) --
Loan costs paid (227) --
Payments on mortgage notes payable (314) (367)
Net cash used in financing activities (73) (367)
Increase in unrestricted cash and cash equivalents 1,013 226
Unrestricted cash and cash equivalents at beginning
of period 1,259 938
Unrestricted cash and cash equivalents at end of period $ 2,272 $ 1,164
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,048 $ 1,015
Supplemental disclosure of non-cash
financing activities:
Accrued interest added to mortgage notes
payable balance $ -- $ 8
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
e) CENTURY PROPERTIES FUND XVIII
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Century Properties Fund XVIII
(the "Partnership" or the "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Fox Capital Management Corp. ("FCMC" or the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employeesand is dependent on its general partner, Fox
Realty Investors ("FRI"), a California general partnership, and the Managing
General Partner, a California corporation, and their 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.
Pursuant to a series of transactions which closed during the first half of 1996,
affiliates of Insignia Financial Group, Inc. ("Insignia") acquired all of the
issued and outstanding shares of stock of FCMC, NPI Equity Investments II, Inc.
("NPI Equity"), the managing general partner of FRI, and National Property
Investors, Inc. ("NPI"). NPI Equity is a wholly-owned subsidiary of NPI. In
connection with these transactions, affiliates of Insignia appointed new
officers and directors of NPI Equity and FCMC.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were charged to expense in 1997 and 1996:
Nine Months Ended
September 30,
(in thousands)
1997 1996
Property management fees (included in operating
expenses) $ 181 $ 176
Reimbursement for services of affiliates
(included in general and administrative
expenses) 93 105
For the period from January 19, 1996, to August 31, 1997, the Partnership
insured its properties under a master policy through an agency and insurer
unaffiliated with the Managing General Partner. An affiliate of the Managing
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 master policy. The agent assumed the financial obligations to the
affiliate of the Managing General Partner who receives payment on these
obligations from the agent. The amount of the Partnership's insurance premiums
that accrued to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations was not significant.
NOTE C - REFINANCING
In September 1997, the Partnership refinanced the mortgage indebtedness
encumbering Oak Run Apartments. The total indebtedness refinanced was
approximately $10,132,000. The new indebtedness, in the principal amount of
$10,600,000, carries a stated interest rate of 7.36% and matures in October
2004. The proceeds from the refinancing enabled the Partnership to pay-off its
previous first mortgage note and a participating note held by a former lender.
As a result of the refinance, the Partnership recognized a net gain of
approximately $108,000 upon extinguishment of the debt. This gain is due to the
write-off of $133,000 in unamortized loan costs and due to $241,000 in debt
forgiveness as a result of the participating note holder accepting a reduced
pay-off. Additionally, the Partnership capitalized loan costs of approximately
$227,000 relating to the refinance.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the nine
months ended September 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Oak Run Apartments
Dallas, Texas 97% 96%
Overlook Point Apartments
Salt Lake City, Utah 93% 96%
The decrease in occupancy at Overlook Point Apartments is attributable to a
decline in market conditions in the Salt Lake City area as well as a decrease in
drive-by exposure due to the re-construction of the sign located in front of the
property.
The Partnership's net income for the nine months ended September 30, 1997, was
approximately $476,000, of which $163,000 was reported in the third quarter.
The Partnership's net income for the corresponding periods in 1996 was $173,000
and $49,000, respectively. The increase in net income is attributable to an
increase in rental income and a decrease in expenses. Rental income increased,
despite a drop in occupancy at Overlook Point Apartments, due to rental rate
increases at both of the Partnership's investment properties. In addition to
the increase in rental income was a decrease in maintenance expense and general
and administrative expenses. The decrease in maintenance expense is due to the
completion of parking lot resurfacing and repairs at Oak Run Apartments in 1996.
The decrease in general and administrative expenses is due to a decrease in
expense reimbursements related to the relocation of the partnership
administration offices during 1996, the timing of quarter-end mailing costs and
decreased professional fees. Partially offsetting these favorable variances was
a slight increase in property tax expense. This increase is due to the
increased assessed value at Oak Run Apartments.
Included in maintenance expense for the nine months ended September 30, 1997,
was approximately $41,000 of exterior building improvements, major landscaping,
and swimming pool repairs. Included in maintenance expense for the nine months
ended September 30, 1996, was approximately $145,000 of exterior building
improvements, major landscaping and parking lot repairs.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the Managing 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
Managing General Partner will be able to sustain such a plan.
In September 1997, the Partnership refinanced the mortgage indebtedness
encumbering Oak Run Apartments. The total indebtedness refinanced was
approximately $10,132,000. The new indebtedness, in the principal amount of
$10,600,000, carries a stated interest rate of 7.36% and matures in October
2004. The proceeds from the refinancing enabled the Partnership to pay-off its
previous first mortgage note and a participating note held by a former lender.
As a result of the refinance, the Partnership recognized a net gain of
approximately $108,000 upon extinguishment of the debt. The gain is due to the
write-off of $133,000 in unamortized loan costs and due to $241,000 in debt
forgiveness as a result of the participating note holder accepting a reduced
pay-off. Additionally, the Partnership capitalized loan costs of approximately
$227,000 relating to the refinance.
At September 30, 1997, the Partnership had unrestricted cash and cash
equivalents of approximately $2,272,000, as compared to approximately $1,164,000
at September 30, 1996. Net cash provided by operating activities increased for
the nine months ended September 30, 1997, as a result of the increase in net
income, as discussed above. Additionally, other assets decreased as a result of
the refinance of the mortgage note secured by Oak Run Apartments. The new
agreement requires no tax and insurance escrow requirements and decreased
restricted escrow requirements. Accrued expenses and other liabilities
decreased due to the paydown of accounts payable. Net cash used in investing
activities decreased as a result of decreased property improvements at Oak Run
Apartments. The decrease in net cash used in financing activities is due to the
proceeds received in excess of the cash used as a result of the refinance of the
mortgage indebtedness secured by Oak Run Apartments.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. At the present time, the Partnership has no outstanding amounts
due under this line of credit. Based on present plans, management does not
anticipate the need to borrow in the near future. Other than unrestricted cash
and cash equivalents, the line of credit is the Partnership's only unused source
of liquidity.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of $18,588,000 is amortized over thirty years with balloon
payments of $9,728,000 and $7,877,000 due in October 2004 and January 1999,
respectively, at which time the properties will either be refinanced or sold.
Future cash distributions will depend on the levels of cash generated from
operations, property sales, and the availability of cash reserves. The Managing
General Partner is currently evaluating the economic position of the Partnership
and the Partnership's ability to make a distribution in 1997. No cash
distributions were made during the first nine months of 1997 or 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.1, Promissory Note between Oak Run, L.L.C., a South
Carolina limited liability company, and Lehman Brothers Holdings
Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings
Inc., a Delaware corporation, dated September 1997.
Exhibit 10.2, Deed of Trust and Security Agreement between Oak Run,
L.L.C., a South Carolina limited liability company, David M.
Parnell, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, a
division of Lehman Brothers Holdings Inc., a Delaware corporation,
dated September 1997.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None were filed during the quarter ended September 30, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CENTURY PROPERTIES FUND XVIII
By: Fox Partners,
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION,
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: October 29, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Century
Properties Fund XVIII 1997 Third Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000704271
<NAME> CENTURY PROPERTIES FUND XVIII
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,272
<SECURITIES> 0
<RECEIVABLES> 12
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 26,800
<DEPRECIATION> 9,605
<TOTAL-ASSETS> 20,010
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 18,558
0
0
<COMMON> 0
<OTHER-SE> 915
<TOTAL-LIABILITY-AND-EQUITY> 20,010
<SALES> 0
<TOTAL-REVENUES> 3,678
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,114
<INCOME-PRETAX> 476
<INCOME-TAX> 0
<INCOME-CONTINUING> 368
<DISCONTINUED> 0
<EXTRAORDINARY> 108
<CHANGES> 0
<NET-INCOME> 476
<EPS-PRIMARY> 5.72<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
PROMISSORY NOTE
$10,600,000.00 New York, New York
As of September ___, 1997
FOR VALUE RECEIVED OAK RUN, L.L.C., a South Carolina limited
liability company, having an address at c/o Insignia Financial Group, One
Insignia Financial Plaza, Greenville, South Carolina 29602 (hereinafter referred
to as "Borrower"), promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation, having an address at Three World Financial Center, 200 Vesey
Street, New York, New York 10285 (hereinafter referred to as "Lender"), or at
such other place as the holder hereof may from time to time designate in
writing, the principal sum of TEN MILLION SIX HUNDRED THOUSAND AND 00/100
DOLLARS ($10,600,000.00), in lawful money of the United States of America with
interest thereon to be computed from the date of this Note at the Applicable
Interest Rate (hereinafter defined), and to be paid as hereinafter provided.
A. PAYMENT TERMS
Borrower shall pay to Lender:
(i) a payment of interest only on October 1, 1997;
(ii) a constant payment of $73,103.23 (the "Monthly Payment") on November
1, 1997 and on the first day of each calendar month (the "Monthly
Payment Date") thereafter to and including the first day of September,
2004; and
(iii)the balance of the principal sum then outstanding and all
interest thereon shall be due and payable on the first day of October
2004 (the "Maturity Date").
Each of such payments shall be applied as follows:
(i) First to the payment of interest computed at the Applicable Interest
Rate; and
(ii) The balance applied toward the reduction of the principal sum.
B. INTEREST
The term "Applicable Interest Rate" as used in this Note shall mean
7.36% per annum.
Interest on the principal sum of this Note shall be calculated in
arrears on the basis of a three hundred sixty (360) day year consisting of
twelve (12) months of thirty (30) days each.
C. DEFAULT AND ACCELERATION
The whole of the principal sum of this Note, together with all
interest accrued and unpaid thereon and all other sums due under the Security
Instrument (hereinafter defined) and this Note (all such sums hereinafter
collectively referred to as the "Debt") shall without notice become immediately
due and payable at the option of Lender if any payment required in this Note is
not paid within ten (10) days after written notice from the Lender notifying
Borrower that the same is due or on the happening of any other default, after
the expiration of any applicable notice and grace periods, herein or under the
terms of the Security Instrument (hereinafter collectively an "Event of
Default"). All of the terms, covenants and conditions contained in the Security
Instrument and the Other Security Documents (hereinafter defined) are hereby
made part of this Note to the same extent and with the same force as if they
were fully set forth herein. In the event that it should become necessary to
employ counsel to collect the Debt or to protect, sell or foreclose the security
hereof, Borrower also agrees to pay reasonable attorney's fees for the services
of such counsel whether or not suit be brought.
D. PREPAYMENT
Borrower shall not have the right or privilege to prepay all or any
portion of the unpaid principal balance of this Note until September 30, 2000.
Beginning October 1, 2000, provided no Event of Default exists, the principal
balance of this Note may be prepaid, in whole but not in part, upon: (i) not
less than 30 days and not more than 45 days prior written notice (the
"Prepayment Notice") to Lender specifying the scheduled payment date on which
prepayment is to be made (the "Prepayment Date"); (ii) payment of all accrued
and unpaid interest on the outstanding principal balance of this Note to and
including the Prepayment Date together with a payment of all interest which
would have accrued on the principal balance of this Note to and including the
first day of the calendar month immediately following the Prepayment Date, if
such prepayment occurs on a date which is not the first day of a calendar month
(the "Shortfall Interest Payment"); (iii) payment of all other sums then due
under this Note, the Security Instrument and the Other Security Documents and
(iv) if the Prepayment Date occurs prior to the date which is six months prior
to the Maturity Date payment of a prepayment consideration (the "Prepayment
Consideration") in an amount equal to the greater of: (A) one (1%) percent of
the principal amount of this Note being prepaid; and (B) the present value of a
series of payments each equal to the Payment Differential (hereinafter defined)
and payable on each monthly payment date over the remaining original term of
this Note and on the Maturity Date discounted at the Reinvestment Yield
(hereinafter defined) for the number of months remaining from the Prepayment
Date to each such monthly payment date and the Maturity Date. The term
"Reinvestment Yield" as used herein shall be equal to the lesser of (a) the
yield on the U.S. Treasury issue (primary issue) with a maturity date closest to
the Maturity Date, or (b) the yield on the U.S. Treasury issue (primary issue)
with a term equal to the remaining average life of the Debt, with each such
yield being based on the bid price for such issue as published in The Wall
Street Journal on the date that is 14 days prior to the Prepayment Date set
forth in the Prepayment Notice (or, if such bid price is not published on that
date, the next preceding date on which such bid price is so published) and
converted to a monthly compounded nominal yield. The term "Payment
Differential" as used herein shall be equal to (x) the Applicable Interest Rate
minus the Reinvestment Yield, divided by (y) 12 and multiplied by (z) the
principal sum outstanding on such Prepayment Date after application of the
Constant Monthly Payment (if any) due on such Prepayment Date, provided that the
Payment Differential shall in no event be less than zero. In no event, however,
shall Lender be required to reinvest any prepayment proceeds in U.S. Treasury
obligations or otherwise. Lender shall notify Borrower of the amount, and the
basis of determination, of the required Prepayment Consideration. If a
Prepayment Notice is given by Borrower to Lender pursuant to this Article D, the
principal balance of this Note and the other sums required under this Article D
shall be due and payable on the Prepayment Date.
Lender shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by all sums due in
connection therewith. Notwithstanding anything contained herein to the
contrary, provided no Event of Default exists, no Prepayment Consideration shall
be due in connection with a complete or partial prepayment resulting from the
application of insurance proceeds or condemnation awards pursuant to paragraphs
3 and 6 of the Security Instrument. In the event of any permitted partial
prepayment of the principal balance of this Note, the amount of principal
prepaid (but not including any Prepayment Consideration or interest) shall be
applied to the principal last due under this Note and shall not release Borrower
from the obligation to pay the Constant Monthly Payments next becoming due under
this Note and the Constant Monthly Payment shall not be adjusted or recalculated
as a result of such partial prepayment.
If a Default Prepayment (defined herein) occurs prior to the date
which is six months prior to the Maturity Date, Borrower shall pay to Lender the
entire Debt, including, without limitation, the Prepayment Consideration.
For purposes of this Note, the term "Default Prepayment" shall mean a
prepayment of the principal amount of this Note made during the continuance of
any Event of Default or after an acceleration of the Maturity Date under any
circumstances, including, without limitation, a prepayment occurring in
connection with reinstatement of the Security Instrument provided by statute
under foreclosure proceedings or exercise of a power of sale, any statutory
right of redemption exercised by Borrower or any other party having a statutory
right to redeem or prevent foreclosure, any sale in foreclosure or under
exercise of a power of sale or otherwise.
Notwithstanding any provision of this Article D to the contrary,
Lender may require Borrower, in lieu of a prepayment as contemplated in the
first paragraph of this Article D, to deliver to Lender the Defeasance
Collateral (hereinafter defined) in the manner contemplated herein. After
Lender's receipt of the Prepayment Notice, Lender shall, if it so elects, advise
Borrower that, in lieu of a prepayment, the Defeasance Collateral shall be
required, in which event Borrower shall be entitled to a release of the Property
(hereinafter defined) from the lien of the Security Instrument and the Other
Security Documents upon satisfaction of the following:
I. Lender shall have received written confirmation from the rating
agencies that have rated the REMIC "real estate mortgage investment conduit"
(defined in Section 860D of the Internal Revenue Code of 1986, as amended from
time to time or any successor statute (the "Code")) ("REMIC") related to the
Securities (as defined in the Security Instrument) that such substitution of
Defeasance Collateral will not result in a downgrade, withdrawal or
qualification of the ratings then assigned to any of the Securities; provided,
however, that in the event that Lender or its agent is unable to obtain such
confirmation, the Lender or its agent shall so advise Borrower and Borrower will
then be subject to the other provisions of this Article D set forth above;
II. all accrued and unpaid interest and all other sums due under this
Note, the Security Instrument and other Security Documents up to the date of the
delivery of the Defeasance Collateral (the "Release Date"), including, without
limitation, all costs and expenses incurred by Lender or its agents in
connection with such release (including, without limitation, the review of the
proposed Defeasance Collateral and the preparation of the Defeasance Security
Agreement (as hereinafter defined) and the related documentation), shall be
fully paid on or before the Release Date; and
III. Borrower shall have delivered to Lender on or before the Release
Date:
(a) a pledge and security agreement, in form and substance
satisfactory to Lender in its sole discretion, creating a first
priority security interest in favor of Lender in the Defeasance
Collateral (the "Defeasance Security Agreement"), which shall provide,
among other things, that any excess received by Lender from the
Defeasance Collateral over the amount payable by Borrower hereunder
shall be refunded to Borrower promptly following each Monthly Payment
Date and the Maturity Date;
(b) direct, non-callable obligations of the United States of
America (the "US Obligations") that provide for payments prior, but as
close as possible, to all successive Monthly Payment Dates occurring
after the Release Date and the Maturity Date, with each such payment
being equal to or greater than the amount of the corresponding
Constant Monthly Payment required to be paid under this Note for the
balance of the term hereof and the amount required to be paid on the
Maturity Date (the "Defeasance Collateral"), each of which shall be
duly endorsed by the holder thereof as directed by Lender or
accompanied by a written instrument of transfer in form and substance
wholly satisfactory to Lender (including, without limitation, such
instrument as may be required by the depository institution holding
such securities or the issuer thereof, as the case may be, to
effectuate book-entry transfers and pledges through the book-entry
facilities of such institution) in order to perfect upon the delivery
of the Defeasance Security Agreement the first priority security
interest therein in favor of the Lender in conformity with all
applicable state and federal laws governing the granting of such
security interests, provided, however, that the price of the
Defeasance Collateral shall not exceed all sums that would otherwise
be due in connection with a prepayment of the principal balance of
this Note under the first paragraph of this Article D; Borrower shall
authorize and direct that the payments received from the U.S.
Obligations shall be made directly to Lender or Lender's designee and
applied to satisfy the Obligations of Borrower under this Note;
(c) evidence reasonably satisfactory to Lender that title to the
Release Property has been transferred to an entity other than
Borrower;
(d) Lender shall have received an opinion of Borrower's counsel,
dated as of the Release Date, in form reasonably satisfactory to
Lender stating, among other things, that (A) the Defeasance Collateral
and the U.S. Obligations have been duly and validly assigned and
delivered to Lender and Lender has a valid, perfected, first priority
lien and security interest in the Defeasance Collateral delivered by
Borrower, (B) the Defeasance Collateral has been validly assigned to
the REMIC, (C) the Defeasance has been effected in accordance with the
requirements of Treasury Regulation 1.860(g)-2(a)(8) (as such
regulation may be amended or substituted from time to time) and will
not be treated as an exchange pursuant to Section 1001 of the Code and
(D) the tax qualification and status of the REMIC will not be
adversely affected or impaired as a result of the Defeasance;
(e) a certificate by Borrower's independent public accountant
certifying that all of the requirements set forth in Clause I and II
above and this Clause III have been fully satisfied;
(f) such other certificates, documents or instruments as Lender
may reasonably require; and
(g) Notwithstanding the foregoing, no such Release shall be
made, given or be deemed effective under this Article D until the
first day after expiration of the period during which the delivery to
Lender of the Defeasance Collateral in connection therewith is subject
to avoidance and recovery as a preferential transfer under 11 U.S.C.
#547 in the event of a bankruptcy of the delivering person or entity
without such avoidance and recovery (which day shall be identified in
writing by Borrower at any time that Borrower delivers the Defeasance
Collateral to Lender), unless Lender receives, at the time of such
delivery, an opinion of counsel to the effect that such delivery of
the Defeasance Collateral would not be avoided and recovered as a
preferential transfer under 11 U.S.C. #547 in the event of the filing
of a bankruptcy petition in respect of the conveying or delivering
person or entity.
Upon compliance with the foregoing requirements relating to the
delivery of the Defeasance Collateral, the Property shall be released from the
lien of the Security Instrument and the Other Security Documents and the
Defeasance Collateral shall constitute collateral which shall secure this Note
and the Debt. Lender will, at Borrower's expenses, execute and deliver any
agreements reasonably requested by Borrower to release the lien of the Security
Instrument from the Property. Upon the release by the Lender in accordance with
this Article D, Borrower shall have no further right to prepay this Note
pursuant to the other provisions of this Article D or otherwise.
E. DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an Event of
Default or upon the failure of Borrower to pay the Debt in full on the Maturity
Date, Lender shall be entitled to receive and Borrower shall pay interest
("Default Interest") on the entire unpaid principal sum at the rate of (i) the
greater of (a) two percent (2%) over the Prime Rate (hereinafter defined), as
such Prime Rate shall change from time to time or (b) five percent (5%) over the
Applicable Interest Rate then in effect or (ii) the maximum rate of interest
which Borrower may by law pay, whichever is lower, to be computed from the
occurrence of the Event of Default until the actual receipt and collection of
the Debt (the "Default Interest Rate"). This charge shall be added to the Debt,
and shall be deemed secured by the Security Instrument. This clause, however,
shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default. The term "Prime
Rate" as used in this Note shall mean the daily "prime rate" published in The
Wall Street Journal from the date of the Event of Default, as such "prime rate"
shall change from time to time. In the event The Wall Street Journal ceases to
publish the "prime rate" then Lender shall select an equivalent publication
which publishes such "prime rate"; and in the event such prime rates are no
longer generally published or are limited, regulated or administered by a
governmental or quasi-governmental body, then Lender shall select a comparable
interest rate index.
F. SECURITY
This Note is secured by the Security Instrument and the Other Security
Documents. The term "Security Instrument" as used in this Note shall mean the
Deed of Trust and Security Agreement dated as of the date hereof in the
principal sum of $10,600,000.00 given by Borrower to Lender encumbering the fee
estate of Borrower in certain premises located in Dallas County, State of Texas
and other property, as more particularly described therein and intended to be
duly recorded in said County. The term "Other Security Documents" as used in
this Note shall mean all and any of the documents other than this Note or the
Security Instrument now or hereafter executed by Borrower and/or others and by
or in favor of Lender, which wholly or partially secure or guarantee payment of
this Note. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Lender" and "Borrower" shall include their
respective successors, assigns, heirs, executors and administrators.
G. SAVINGS CLAUSE
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance due
hereunder at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of such
maximum rate, the Applicable Interest Rate shall be deemed to be immediately
reduced to such maximum rate and all previous payments in excess of the maximum
rate shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder.
H. LATE CHARGE
If any sum payable under this Note is not received by Lender within
five (5) days of the date on which it is due, without taking into account or
including within said five (5) day period any applicable notice or grace period,
Borrower shall pay to Lender upon demand an amount equal to the lesser of five
percent (5%) of such unpaid sum or the maximum amount permitted by applicable
law to defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment and such amount shall be secured by the Security Instrument
and the Other Security Documents. Nothing contained herein is intended to
affect the rights of Lender in and to any Default Interest due to Lender
pursuant to the provisions of paragraph E hereof entitled "Default Interest".
I. MISCELLANEOUS
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
If Borrower consists of more than one person or party, the obligations
and liabilities of each such person or party shall be joint and several. The
foregoing sentence, however, is not intended to affect the limited liability of
any limited partner or stockholder of Borrower afforded by applicable
partnership or corporate law.
Borrower and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment. No
release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Security Instrument or the Other Security Documents
made by agreement between Lender and any other person or party shall release,
modify, amend, waive, extend, change, discharge, terminate or affect the
liability of Borrower, and any other who may become liable for the payment of
all or any part of the Debt, under this Note, the Security Instrument or the
Other Security Documents.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Security Instrument and the Other Security Documents
and that this Note, the Security Instrument and the Other Security Documents
constitute valid and binding obligations of Borrower.
This Note shall be governed and construed in accordance with the laws
of the State of New York and the applicable laws of the United States of
America.
J. EXCULPATION
Lender shall not enforce the liability and obligation of Borrower to
perform and observe the obligations contained in this Note or the Security
Instrument by any action or proceeding wherein a money judgment shall be sought
against Borrower or any general or limited partner or member of Borrower
(hereinafter collectively referred to as the "Exculpated Parties"), except that
Lender may bring a foreclosure action, action for specific performance or other
appropriate action or proceeding to enable Lender to enforce and realize upon
this Note, the Security Instrument, the Other Security Documents, and the
interest in the Property, the Rents (as defined in the Security Instrument) and
any other collateral given to Lender created by this Note, the Security
Instrument and the Other Security Documents; provided, however, that any
judgment in any such action or proceeding shall be enforceable against the
Exculpated Parties only to the extent of Borrower's interest in the Property, in
the Rents and in any other collateral given to Lender. Lender, by accepting
this Note and the Security Instrument, agrees that it shall not sue for, seek or
demand any deficiency judgment against the Exculpated Parties in any such action
or proceeding, under or by reason of or under or in connection with the Security
Instrument, the Other Security Documents or this Note. The provisions of this
paragraph shall not, however, (i) constitute a waiver, release or impairment of
any obligation evidenced or secured by the Security Instrument, the Other
Security Documents or this Note; (ii) impair the right of Lender to name
Borrower as a party defendant in any action or suit for judicial foreclosure and
sale under the Security Instrument; (iii) affect the validity or enforceability
of any guaranty made in connection with the Security Instrument, this Note, or
the Other Security Documents; (iv) impair the right of Lender to obtain the
appointment of a receiver upon the occurrence and continuance of an Event of
Default; (v) impair the enforcement of the Assignment of Leases and Rents dated
the date hereof given by Borrower to Lender executed in connection herewith;
(vi) impair the right of Lender to bring suit with respect to fraud or
intentional misrepresentation by Borrower, the Exculpated Parties or any other
person or entity in connection with the Security Instrument, this Note or the
Other Security Documents; (vii) impair the right of Lender to obtain the Rents
received by any of the Exculpated Parties after the occurrence and continuance
of an Event of Default; (viii) impair the right of Lender to bring suit with
respect to the Exculpated Parties' misappropriation of tenant security deposits
or Rents collected in advance; (ix) impair the right of Lender to obtain
insurance proceeds or condemnation awards due to Lender under the Security
Instrument; (x) impair the right of Lender to enforce the provisions of sub-
paragraphs 36(g) through 36(k), inclusive and paragraphs 34 and 35 of the
Security Instrument against the Borrower (excluding the general and limited
partners or members of Borrower); or (xi) impair the right of Lender to recover
any part of the Debt from the Borrower (excluding the general and limited
partners and members of Borrower) following the breach of any covenant contained
in paragraphs 9 or 55 of the Security Instrument.
K - TEXAS PROVISIONS
In the event of any inconsistencies between this paragraph K and any
other provisions of this Note, the terms and conditions of this paragraph K
shall control and be binding.
The following language is hereby added to the end of the second
paragraph of Article B Hereof:
", unless such calculation would result in a usurious rate,
in which case interest shall be calculated on the per annum
basis of a year of 365 or 366 days, as the case may be."
The first paragraph of Article B hereof is hereby deleted and the
following substituted therefor:
The term "Applicable Interest Rate" as used in this Note
shall mean a rate equal to the lesser of 7.36% per annum or
the Highest Lawful Rate (hereinafter defined). The term
"Highest Lawful Rate" as used herein shall mean, with
respect to the Lender, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the
Debt (hereinafter defined) under laws applicable to the
Lender that are presently in effect or, to the extent
allowed by law, under such applicable laws that may
hereafter be in effect and that allow a higher maximum
nonusurious interest rate than applicable laws now allow.
The phrase "maximum interest rate which Borrower is permitted by
applicable law to contract or agree to pay" is hereby deleted wherever such
phrase appears herein and the phrase "Highest Lawful Rate" substituted therefor.
Article G entitled "Savings Clause" is hereby deleted in its entirety.
The following language is hereby added to the first sentence of the
third paragraph of Article I hereof after the words "notice of dishonor..."
", notice of intention to accelerate, notice of acceleration,"
The following language is hereby added to the end hereof immediately
preceding the words "IN WITNESS WHEREOF":
It is the intention of the parties hereto to conform
strictly to applicable usury laws. Accordingly, if the
transactions contemplated hereby would be usurious under any
such applicable law, then, and in that event,
notwithstanding anything to the contrary in this Note, or in
any other instrument or agreement entered into in connection
with or as security for this Note, it is agreed as follows:
(i) the aggregate of all consideration that constitutes
interest under any such applicable law and that is contracted
for, charged or received under this Note, or under any of the
aforesaid instruments or agreements or otherwise in connection
with this Note (whether designated as interest, fees, late
charges, payments or otherwise) shall under no circumstances
exceed the maximum amount of interest permitted by any such
applicable law and any excess shall be canceled automatically
and, if theretofore paid, shall be credited on this Note by
Lender (or, if this Note has been paid in full, refunded to
Borrower); and
(ii) in the event that the maturity of this Note is
accelerated by reason of an Event of Default under this Note, or
otherwise, then such consideration that constitutes interest may
never include more than the maximum amount permitted by any such
applicable law, and excess interest, if any, provided for in this
Note, or otherwise, shall be canceled automatically as of the
date of such acceleration or prepayment, and, if theretofore
paid, shall be credited on this Note (or, if this Note has been
paid in full, refunded to Borrower).
All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that
the rate or amount of interest on account of any such
indebtedness does not exceed the applicable usury ceiling.
To the extent that Texas law is applicable, applicable
interest rate ceiling under Texas law shall be the "interest
rate ceiling" from time to time in effect under Chapter 1D
of the Texas Credit Title, Revised Civil Statutes of Texas
1925, as amended, substituted for or restated.
THIS NOTE, AND THE OTHER SECURITY DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN LENDER, BORROWER AND THE OTHER RESPECTIVE
PARTIES HERETO AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS
BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, Borrower has duly executed this Note under seal as
of the day and year first above written.
OAK RUN, L.L.C., a South Carolina limited liability company
By: CENTURY PROPERTIES FUND XVIII, a California limited
partnership, its sole member
By: FOX PARTNERS, a California general partnership,
its general partner
By: FOX CAPITAL MANAGEMENT CORPORATION, a California
corporation, its general partner
By: /s/ Robert D. Long, Jr.
Name: Robert D. Long, Jr.
Title: Vice President
This instrument prepared by:
Carson M. Leonard, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
ATTENTION: COUNTY CLERK -- THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO
BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR
RECORD IN THE RECORDS WHERE MORTGAGES AND DEEDS OF TRUST ON REAL ESTATE ARE
RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT
ONLY AS A MORTGAGE OR DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING
GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN.
THE MAILING ADDRESSES OF THE BORROWER (DEBTOR) AND LENDER (SECURED PARTY) ARE
SET FORTH IN THIS INSTRUMENT.
OAK RUN, L.L.C.,
a South Carolina limited liability company
(Borrower)
to
DAVID M. PARNELL
(Trustee)
and
LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION OF
LEHMAN BROTHERS HOLDINGS INC.
a Delaware corporation
(Lender)
DEED OF TRUST AND
SECURITY AGREEMENT
Dated: As of September ___, 1997
Location: Oak Run
Dallas, Texas
County: Dallas
PREPARED BY AND UPON
RECORDATION RETURN TO:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: Carson Leonard, Esq.
Counsel's File No.: 16248-00000
Title Co: Commonwealth Land Title Insurance Company
Title No.: G9065396
THIS DEED OF TRUST AND SECURITY AGREEMENT (the "Security Instrument"),
is made as of the ___ day of September, 1997, by OAK RUN, L.L.C., a South
Carolina limited liability company, having its principal place of business c/o
Insignia Financial Group, Inc., One Insignia Financial Plaza, Greenville, South
Carolina 29602, as mortgagor ("Borrower"), to DAVID M. PARNELL, having an
address at 12201 Merit Drive, Suite 450, Dallas, Texas 75251 ("Trustee") and
LEHMAN BROTHERS HOLDINGS INC. D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN
BROTHERS HOLDINGS INC., a Delaware corporation, having an address at Three World
Financial Center, 200 Vesey Street, New York, New York 10285, as mortgagee
("Lender").
W I T N E S E T H :
To secure the payment of an indebtedness in the principal sum of TEN
MILLION SIX HUNDRED THOUSAND AND 00/100 DOLLARS ($10,600,000), lawful money of
the United States of America, to be paid with interest according to a certain
note dated the date hereof made by Borrower to Lender (the note, together with
all extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") (said indebtedness, interest and all other sums due hereunder
and under the Note being collectively called the "Debt") and that certain loan
agreement dated the date hereof between Borrower and Lender (the "Loan
Agreement"), Borrower has mortgaged, given, granted, bargained, sold, aliened,
enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated and by these
presents does mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm, pledge, assign, set over and hypothecate unto Trustee, its successors
and assigns, with power of sale and right of entry and possession, the real
property described in Exhibit A attached hereto (the "Premises") and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and improvements now or hereafter located
thereon (the "Improvements");
TOGETHER WITH: all right, title, interest and estate of Borrower now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements together with the
following property, rights, interests and estates being hereinafter collectively
referred to as the "Property"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights
and powers, air rights and development rights, and all estates, rights,
titles, interests, privileges, liberties, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way belonging, relating or
pertaining to the Premises and the Improvements and the reversion and
reversions, remainder and remainders, and all land lying in the bed of any
street, road or avenue, opened or proposed, in front of or adjoining the
Premises, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy,
property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Premises and the Improvements and
every part and parcel thereof, with the appurtenances thereto;
(b) all machinery, equipment, fixtures (including but not limited to
all heating, air conditioning, plumbing, lighting, communications and
elevator fixtures) and other property of every kind and nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now
or hereafter located upon the Premises and the Improvements, or appurtenant
thereto, and usable in connection with the present or future management,
maintenance operation and occupancy of the Premises and the Improvements
and all building equipment, materials and supplies of any nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now
or hereafter located upon the Premises and the Improvements, or appurtenant
thereto, or usable in connection with the present or future management,
maintenance operation and occupancy of the Premises and the Improvements
(hereinafter collectively called the "Equipment"), and the right, title and
interest of Borrower in and to any of the Equipment which may be subject to
any security interests, as defined in the Uniform Commercial Code, as
adopted and enacted by the state or states where any of the Property is
located (the "Uniform Commercial Code"), superior in lien to the lien of
this Security Instrument;
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Property, whether from
the exercise of the right of eminent domain (including but not limited to
any transfer made in lieu of or in anticipation of the exercise of said
right), or for a change of grade, or for any other injury to or decrease in
the value of the Property;
(d) all leases and other agreements affecting the use, enjoyment or
occupancy of the Premises and the Improvements heretofore or hereafter
entered into (the "Leases") and all right, title and interest of Borrower,
its successors and assigns therein and thereunder, including, without
limitation, cash or securities deposited thereunder to secure the
performance by the lessees of their obligations thereunder and all rents,
additional rents, revenues, issues and profits (including all oil and gas
or other mineral royalties and bonuses) from the Premises and the
Improvements (the "Rents") and all proceeds from the sale or other
disposition of the Leases and the right to receive and apply the Rents to
the payment of the Debt;
(e) all proceeds of and any unearned premiums on any insurance
policies covering the Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements
made in lieu thereof, for damage to the Property;
(f) the right, in the name and on behalf of Borrower, to appear in
and defend any action or proceeding brought with respect to the Property
and to commence any action or proceeding to protect the interest of Lender
in the Property;
(g) all contract rights, with respect to, or which may in any way
pertain to, the Premises or the business of the Borrower, including,
without limitation, all refunds, rebates, security deposits, or other
expectancy under or from any such account or contract right;
(h) all general intangibles with respect to, or which may in any way
pertain to, the Premises or the business of the Borrower, including without
limitation, any trade names, or other names under or by which the Premises
may at any time be operated or known, the good will of the Borrower in
connection therewith and the right of the Borrower to carry on business
under any or all such name or names and any variant or variants thereof,
insofar as the same may be transferable by the Borrower without breach of
any agreement pursuant to which the Borrower may have obtained its right to
use such name or names, and any and all trademarks, prints, labels,
advertising concepts and literature;
TO HAVE AND TO HOLD the above granted and described Property unto and to
the use and benefit of Trustee, and the successors and assigns of Trustee,
forever;
IN TRUST, WITH POWER OF SALE, to secure the payment to Lender of the Debt
at the time and in the manner provided for its payment in the Note and in this
Security Instrument;
PROVIDED, HOWEVER, these presents are upon the express condition that, if
Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument and shall well and
truly abide by and comply with each and every covenant and condition set forth
herein and in the Note, these presents and the estate hereby granted shall
cease, terminate and be void;
AND Borrower represents and warrants to and covenants and agrees with
Lender as follows:
PART I
PROVISIONS OF GENERAL APPLICATION
1. Payment of Debt and Incorporation of Covenants, Conditions and
Agreements. Borrower will pay the Debt at the time and in the manner provided
in the Note and in this Security Instrument. All the covenants, conditions and
agreements contained in (a) the Note and (b) all and any of the documents other
than the Note or this Security Instrument now or hereafter executed by Borrower
and/or others and by or in favor of Lender, which wholly or partially secure or
guaranty payment of the Note including but not limited to the First Assignment
of Leases and Rents (the "Assignment of Rents") between Borrower, as assignor
and Lender, as assignee (collectively, the "Other Security Documents"), are
hereby made a part of this Security Instrument to the same extent and with the
same force as if fully set forth herein.
2. Warranty of Title. Borrower warrants that Borrower has good title to
the Property and has the right to mortgage, give, grant, bargain, sell, alien,
enfeoff, convey, confirm, pledge, assign and hypothecate and grant a security
interest in the same and that Borrower possesses an unencumbered fee estate in
the Premises and the Improvements and that it owns the Property free and clear
of all liens, encumbrances and charges whatsoever except for those exceptions
shown in the title insurance policy insuring the lien of this Security
Instrument. Borrower shall forever warrant, defend and preserve such title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all persons
whomsoever.
3. Insurance. (a) Borrower will keep the Property insured against loss
or damage by fire, flood and such other hazards, risks and matters, as Lender
may from time to time reasonably require, including without limitation, rental
value insurance against the abatement in rent or business interruption insurance
for at least twelve (12) months and general public liability in an amount not
less than $1,000,000.00, including excess liability coverage and umbrella
liability insurance. Borrower shall pay the premiums for such insurance (the
"Insurance Premiums") as the same become due and payable. All policies of
insurance (the "Policies") shall (i) be issued under forms acceptable to Lender
(containing the standard New York mortgagee non-contribution clause naming the
Lender as the insured mortgagee and the person to which all payments made by the
Qualified Insurer (hereinafter defined) shall be paid); (ii) provide for at
least thirty (30) days prior written notice to the Lender of any cancellation,
reduction in an amount or change in insurance coverage; (iii) contain a
replacement cost endorsement for 100% of all replacement costs relating to the
Improvements (without deduction for depreciation); (iv) contain an "enforcement"
or "Law and Ordinance" endorsement in form and substance satisfactory to Lender;
and (v) be issued by insurers qualified under the laws of the State in which the
Property is located, duly authorized and licensed to transact insurance business
in such State and reflecting a claims-paying ability of A or better as
determined by Standard & Poors' Corporation ("S&P"), Duff and Phelps Credit
Rating Co. ("Duff"), if rated by Duff, Fitch Investors Service, Inc. ("Fitch"),
if rated by Fitch, and a claims paying ability of A2 as determined by Moody's
Investors Service, Inc. ("Moody's"), if rated by Moody's (each such insurer
hereinafter referred to as a "Qualified Insurer", collectively "Qualified
Insurers"). Notwithstanding the foregoing, Travelers/Aetna Casualty and Surety
("Aetna") is an acceptable insurance company to Lender provided that if Aetna
has a senior unsecured debt rating of less than A by each of the Rating Agencies
(hereinafter defined), then such insurer shall be replaced with a Qualified
Insurer or Qualified Insurers within thirty (30) days after written notice by
the Lender of the reduction of such rating. Such insurance shall not be
invalidated due to the use or occupancy of the Property for purposes more
hazardous than are permitted by the policy. The maximum amount deductible
permitted under each insurance policy shall be such as is customarily carried by
owners or managing agents operating first class multi-family residences of
similar type and size of the Property of similar type, size and quality to the
Property as applicable. Borrower shall deliver the Policies, or duplicate
originals of the same, to Lender. Not later than forty-five (45) days prior to
the expiration date of each of the Policies, Borrower will deliver evidence
satisfactory to Lender of the renewal of each of the Policies. The Borrower
shall not insure the Property under any insurance policy other than as expressly
set forth herein.
(b) If the Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty, Borrower shall give prompt notice thereof to Lender.
The net amount of all insurance proceeds received by Lender with respect to such
damage or destruction, shall be held in a segregated account (the "Net Proceeds
Account") and invested in an Eligible Investment (hereinafter defined). Lender
shall be entitled to deduct from such insurance proceeds all of its
administrative costs and expenses reasonably incurred in connection with the
investing and collection of such insurance proceeds, and the balance if any,
(the "Net Proceeds") shall be disbursed by Lender in accordance with the terms
and conditions set forth herein to pay for the costs and expenses of the
Restoration (hereinafter defined) provided (i) no Event of Default has occurred
and remains uncured under this Security Instrument, the Note or any of the Other
Security Documents, (ii) Borrower proceeds promptly after the insurance claims
are settled with the restoration, replacement, rebuilding or repair of the
Property as nearly as possible to the condition the Property was in immediately
prior to such fire or other casualty (the "Restoration"), (iii) the Restoration
shall be done in compliance with all applicable laws, rules and regulations,
and, following the Restoration, the Property shall be permitted under all
applicable zoning laws to be used for, and shall continue to be used for, all
purposes associated with multi-family residences, (iv) a set of the plans and
specifications in connection with the Restoration shall be submitted to Lender
and shall be acceptable to Lender in all respects, (v) all costs and expenses
incurred by Lender in connection with making the Net Proceeds available for the
Restoration of the Property including, without limitation, counsel fees and
inspecting engineer fees incurred by Lender, shall be paid by Borrower, (vi)
rental loss insurance is available to offset fully any abatement of rent to
which any tenant of the Property may be entitled or any rent loss arising out of
the cancellation of any Lease as a result of the casualty, throughout the
Restoration and a reasonable lease-up period following the Restoration, and
(vii) in Lender's judgment, the Restoration must be able to be completed within
one (1) year after the loss and at least one (1) year prior to the Maturity Date
of the Note. The term "Eligible Investment" shall mean any investment approved
by Lender in its sole discretion.
(c) The Net Proceeds shall be held in trust in the Net Proceeds Account.
The Net Proceeds shall be paid by Lender (or by a disbursing agent
("Depository") selected by Lender), to, or as directed by, Borrower from time to
time during the course of the Restoration, upon receipt of evidence, and
certification from Borrower, satisfactory to Lender, that (i) all materials
installed and work and labor performed (except to the extent they are to be paid
for out of the requested payment) in connection with the Restoration have been
paid for in full, (ii) no notices of intention, mechanics' or other liens or
encumbrances on the Property arising out of the Restoration exist, and (iii) the
balance of the Net Proceeds plus the balance of any deficiency deposits given by
Borrower to Lender or Depository pursuant to the provisions of this paragraph
hereinafter set forth shall be sufficient to pay in full the balance of the cost
of the Restoration. Borrower shall pay all fees and expenses of the Depository
in connection with the above.
(d) Notwithstanding anything to the contrary contained herein, if the Net
Proceeds shall be less than $50,000.00, only one disbursement shall be required
upon the completion of the Restoration to the satisfaction of Lender. If the
Net Proceeds shall be $50,000.00 or more, Lender shall disburse the Net Proceeds
as provided above, however, in no event shall Lender be required to disburse
such Net Proceeds, or any portion thereof, more often then once every thirty
(30) days. If at any time the Net Proceeds, or the undisbursed balance thereof,
shall not be sufficient to pay in full the balance of the cost of the
Restoration, Borrower shall deposit the deficiency with Lender or Depositary
before any further disbursement of the Net Proceeds shall be made.
(e) Any amount of the Net Proceeds received by Lender and not required to
be disbursed for the Restoration pursuant to the provisions of this paragraph
hereinabove set forth shall be retained and applied by Lender toward the payment
of the Debt whether or not then due and payable in such priority and proportions
as Lender in its discretion shall deem proper. Upon the receipt and retention
by Lender of such insurance proceeds, the lien of this Security Instrument shall
be reduced only by the amount thereof received and retained by Lender and
actually applied by Lender in reduction of the Debt.
(f) Notwithstanding anything to the contrary contained herein, Lender
shall not be obligated to make the Net Proceeds available for Restoration of the
Property unless the principal balance of the Note following the completion of
the Restoration (assuming the amount of Net Proceeds received by Lender in
excess of the cost of the Restoration (as estimated by Lender) is applied to the
prepayment of the Note) will be in an amount sufficient to cause (i) the Debt
Service Coverage Ratio (hereinafter defined) applicable to the Property
immediately following the Restoration to be not less than 1.2 to 1.0 and (ii) in
the event of any Restoration involving Net Proceeds of more than $250,000.00,
the ratio of (a) the then outstanding principal balance of the Note to (b) the
appraised value of the Property after completion of the Restoration (as
determined by an independent third-party appraiser holding an MAI designation
and having a national practice and at least ten (10) years real estate
experience appraising properties of a similar nature and type as the Property)
to be equal to or greater than the Minimum Loan to Value Ratio (hereinafter
defined). The term "Minimum Loan to Value Ratio" means a ratio equal to the
lesser of (i) 0.8 to 1.0 or (ii) the ratio of (a) the then outstanding principal
balance of the Note to (b) the appraised value of the Property on the date
hereof. The fee for such appraisal shall be paid for by the Borrower.
4. Payment of Taxes, etc. Borrower shall pay all taxes, assessments,
water rates and sewer rents, now or hereafter levied or assessed or imposed
against the Property or any part thereof (the "Taxes") and all ground rents,
maintenance charges, other governmental impositions, and other charges,
including without limitation vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Premises, now or hereafter levied
or assessed or imposed against the Property or any part thereof (the "Other
Charges") as same become due and payable. Upon written request from Lender,
Borrower will deliver to Lender evidence satisfactory to Lender that the Taxes
and Other Charges have been so paid or are not then delinquent. Borrower shall
not suffer and shall promptly cause to be paid and discharged any lien or charge
whatsoever which may be or become a lien or charge against the Property, and
shall promptly pay for all utility services provided to the Property. Borrower
shall furnish to Lender receipts for the payment of the Taxes, Other Charges and
said utility services prior to the date the same shall become delinquent.
Notwithstanding the above, after prior written notice to Lender, Borrower,
at its own expense, may contest by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application in whole or in part of any of the Taxes, provided that
(i) no Event of Default under the Note or this Security Instrument shall have
occurred and be continuing, (ii) Borrower is permitted to do so under the
provisions of any mortgage or deed of trust or deed to secure debt superior or
junior in lien to this Security Instrument, (iii) such proceeding shall suspend
the collection of the Taxes from Borrower and from the Property, (iv) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder, (v) neither the Property nor any part thereof
or interest therein will be in danger of being sold, forfeited, terminated,
canceled or lost, (vi) Borrower shall have set aside adequate reserves for the
payment of the Taxes, together with all interest and penalties thereon, and
(vii) Borrower shall have furnished such security as may be reasonably required
in the proceeding, or as may be requested by Lender to insure the payment of any
such Taxes, together with all interest and penalties thereon.
5. Escrow Fund. Upon (i) the occurrence of an Event of Default
(hereinafter defined), and for so long as such Event of Default shall be
continuing, or (ii) the transfer of the Property to any entity in accordance
with the terms of paragraph 9(c) hereof, Borrower shall pay to Lender upon
request on the fifteenth day of each calendar month thereafter (a) one-twelfth
of an amount which would be sufficient to pay the Taxes payable, or estimated by
Lender to be payable, during the next ensuing twelve (12) months and (b) one-
twelfth of an amount which would be sufficient to pay the Insurance Premiums due
for the renewal of the coverage afforded by the Policies upon the expiration
thereof (the amounts set forth in (a) and (b) above hereinafter called the
"Escrow Fund"). The Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Note shall be added together and shall be paid as
an aggregate sum by Borrower to Lender. Borrower hereby pledges to Lender any
and all monies now or hereafter deposited in the Escrow Fund as additional
security for the payment of the Debt. Lender will apply the Escrow Fund to
payments of Taxes and Insurance Premiums required to be made by Borrower
pursuant to paragraphs 3 and 4 hereof. If the amount of the Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to paragraphs 3
and 4 hereof, Lender shall credit such excess against future payments to be made
to the Escrow Fund. In allocating such excess, Lender may deal with the person
shown on the records of Lender to be the owner of the Property. If the Escrow
Fund is not sufficient to pay the items set forth in (a) and (b) above, Borrower
shall promptly pay to Lender, upon demand, an amount which Lender shall estimate
as sufficient to make up the deficiency. Lender may apply any sums then present
in the Escrow Fund to the payment of the following items in any order in its
uncontrolled discretion:
(i)Taxes and Other Charges;
(ii)Insurance Premiums;
(iii)Interest on the unpaid principal balance of the Note;
(iv)Amortization of the unpaid principal balance of the Note;
(v)All other sums payable pursuant to the Note, this Security Instrument
and the Other Security Documents, including without limitation
advances made by Lender pursuant to the terms of this Security
Instrument.
Until expended or applied as above provided, any amounts in the Escrow Fund
shall constitute additional security for the Debt. The Escrow Fund shall not
constitute a trust fund and may be commingled with other monies held by Lender.
No earnings or interest on the Escrow Fund shall be payable to Borrower.
6. Condemnation. (a) Borrower shall give Lender prompt notice of the
actual or threatened commencement of any condemnation or eminent domain
proceeding and shall deliver to Lender copies of any and all papers served in
connection with such proceedings. If less than 25% of the land constituting the
Property is taken, then the net amount of all awards and payments received by
Lender with respect to such taking shall be held in a segregated account (the
"Net Awards Account") and invested in an Eligible Investment. Lender shall be
entitled to deduct from the condemnation award all of its administrative costs
and expenses incurred in connection with investing and collecting such
condemnation award and the balance, if any, (hereinafter referred to as the "Net
Award"), will be disbursed by Lender to pay for the costs and expenses of the
Condemnation Restoration (hereinafter defined), provided (i) Borrower is not in
default under this Security Instrument, the Note or any of the Other Security
Documents, (ii) Borrower proceeds promptly after the making of any award of
payment for such taking with the restoration, replacement, rebuilding or repair
of the Property as nearly as possible to the condition the Property was in
immediately prior to such taking (the "Condemnation Restoration"), (iii) the
Condemnation Restoration shall be done in compliance with all applicable laws,
rules and regulations, and, following the Condemnation Restoration, the Property
shall be permitted under all applicable zoning laws to be used for, and shall
continue to be used for, all purposes associated with multi-family residences,
(iv) a set of plans and specifications in connection with the Condemnation
Restoration shall be submitted to Lender and shall be satisfactory to Lender in
all respects, (v) Borrower shall have reimbursed Lender for all costs and
expenses incurred by Lender in connection with making the Net Award available
for the Condemnation Restoration of the Property, including, without limitation,
counsel fees, inspecting engineer fees and appraisal fees incurred by Lender,
(vi) rental loss proceeds are available to offset in full any loss in rents
throughout the Condemnation Restoration and a reasonable lease-up period
following the completion of the Condemnation Restoration and (vii) in the
opinion of Lender the Condemnation Restoration of the Property can be completed
within one (1) year after the taking and at least one (1) year prior to the
maturity date of the Note.
(b) The Net Award shall be held in trust by Lender in the Net Awards
Account and shall be paid by Lender or a Depository designated by Lender to, or
as directed by, Borrower from time to time during the course of the Condemnation
Restoration, upon receipt of evidence satisfactory to Lender, that (i) all
materials installed and work and labor performed (except to the extent they are
to be paid for out of the requested payment) in connection with the Condemnation
Restoration have been paid for in full, (ii) there exist no notices of
intention, mechanics' or other liens or encumbrances on the Property arising out
of the Condemnation Restoration, and (iii) the balance of the Net Award plus the
balance of any deficiency deposits given by Borrower to Lender or Depositary
pursuant to the provisions of this paragraph hereinafter set forth shall be
sufficient to pay in full the balance of the cost of the Condemnation
Restoration.
(c) Notwithstanding anything to the contrary contained herein, Lender
shall not be obligated to make the Net Award available for the Condemnation
Restoration of the Property unless the principal balance of the Note after the
completion of the Condemnation Restoration (assuming the amount of the Net Award
received by Lender in excess of the cost of the Condemnation Restoration as
estimated by Lender is applied to the prepayment of the Note) will be sufficient
to cause (i) the Debt Service Coverage Ratio applicable to the Property
immediately following the Condemnation Restoration to be not less than 1.2 to
1.0 and (ii) in the event of any Condemnation Restoration involving Net Award of
more than $250,000.00, the ratio of (a) the then outstanding principal balance
of the Note to (b) the appraised value of the Property after completion of the
Condemnation Restoration (as determined by an independent third-party appraiser
holding an MAI designation and having a national practice and at least ten (10)
years real estate experience appraising properties of a similar nature and type
as the Property) to be equal to or greater than the Minimum Loan to Value Ratio.
The fee for the appraisal shall be paid for by Borrower.
(d) Notwithstanding anything to the contrary contained herein, if the Net
Award shall be less than $50,000.00, only one such disbursement shall be
required upon the completion of the Condemnation Restoration to the satisfaction
of Lender. If the Net Award shall be $50,000.00 or more, Lender shall disburse
the Net Award as provided above, however, in no event shall Lender be required
to disburse such Net Award, or any portion thereof, more often than once every
thirty (30) days. If at any time the Net Award, or the undisbursed balance
thereof, shall not in the opinion of Lender be sufficient to pay in full the
balance of the cost of Condemnation Restoration, Borrower shall deposit such
deficiency with Lender or Depository before any further disbursement of the Net
Award shall be made.
(e) Notwithstanding anything to the contrary contained herein, any taking
by any public or quasi public authority through eminent domain or otherwise
(including but not limited to any transfer made in lieu of or in anticipation of
the exercise of such taking), Borrower shall continue to pay the Debt at the
time and in the manner provided for in the Note and in this Security Instrument
and the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied in accordance with this paragraph 6. Lender
shall not be limited to the interest paid on the award by the condemning
authority but shall be entitled to receive out of the award interest at the rate
or rates provided herein and in the Note.
(f) Any amount of the Net Award received by Lender and not required to be
disbursed for the Condemnation Restoration pursuant to the provisions of this
paragraph hereinabove set forth may be retained and applied by Lender to the
discharge of the Debt, whether or not then due and payable, in such priority and
proportions as Lender in its discretion shall deem proper. If the Property is
sold through foreclosure or otherwise prior to the receipt by Lender of such
award or payment, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive
such award or payment or a portion thereof sufficient to pay the Debt, whichever
is less. Borrower shall file and prosecute its claim or claims for any such
award or payment in good faith and with due diligence and cause the same to be
collected and paid over to Lender, and Borrower hereby irrevocably authorizes
and empowers Lender, in the name of Borrower or otherwise, to collect and
receipt for any such award or payment and to file and prosecute such claim or
claims, and although it is hereby expressly agreed that the same shall not be
necessary in any event, Borrower shall upon demand of Lender make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such award or payment to Lender, free and clear of any
encumbrances of any kind or nature whatsoever.
7. Leases and Rents. (a) Trustee and Lender are hereby granted and
assigned by Borrower the right to enter the Property for the purpose of
enforcing its interest in the Leases and the Rents, this Security Instrument
constituting a present, absolute assignment of the Leases and the Rents.
Nevertheless, subject to the terms of this paragraph 7, Lender grants to
Borrower a revocable license to operate and manage the Property and to collect
the Rents. Borrower shall hold the Rents, or a portion thereof sufficient to
discharge all current sums due on the Debt, for use in the payment of such sums.
Upon or at any time after an Event of Default, the license granted to Borrower
herein may be revoked by Lender, and Lender or Trustee may enter upon the
Property, and collect, retain and apply the Rents toward payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
(b) All Leases shall be written on the standard form of lease which has
been approved by Lender. Upon written request from Lender, Borrower shall
furnish Lender with executed copies of all Leases and all modifications thereto
as soon as may be practicable. No material changes may be made to the Lender-
approved standard forms except as may be required by applicable law. In
addition, all renewals of Leases and all proposed leases shall provide for
rental rates comparable to existing local market rates and shall be arms-length
transactions. Borrower shall not enter into any lease having a term of more
than three (3) years. All Leases shall provide that they are subordinate to
this Security Instrument and that the lessee agrees to attorn to Lender.
Borrower (i) shall observe and perform all the obligations imposed upon the
lessor under the Leases and shall not do or permit to be done anything to impair
the value of the Leases as security for the Debt; (ii) shall enforce all of the
terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed; (iii) shall not collect any of
the Rents more than one (1) month in advance; (iv) shall not execute any other
assignment of lessor's interest in the Leases or the Rents; (v) shall not
materially alter, modify or change the terms of the Leases, or cancel or
terminate the Leases or accept a surrender thereof or convey or transfer or
suffer or permit a conveyance or transfer of the Premises or of any interest
therein so as to effect a merger of the estates and rights of, or a termination
or diminution of the obligations of, lessees thereunder, except that Borrower
may terminate any Lease in exercising its rights as landlord thereunder upon a
default by the tenant under said Lease; (vi) shall not alter, modify or change
the terms of any guaranty of the Leases or cancel or terminate such guaranty;
(vii) shall not consent to any assignment of or subletting under the Leases not
in accordance with their terms; and (viii) shall execute and deliver all such
further assurances, confirmations and assignments in connection with the
Property as Lender shall from time to time require.
8. Maintenance of Property. (a) Borrower shall cause the Property to be
maintained in a good and safe condition and repair. The Improvements and the
Equipment shall not be removed, demolished or materially altered (except for
normal replacement of the Equipment). Borrower shall promptly comply with all
laws, orders and ordinances affecting the Property, or the use thereof.
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become damaged, worn or dilapidated
or which may be affected by any proceeding of the character referred to in
paragraph 6 hereof and shall complete and pay for any structure at any time in
the process of construction or repair on the Premises. Borrower shall not
initiate, join in, acquiesce in, or consent to any change in any private
restrictive covenant, zoning law or other public or private restriction,
limiting or otherwise changing the uses which may be made of the Property or any
part thereof. If under applicable zoning provisions the use of all or any
portion of the Property is or shall become a nonconforming use, Borrower will
not cause or permit such nonconforming use to be discontinued or abandoned
without the express written consent of Lender.
(b) Borrower hereby represents that all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Property and with respect to the use and occupancy of the same, including
but not limited to, certificates of occupancy and fire underwriter certificates,
have been made by or obtained from the appropriate governmental authorities.
Borrower hereby represents, warrants and covenants that it has obtained and will
maintain all permits and licenses required to operate the Property as a
multifamily residential development. Borrower has and shall continue to comply
in all material respects with and make all payments required under all laws,
ordinances, regulations, covenants, conditions and restrictions now or hereafter
affecting the Property or any part thereof or the business or the activity
conducted thereon. Borrower will not commit, suffer, permit or allow any act to
be done in or upon the Property in violation of any law, ordinance or
regulation. Borrower is in material compliance and shall continue to comply in
all material respects with all existing and future requirements of all
governmental authorities having jurisdiction over the Property.
9. Transfer or Encumbrance of the Property. (a) Borrower acknowledges
that Lender has examined and relied on the creditworthiness of Borrower and the
experience of Borrower in owning properties such as the Property in agreeing to
make the loan secured hereby, and that Lender will continue to rely on
Borrower's ownership of the Property as a means of maintaining the value of the
Property as security for repayment of the Debt. Borrower acknowledges that
Lender has a valid interest in maintaining the value of the Property so as to
ensure that, should Borrower default in the repayment of the Debt, Lender can
recover the Debt by a sale of the Property. Except as otherwise provided in
subparagraph 9(c) hereof, Borrower shall not sell, convey, alien, mortgage,
encumber, pledge or otherwise transfer the Property or any part thereof, or
permit the Property or any part thereof to be sold, conveyed, aliened,
mortgaged, encumbered, pledged or otherwise transferred.
(b) A sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer within the meaning of this paragraph 9 shall be deemed to include (i)
an installment sales agreement wherein Borrower agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (iii) if Borrower or any general partner of
Borrower is a corporation, the voluntary or involuntary sale, conveyance or
transfer of such corporation's stock or the creation or issuance of new stock by
which an aggregate of more than 49% of such corporation's stock shall be vested
in a party or parties who are not now stockholders, except for any sale,
conveyance or transfer of such corporation's stock to an Affiliate provided
Lender shall have received prior written notice of such transfer; (iv) if
Borrower or any general partner of Borrower is a limited or general partnership
or joint venture, the change, removal or resignation of a general partner or
managing partner or the transfer of the partnership interest of any general
partner or managing partner, except for any transfer of such partnership
interest to an Affiliate, and excluding the removal or resignation of any non-
Affiliate or non-managing general partner where the managing general partner
shall remain following such removal or resignation, provided, in either case,
Lender shall have received prior written notice of such transfer resignation or
removal; (v) if Borrower or any general partner or member of Borrower is a
limited liability company, the change, removal or resignation of a managing or
sole member or the transfer of the membership interest of any managing member or
the voluntary or involuntary sale, conveyance, transfer or pledge of membership
interests, (vi) any transfer of any interest by the Manager (hereinafter
defined) other than as permitted under paragraph 53; and (vii) any transfer of
the beneficial interest of any Borrower in any trust holding legal title to the
Property.
(c) Notwithstanding anything to the contrary contained herein:
(i) Upon sixty (60) days prior written notice to Lender, the
Borrower shall have the limited right to transfer legal title to the
Property to a Single Purpose Entity Transferee (hereinafter defined)
provided (a) such Single Purpose Entity Transferee assumes all of the
obligations of the Borrower under this Security Instrument, the Note
and the Other Security Documents in a manner satisfactory to Lender in
all respects, including, without limitation, by entering into an
assumption agreement with Borrower and Lender in form and substance
reasonably satisfactory to Lender (an "Assumption Agreement"), (b) the
Single Purpose Entity Transferee shall have been newly formed
exclusively and solely for the purpose of owning and operating the
Property and shall have been engaged in no other business activities
prior to the transfer of title to such Single Purpose Entity
Transferee and must be a "United States person" as defined by Section
7701(a)(30) of the United States Internal Revenue Code of 1986, as
amended, (c) the Single Purpose Entity Transferee or the management
agent it employs to manage the Property shall have Adequate Real
Estate Experience (hereinafter defined), (d) the Single Purpose Entity
Transferee shall deliver to Lender evidence of the fulfillment of the
requirements of subsection (b) above, (e) the Single Purpose Entity
Transferee shall deliver any and all organizational documentation
requested by Lender, which documentation shall be reasonably
satisfactory to Lender in all respects, and shall deliver an opinion
of counsel of the Single Purpose Entity Transferee covering the
Assumption Agreement in form and substance similar to the due
execution, delivery and enforcement opinions delivered by counsel to
Borrower in connection with the execution of this Security Instrument,
(f) the Single Purpose Entity Transferee shall deliver any
certificates and opinions of counsel, enter into agreements and
covenants, or cause each of its general partners (or any other
principal thereof) to deliver certificates, enter into agreements and
covenants, which certificates, agreements, opinions of counsel and
covenants shall be similar in nature to those delivered, executed and
made by Borrower or any general partner of Borrower or any other
principal thereof in connection with the execution of this Security
Instrument or the Securitization (hereinafter defined) relating to the
single purpose nature of the Single Purpose Entity Transferee or
otherwise, and (g) Borrower shall deliver, at its sole cost and
expense, an endorsement to the existing title policy insuring the
Security Instrument as modified by the Assumption Agreement as a valid
first lien on the Property, naming the Single Purpose Entity
Transferee as owner of the fee estate of the Property, which
endorsement shall insure that, as of the date of the recording of the
Assumption Agreement, the Property shall not be subject to any
additional exceptions or liens other than those contained in the
original title policy insuring the lien of this Security Instrument
and delivered in connection with the execution of this Security
Instrument. Any and all costs incurred in connection with the above
(including Lender's counsel's fees and disbursements and expenses and
all recording fees, mortgage or intangible taxes, and title insurance
premiums), shall be paid by Borrower. Lender shall respond to
Borrower's request to transfer legal title to the Property within
forty-five (45) days of delivery of all of the information required by
subsections (a)-(g) above. The failure of Lender to respond to such
request shall not be deemed consent to the transfer.
For purposes of this Security Instrument, the term "Adequate Real
Estate Experience" shall mean an entity which manages first class
multi-family residential complexes of a type and size similar to the
Property, and which manages in the aggregate no less than 1,000
residential units at the time of such transfer.
The term "Single Purpose Entity Transferee" shall mean an entity that:
A. shall not own any asset other than the Property;
B. shall not engage in any business other than those necessary
for the ownership, management or operation of the Property
and any such business transactions with any general partner,
principal or affiliate of the Single Purpose Entity
Transferee or any affiliate of the general partner of the
Single Purpose Entity Transferee shall be entered into upon
terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an
arms-length basis with third parties other than an affiliate
of the Single Purpose Entity Transferee or the general
partner or an affiliate of the general partner of the Single
Purpose Entity Transferee;
C. shall not incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other
than the Debt and any Affiliate Advance (hereinafter
defined);
D. shall not make any loans or advances to any third party
(including any affiliates of such Single Purpose Entity
Transferee or the general partner, member or an affiliate of
the general partner of such Single Purpose Entity
Transferee);
E. shall be solvent and pay its debts from its assets as the
same become due;
F. shall do or cause to be done all things necessary to
preserve its existence, and shall not amend, modify or
otherwise change its partnership certificate, partnership
agreement, articles of incorporation or by-laws in a manner
which adversely affects such Single Purpose Entity
Transferee's existence as a single purpose entity;
G. shall maintain books and records and bank accounts separate
from those of its affiliates, including its general
partners;
H. shall be, and at all times shall hold itself out to the
public as, a legal entity separate and distinct from any
other entity (including any affiliate thereof, including the
general partner or any affiliate of the general partner of
such Single Purpose Entity Transferee);
I. shall file its own tax returns;
J. shall maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and
character and in light of its contemplated business
operations;
K. shall not seek the dissolution or winding up, in whole or in
part, of the Single Purpose Entity Transferee or voluntarily
file, or consent to the filing of, a petition for
bankruptcy, reorganization, assignment for the benefit of
creditors or similar proceeding; and
L. shall not commingle its funds or other assets with any other
person or entity.
The term "Affiliate Advance" shall mean and be limited to a payment made by an
Affiliate to a third party on behalf of Borrower, the repayment of which remains
an unsecured obligation of the Borrower, provided: (i) such payment shall have
been made by the Affiliate to enable the Borrower to pay for its ordinary and
customary operating expenses or property or capital expense, (exclusive of any
payments of debt service under any loan made to Borrower, including, without
limitation, the Debt secured by this Security Instrument), (ii) upon an Event of
Default under the Note, this Security Instrument or the Other Security
Documents, no payments of or accrual of interest or principal shall be made or
required on or before the repayment of all sums due under the Note, this
Security Instrument or the Other Security Documents, and (iii) the obligation of
Borrower, whether written or otherwise, shall be (a) subordinate in lien and
payment to the Debt, (b) non-defaultable and non callable upon a default
(monetary or nonmonetary) or otherwise, prior to one year and a day from the
repayment of all sums due under the Note, this Security Instrument or the Other
Security Documents and (c) unsecured obligation of Borrower at all times.
(ii)[INTENTIONALLY OMITTED]
(iii)Borrower may sell, convey or transfer stock, partnership interest
or membership interest as described in subsections 9(b)(iii) through
(v) hereof by the Borrower or the general partner or sole member of
Borrower (but not by any subsequent Single Purpose Entity Transferee),
provided that:
1. No Event of Default shall have occurred and be continuing;
2. The Single Purpose Entity Transferee shall be a person, firm or
corporation whose character, financial strength, stability and
experience shall be similar to the existing Borrower and any
general partner of Borrower as of the date hereof and otherwise
reasonably satisfactory to Lender;
3. The Single Purpose Entity Transferee shall deliver such
organizational documentation and other material necessary to
establish the transfer; and
4. The Single Purpose Entity Transferee shall pay the costs and
expenses of Lender and Lender's counsel incurred in connection
with the review and approval of such stock, partnership or
membership transfer.
The term "Affiliate" shall mean a corporation or other entity which shall
(i) control, (ii) be controlled by, or (iii) be under common control with either
Borrower, any general partner of Borrower, Insignia Financial Group, Inc. or a
corporation or other entity that would be considered an affiliate of Borrower
under the regulations promulgated by the United States Securities and Exchange
Commission.
The term "Debt Service Coverage Ratio" shall mean the ratio of (a) the NOI
(hereinafter defined) produced by the operation of the Property during the
twelve (12) calendar month period immediately preceding the calculation to (b)
the projected aggregate payments of interest and principal due under this
Security Instrument and the Note and any other subordinate loans affecting the
Property for the twelve (12) calendar month period immediately following the
calculation.
The term "Expenses" shall mean the aggregate of the following items: (a)
real estate taxes, general and special assessments or similar charges; (b)
sales, use and personal property taxes; (c) management fees and disbursements;
(d) wages, salaries, pension costs and all fringe and other employee-related
benefits and expenses; (e) insurance premiums; (f) cost of utilities, and all
other administrative, management, ownership, operating, leasing and maintenance
expenses incurred in connection with the operation of the Property; (g) cost of
necessary repair or replacement of existing improvements on the Property with
repairs or replacements of like kind and quantity or such kind or quality which
is necessary to maintain the Property to the same standards as competitive
rental properties of similar size and location of the Property; and (h) the cost
of such other maintenance materials, HVAC repairs, parts and supplies, other
decorating supplies, floor covering repairs, other decorating contracts, drapes
and equipment. The Expenses shall be based on the above-described items
actually incurred by Borrower during the period for which the calculation is
being made.
The term "general partner" shall include the sole member or the managing
member of Borrower or a general partner of Borrower if Borrower or any general
partner of Borrower is a limited liability company.
The term "NOI" shall mean the gross income derived from the operation of
the Property, less Expenses. NOI shall include only Rents, and such other
income, including any rent loss or business interruption insurance proceeds,
vending income, pet charges, late fees, forfeited security deposits and other
miscellaneous tenant charges, which are actually received during the period for
which the NOI is being calculated. NOI shall be calculated on a cash basis in
accordance with customary accounting principles applicable to real estate.
Notwithstanding the above, in no event shall the NOI include any rents from the
Property in excess of an amount which would be produced from the Property
assuming a 95% occupancy level on the Property at the time of such calculation.
(d) Lender reserves the right to condition the consent required hereunder
upon such other conditions as Lender shall determine in its reasonable
discretion to be in the interest of Lender. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Debt immediately due and payable upon
Borrower's sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property without Lender's consent. This provision shall apply
to every sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer
of the Property regardless of whether voluntary or not, or whether or not Lender
has consented to any previous sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property.
10. Estoppel Certificates. (a) After request by Lender, Borrower, within
ten (10) days, shall furnish Lender with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) the rate of interest
of the Note, (iv) the date installments of interest and/or principal were last
paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi)
that the Note and this Security Instrument are valid, legal and binding obliga-
tions and have not been modified or if modified, giving particulars of such
modification.
11. Changes in the Laws Regarding Taxation. If any law is enacted or
adopted or amended after the date of this Security Instrument which deducts the
Debt from the value of the Property for the purpose of taxation or which imposes
a tax, either directly or indirectly, on the Debt or Lender's interest in the
Property, Borrower will pay such tax, with interest and penalties thereon, if
any. In the event Lender is advised by counsel chosen by it that the payment of
such tax or interest and penalties by Borrower would be unlawful or taxable to
Lender or unenforceable or provide the basis for a defense of usury, then in any
such event, Lender shall have the option, by written notice of not less than
ninety (90) days, to declare the Debt immediately due and payable.
12. No Credits on Account of the Debt. Borrower will not claim or demand
or be entitled to any credit or credits on account of the Debt for any part of
the Taxes or Other Charges assessed against the Property, or any part thereof,
and no deduction shall otherwise be made or claimed from the assessed value of
the Property, or any part thereof, for real estate tax purposes by reason of
this Security Instrument or the Debt. In the event such claim, credit or
deduction shall be required by law, Lender shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt immediately due
and payable.
13. Documentary Stamps. If at any time the United States of America, any
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Security Instrument, or impose
any other tax or charge on the same, Borrower will pay for the same, with
interest and penalties thereon, if any.
14. Usury Laws. This Security Instrument and the Note are subject to the
express condition that at no time shall Borrower be obligated or required to pay
interest on the Debt at a rate which could subject the holder of the Note to
either civil or criminal liability as a result of being in excess of the maximum
interest rate which Borrower is permitted by applicable law to contract or agree
to pay. If by the terms of this Security Instrument or the Note, Borrower is at
any time required or obligated to pay interest on the Debt at a rate in excess
of such maximum rate, the rate of interest under the same shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note.
15. Books and Records. Borrower shall keep adequate books and records of
account which accurately reflect the operations of, and income and expenses
attributable to, the Property and furnish to Lender the following statements,
all of which shall be in form and substance acceptable to Lender:
(i) a monthly and an annual occupancy statement listing each and
every Lease, identifying the leased premises, names of all
tenants, monthly rental and all other charges payable under the
Lease, date to which paid, date of occupancy, date of expiration,
any and every special provision, concession or inducement granted
to tenants and such other information as is reasonably requested
by Lender, signed, dated and certified as true and accurate by
the general partner of Borrower and Borrower;
(ii) an annual operating statement of the operation of the Property in
a form pre-approved by Lender and otherwise satisfactory to
Lender, showing in reasonable detail total revenues received and
total expenses, prepared and certified by the general partner of
Borrower and Borrower;
(iii) an annual balance sheet and profit and loss statement of
Borrower, prepared and certified by the general partner of
Borrower and Borrower within ninety (90) days after the close of
each fiscal year; and
(iv) such annual and monthly (including, without limitation, with
respect to the Reserve Account and the Capital Improvements
Account) balance sheets and profit and loss statements and other
financial statements as may, from time to time, be required by
Lender.
16. Performance of Other Agreements. Borrower shall observe and perform
each and every term to be observed or performed by Borrower pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Property.
17. Further Acts, etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
require, for the better assuring, conveying, assigning, transferring, and
confirming unto Lender the property and rights hereby mortgaged, given, granted,
bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument.
Borrower on demand, will execute and deliver and hereby authorizes Lender to
execute in the name of Borrower or without the signature of Borrower to the
extent Lender may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence more effectively the security
interest of Lender in the Property. Borrower grants to Lender an irrevocable
power of attorney coupled with an interest for the purpose of perfecting any and
all rights and remedies available to Lender at law and in equity pursuant to the
terms of the Note, this Security Instrument or the Other Security Documents,
including without limitation such rights and remedies available to Lender
pursuant to this paragraph 17.
18. Recording of Security Instrument, etc. Borrower forthwith upon the
execution and delivery of this Security Instrument and thereafter, from time to
time, will cause this Security Instrument, and any security instrument creating
a lien or security interest or evidencing the lien hereof upon the 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 fully to protect the lien or security interest
hereof upon, and the interest of Lender in, the Property. Borrower will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Security Instrument, any
mortgage supplemental hereto, any security instrument with respect to the
Property and any instrument of further assurance, and all federal, state, county
and municipal, taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of this Security Instrument, any
mortgage supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, except where prohibited by law
so to do. Borrower shall hold harmless and indemnify Lender, its successors and
assigns, against any liability incurred by reason of the imposition of any tax
on the making and recording of this Security Instrument.
19. Prepayment. If permitted by the Note, the Debt may be prepaid in
accordance with the terms thereof.
20. Events of Default. The Lender may declare the Debt immediately due
and payable upon any one or more of the following events ("Event of Default"):
(a) if any portion of the Debt is not paid within ten (10) days after
written notice is delivered by the Lender notifying Borrower that the
same is overdue;
(b) except as otherwise provided in paragraph 4 hereof, if any of the
Taxes or Other Charges is not paid when the same is due and payable;
(c) if the Policies are not kept in full force and effect, or if the
Policies (or duplicate originals thereof) are not delivered to Lender
upon request;
(d) if Borrower violates or does not comply with any of the provi-
sions of paragraphs 7, 9, 34, 35 or 55 hereof;
(e) if any representation or warranty of Borrower made herein or in
any certificate, report, financial statement or other instrument or
document furnished to Lender shall have been false or misleading in
any material respect when made;
(f) if Borrower shall make an assignment for the benefit of creditors
or if Borrower shall generally not be paying its debts as they become
due;
(g) if a receiver, liquidator or trustee of Borrower shall be
appointed or if Borrower shall be adjudicated a bankrupt or insolvent,
or if any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by,
Borrower or if any proceeding for the dissolution or liquidation of
Borrower shall be instituted; however, if such appointment, adjudica-
tion, petition or proceeding was involuntary and not consented to by
Borrower, upon the same not being discharged, stayed or dismissed
within ninety (90) days;
(h) [INTENTIONALLY OMITTED]
(i) if Borrower shall be in default under any other mortgage or
security agreement covering any part of the Property whether it be
superior or junior in lien to this Security Instrument;
(j) if the Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate
taxes and assessments not then due and payable and such lien shall
remain undischarged of record (by payment, bonding or otherwise) on
the earlier of (i) thirty (30) days after Borrower shall have notice
(written or oral) of such lien or (ii) following a judgment in favor
of the holder of such lien, one week prior to the date on which such
lien may be foreclosed;
(k) if Borrower fails to cure promptly any violations of laws or
ordinances affecting or which may be interpreted to affect the
Property; provided, however, after prior written notice to Lender,
Borrower, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with
due diligence, the validity or application of any building, fire or
zoning law or ordinance affecting the Property provided that (i) no
other Event of Default exists under the Note, this Security
Instrument, or the Other Security Documents, (ii) such proceeding
shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder, (iii) neither the Property
nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, canceled or lost, and (iv) if by the
terms of such law or ordinance, compliance therewith pending the
prosecution of any such proceeding may legally be delayed without
incurring any lien, charge or liability of any kind against the
Property, or any part thereof, and without subjecting the Borrower or
the Lender to any liability, civil or criminal, for failure to comply
therewith; or
(l) if Borrower shall continue to be in default under any of the
other terms, covenants or conditions of the Note, this Security
Instrument or the Other Security Documents for five (5) days after
notice from Lender in the case of any default which can be cured by
the payment of a sum of money or for thirty (30) days after notice
from Lender in the case of any other default, provided that if such
default cannot reasonably be cured within such thirty (30) day period
and Borrower shall have commenced to cure such default within such
thirty (30) day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period shall be
extended for so long as it shall require Borrower in the exercise of
due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of ninety (90) days.
21. Remedies of Lender. Upon the occurrence of an Event of Default, (a)
Borrower will pay, from the date of that Event of Default, interest on the
unpaid principal balance of the Note at the rate of (i) the greater of (A) five
percent (5%) over the Applicable Interest Rate (as defined in the Note) due
under the Note and (B) two percent (2%) over the Prime Rate (hereinafter
defined) as the same shall change from time to time or (ii) at the maximum
interest rate which Borrower may by law pay, whichever is lower, (the "Default
Rate") and (b) Lender shall have the right to exercise any and all rights and
remedies available at law and in equity. The term "Prime Rate" shall mean the
daily "Prime Rate" published in The Wall Street Journal from the date of the
default, as such "Prime Rate" shall change from time to time. In the event The
Wall Street Journal ceases to publish the prime rate or in the event such prime
rates are no longer generally published or are limited, regulated or
administered by a governmental or quasi-governmental body, a comparable interest
rate index shall be substituted therefor by Lender.
22. Sale of Property. (a) If this Security Instrument is foreclosed or
if the Property is sold pursuant to the exercise of a power of sale, the
Property, or any interest therein, may at the discretion of Lender, be sold in
one or more parcels or in several interests or portions and in any order or
manner.
(b) In addition, Borrower hereby vests Lender with full power and
authority, upon the happening of an Event of Default, at Lender's option, to
declare the entire Debt to be immediately due and payable, and at Lender's
option, to take possession of the Property if and to the extent allowed by law,
and to sell the Property to the highest bidder at public auction in front of the
courthouse door in the county or counties, as may be required, where the
Property is located, either in person or by auctioneer, after having first given
notice of the time, place and terms of sale, together with a description of the
property to be sold, by publication once a week for three (3) successive weeks
prior to said sale in some newspaper published in said county or counties, as
may be required, and, upon payment of the purchase money, Lender or any person
conducting the sale for Lender is authorized to execute to the purchaser at said
sale a deed to the Property so purchased. Lender may bid at said sale and
purchase the Property, or any part thereof, if the highest bidder therefor. At
the foreclosure sale the Property may be offered for sale and sold as a whole
without first offering it in any other manner or may be offered for sale and
sold in any other manner as Lender may elect. The proceeds of any foreclosure
sale pursuant to this paragraph shall be applied first, to the payment of the
costs of said sale, including reasonable attorney's and auctioneer's fees;
second, to the payment of the Debt hereby secured, whether due or not, with the
unpaid interest thereon to the date of sale, and any amount that may be due
Lender by virtue of any of the special liens or agreements herein contained;
and, third, the balance, if any, to be paid over to Borrower, or as may
otherwise be provided by law.
23. Right to Cure Defaults. Upon the occurrence of any Event of Default,
if Borrower fails to make any payment or perform any act as herein provided
Lender may, but without any obligation to do so and without notice to or demand
on Borrower and without releasing Borrower from any obligation hereunder, make
or do the same in such manner and to such extent as Lender may deem necessary to
protect the security hereof. Lender is authorized to enter upon the Property
for such purposes, or appear in, defend, or bring any action or proceeding
to protect its interest in the Property or to foreclose this Security Instrument
or collect the Debt, and the cost and expense thereof (including reasonable
attorneys' fees to the extent permitted by law), with interest as provided in
this paragraph 23, shall constitute a portion of the Debt and shall be due and
payable to Lender upon demand. All such costs and expenses incurred by Lender
in remedying such Event of Default or in appearing in, defending, or bringing
any such action or proceeding shall bear interest at the Default Rate, for the
period after notice from Lender that such cost or expense was incurred to the
date of payment to Lender. All such costs and expenses incurred by Lender
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by this Security Instrument and
the Other Security Documents and shall be immediately due and payable upon
demand by Lender therefor.
24. Late Payment Charge. If any portion of the Debt is not received by
Lender within five (5) days of the date on which it is due without taking into
account any applicable notice or grace period, Borrower shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of such unpaid portion
of the Debt or the maximum amount permitted by applicable law, to defray the
expense incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment, and
such amount shall be secured by this Security Instrument and the Other Security
Documents.
25. Prepayment After Event of Default. If following the occurrence of any
Event of Default, Borrower shall tender payment of an amount sufficient to
satisfy the Debt in whole or in part at any time prior to a foreclosure sale of
the Property, or a sale of the Property pursuant to the exercise of a power of
sale, such tender shall be deemed to be a voluntary prepayment of the principal
balance of the Note and Borrower shall, in addition to the entire Debt, also pay
to Lender a sum equal to the interest which would have accrued on the principal
balance of the Note at the Applicable Interest Rate as defined in the Note from
the date of such tender to the earlier of (i) the Maturity Date as defined in
the Note or to (ii) the first day of the period during which prepayment of the
principal balance of the Note would have been permitted together with a
prepayment consideration equal to the prepayment consideration which would have
been payable as of the first day of the period during which prepayment would
have been permitted. If at the time of such tender prepayment of the principal
balance of the Note is permitted, such tender by Borrower shall be deemed to be
a voluntary prepayment of the principal balance of the Note, and Borrower shall,
in addition to the entire Debt, also pay to Lender the applicable prepayment
consideration specified in the Note and this Security Instrument, if any.
26. Right of Entry. Lender and its agents shall have the right to enter
and inspect the Property at all reasonable times.
27. Appointment of Receiver. The holder of this Security Instrument, upon
the occurrence of an Event of Default or in any action to foreclose this
Security Instrument or upon the actual or threatened waste to any part of the
Property, shall be entitled to the appointment of a receiver without notice and
without regard to the value of the Property as security for the Debt, or the
solvency or insolvency of any person liable for the payment of the Debt.
28. Reasonable Use and Occupancy. In addition to the rights which Lender
may have herein, upon the occurrence of any Event of Default, Lender, at its
option, may require Borrower to pay monthly in advance to Lender, or any
receiver appointed to collect the Rents, the fair and reasonable rental value
for the use and occupation of such part of the Property as may be occupied by
Borrower or may require Borrower to vacate and surrender possession of the
Property to Lender or to such receiver and, in default thereof, Borrower may be
evicted by summary proceedings or otherwise.
29. Security Agreement. This Security Instrument is both a real property
mortgage and a "security agreement" within the meaning of the Uniform Commercial
Code. The Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Borrower in
the Property. Borrower by executing and delivering this Security Instrument has
granted and hereby grants to Lender, as security for the Debt, a security
interest in the Property to the full extent that the Property may be subject to
the Uniform Commercial Code (said portion of the Property so subject to the
Uniform Commercial Code being called in this paragraph 29 the "Collateral"). If
an Event of Default shall occur, Lender and Trustee, in addition to any other
rights and remedies which they may have, shall have and may exercise immediately
and without demand, any and all rights and remedies granted to a secured party
upon default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing, the right to take possession of the Collateral or
any part thereof, and to take such other measures as Lender may deem necessary
for the care, protection and preservation of the Collateral. Upon request or
demand of Lender or Trustee, Borrower shall at its expense assemble the
Collateral and make it available to Lender and Trustee at a convenient place
acceptable to Lender. Borrower shall pay to Lender and Trustee on demand any
and all reasonable expenses, including legal expenses and attorneys' fees,
incurred or paid by Lender and Trustee in protecting the interest in the
Collateral and in enforcing the rights hereunder with respect to the Collateral.
Any notice of sale, disposition or other intended action by Lender or Trustee
with respect to the Collateral sent to Borrower in accordance with the
provisions hereof at least five (5) days prior to such action, shall constitute
commercially reasonable notice to Borrower unless otherwise required by law.
The proceeds of any disposition of the Collateral, or any part thereof, may be
applied by Lender to the payment of the Debt in such priority and proportions as
Lender in its discretion shall deem proper.
30. Actions and Proceedings. Lender or Trustee has the right to appear in
and defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect their interest
in the Property. Lender shall, at its option, be subrogated to the lien of any
deed of trust, mortgage or other security instrument discharged in whole or in
part by the Debt, and any such subrogation rights shall constitute additional
security for the payment of the Debt.
31. Waiver of Counterclaim. Borrower hereby waives the right to assert a
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against it by Lender, and waives trial by jury in any
action or proceeding brought by either party hereto against the other or in any
counterclaim asserted by Lender against Borrower, or in any matters whatsoever
arising out of or in any way connected with this Security Instrument, the Note,
any of the Other Security Documents or the Debt.
32. Recovery of Sums Required To Be Paid. Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of Lender
or Trustee thereafter to bring an action of foreclosure, or to sell the Property
pursuant to the exercise of a power of sale, or to bring any other action, for a
default or defaults by Borrower existing at the time such earlier action was
commenced.
33. Marshalling and Other Matters. Borrower hereby waives, to the extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale hereunder of the Property or any part
thereof or any interest therein. Further, Borrower hereby expressly waives any
and all rights of redemption from sale under any order or decree of foreclosure
of this Security Instrument on behalf of Borrower, and on behalf of each and
every person acquiring any interest in or title to the Property subsequent to
the date of this Security Instrument and on behalf of all persons to the extent
permitted by applicable law.
34. Hazardous Materials. Borrower represents and warrants that, except as
otherwise disclosed in that certain environmental report delivered by Borrower
to Lender in connection with the origination of this Security Instrument, to the
best of Borrower's knowledge, after due inquiry and investigation, (a) there are
no Hazardous Materials (hereinafter defined) on the Property, except those in
compliance with all applicable federal, state and local laws, ordinances, rules
and regulations, and (b) no owner or occupant nor, to the best of Borrower's
knowledge, any prior owner or occupant of the Property has received any notice
or advice from any governmental agency or any source whatsoever with respect to
Hazardous Materials on, from or affecting the Property. Borrower covenants that
the Property shall be kept free of Hazardous Materials, and neither Borrower nor
any occupant of the Property shall use, transport, store, dispose of or in any
manner deal with Hazardous Materials on the Property, except in compliance with
all applicable federal, state and local laws, ordinances, rules and regulations.
Borrower shall comply with, and ensure compliance by all occupants of the
Property with, all applicable federal, state and local laws, ordinances, rules
and regulations, and shall keep the Property free and clear of any liens imposed
pursuant to such laws, ordinances, rules or regulations. At any time after the
occurrence of an Event of Default and the continuance thereof, Lender may enter
upon the Property and conduct such environmental tests and studies as Lender
shall require. The cost and expense of such tests and studies shall be borne by
Borrower and such amounts shall be secured by this Security Instrument. In the
event that Borrower receives any notice or advice from any governmental agency
or any source whatsoever with respect to Hazardous Materials on, from or
affecting the Property, Borrower shall immediately notify Lender. Borrower
shall conduct and complete all investigations, studies, sampling, and testing,
and all remedial actions necessary to clean up and remove all Hazardous
Materials from the Property in accordance with all applicable federal, state,
and local laws, ordinances, rules and regulations. The term "Hazardous
Materials" as used in this Security Instrument shall include, without
limitation, gasoline, petroleum products, explosives, radioactive materials,
polychlorinated biphenyls or related or similar materials, or any other
substance or material defined as a hazardous or toxic substance or material by
any federal, state or local law, ordinance, rule, or regulation, but excluding
Asbestos, as defined in paragraph 35 hereof. The obligations and liabilities of
Borrower under this paragraph 34 shall survive any entry of a judgment of
foreclosure, the sale of the Property pursuant to the exercise of a power of
sale, or the delivery of a deed in lieu of foreclosure of this Security
Instrument.
35. Asbestos. Borrower represents and warrants that, except as otherwise
disclosed in that certain asbestos survey (the "Asbestos Survey") delivered by
Borrower to Lender in connection with the origination of this Security
Instrument, to the best of Borrower's knowledge, after due inquiry and
investigation, there is no asbestos or material containing asbestos ("Asbestos")
on the Property, and that no owner or occupant nor to the best of Borrower's
knowledge, any prior owner or occupant of the Property has received any notice
or advice from any governmental agency or any source whatsoever with respect to
Asbestos on, affecting or installed on the Property. Borrower covenants that,
except as otherwise disclosed in the Asbestos Survey, the Property shall be kept
free of Asbestos, and neither Borrower nor any occupant of the Property shall
install, or permit to be installed, Asbestos on the Property. Borrower shall
comply with, and ensure compliance by all occupants of the Property with, all
applicable federal, state and local laws, ordinances, rules and regulations with
respect to Asbestos, and shall keep the Property free and clear of any liens
imposed pursuant to such laws, ordinances, rules or regulations. In the event
that Borrower receives any notice or advice from any governmental agency or any
source whatsoever with respect to Asbestos on, affecting or installed on the
Property, Borrower shall immediately notify Lender. Borrower shall conduct and
complete all investigations, studies, sampling, and testing, and all remedial
actions necessary to manage and remove all Asbestos from the Property in accor-
dance with all applicable federal, state and local laws, ordinances, rules and
regulations. The obligations and liabilities of Borrower under this paragraph
35 shall survive any entry of a judgment of foreclosure, the sale of the
Property pursuant to the exercise of a power of sale, or delivery of a deed in
lieu of foreclosure of this Security Instrument.
36. INDEMNIFICATION. BORROWER SHALL PROTECT, DEFEND, INDEMNIFY AND SAVE
HARMLESS LENDER FROM AND AGAINST ALL LIABILITIES, OBLIGATIONS, CLAIMS, DAMAGES,
PENALTIES, CAUSES OF ACTION, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION
REASONABLE ATTORNEYS' FEES AND EXPENSES), IMPOSED UPON OR INCURRED BY OR
ASSERTED AGAINST LENDER (EXCEPT ANY LIABILITY, OBLIGATION, CLAIM, DAMAGE,
PENALTY, CAUSE OF ACTION, COST OR EXPENSE IMPOSED UPON OR INCURRED BY LENDER BY
REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER) BY REASON OF (A)
OWNERSHIP OF THIS SECURITY INSTRUMENT, THE PROPERTY OR ANY INTEREST THEREIN
ARISING PURSUANT TO THE TERMS OF THIS SECURITY INSTRUMENT OR RECEIPT OF ANY
RENTS; (B) ANY ACCIDENT, INJURY TO OR DEATH OF PERSONS OR LOSS OF OR DAMAGE TO
PROPERTY OCCURRING IN, ON OR ABOUT THE PROPERTY OR ANY PART THEREOF OR ON THE
ADJOINING SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT PARKING AREAS, STREETS
OR WAYS; (C) ANY USE, NONUSE OR CONDITION IN, ON OR ABOUT THE PROPERTY OR ANY
PART THEREOF OR ON THE ADJOINING SIDEWALKS, CURBS, ADJACENT PROPERTY OR ADJACENT
PARKING AREAS, STREETS OR WAYS; (D) ANY FAILURE ON THE PART OF BORROWER TO
PERFORM OR COMPLY WITH ANY OF THE TERMS OF THIS SECURITY INSTRUMENT; (E)
PERFORMANCE OF ANY LABOR OR SERVICES OR THE FURNISHING OF ANY MATERIALS OR OTHER
PROPERTY IN RESPECT OF THE PROPERTY OR ANY PART THEREOF; (F) THE FAILURE OF ANY
PERSON TO FILE TIMELY WITH THE INTERNAL REVENUE SERVICE AN ACCURATE FORM 1099-B,
STATEMENT FOR RECIPIENTS OF PROCEEDS FROM REAL ESTATE, BROKER AND BARTER
EXCHANGE TRANSACTIONS, WHICH MAY BE REQUIRED IN CONNECTION WITH THIS SECURITY
INSTRUMENT, OR TO SUPPLY A COPY THEREOF IN A TIMELY FASHION TO THE RECIPIENT OF
THE PROCEEDS OF THE TRANSACTION IN CONNECTION WITH WHICH THIS SECURITY
INSTRUMENT IS MADE; (G) THE PRESENCE, DISPOSAL, ESCAPE, SEEPAGE, LEAKAGE,
SPILLAGE, DISCHARGE, EMISSION, RELEASE, OR THREATENED RELEASE OF ANY HAZARDOUS
MATERIALS ON, FROM, OR AFFECTING THE PROPERTY OR ANY OTHER PROPERTY OR THE
PRESENCE OF ASBESTOS ON THE PROPERTY; (H) ANY PERSONAL INJURY (INCLUDING
WRONGFUL DEATH) OR PROPERTY DAMAGE (REAL OR PERSONAL) ARISING OUT OF OR RELATED
TO SUCH HAZARDOUS MATERIALS OR ASBESTOS; (I) ANY LAWSUIT BROUGHT OR THREATENED,
SETTLEMENT REACHED, OR GOVERNMENT ORDER RELATING TO SUCH HAZARDOUS MATERIALS OR
ASBESTOS; OR (J) THE FAILURE OF BORROWER TO COMPLY WITH TERMS OF THE O&M PLAN
(HEREINAFTER DEFINED); OR (K) ANY VIOLATION OF LAWS, ORDERS, REGULATIONS,
REQUIREMENTS, OR DEMANDS OF GOVERNMENT AUTHORITIES, WHICH ARE BASED UPON OR IN
ANY WAY RELATED TO SUCH HAZARDOUS MATERIALS OR ASBESTOS INCLUDING, WITHOUT
LIMITATION, THE COSTS AND EXPENSES OF ANY REMEDIAL ACTION REQUIRED BY SUCH
GOVERNMENTAL AUTHORITIES, ATTORNEY AND CONSULTANT FEES, INVESTIGATION AND
LABORATORY FEES, COURT COSTS, AND LITIGATION EXPENSES. ANY AMOUNTS PAYABLE TO
LENDER BY REASON OF THE APPLICATION OF THIS PARAGRAPH 36 SHALL BE SECURED BY
THIS SECURITY INSTRUMENT AND SHALL BECOME IMMEDIATELY DUE AND PAYABLE UPON
DEMAND AND SHALL BEAR INTEREST AT THE DEFAULT RATE COMMENCING ON THE FIFTH (5TH)
DAY FOLLOWING SUCH DEMAND UNTIL PAID. THE OBLIGATIONS AND LIABILITIES OF
BORROWER UNDER THIS PARAGRAPH 36 SHALL SURVIVE ANY TERMINATION, SATISFACTION,
ASSIGNMENT, ENTRY OF A JUDGMENT OF FORECLOSURE OR DELIVERY OF A DEED IN LIEU OF
FORECLOSURE OF THIS SECURITY INSTRUMENT.
37. Notices. Any notice, demand, statement, request or consent made
hereunder shall be effective and valid only if in writing and delivered
personally or by a reputable overnight courier service and shall be deemed given
when received at the address, as set forth above, of the party to whom such
notice is to be given, or to such other address as Borrower, Lender or Trustee,
as the case may be, shall in like manner designate in writing. In the event
delivery is not accepted, notice shall be deemed given on the date such delivery
is refused.
38. Authority. (a) Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, give, grant, bargain, sell, alien,
enfeoff, convey, confirm, pledge, hypothecate, assign and grant a security
interest in the Property pursuant to the terms hereof and to keep and observe
all of the terms of this Security Instrument on Borrower's part to be performed.
(b) Borrower represents and warrants that Borrower is not a "foreign
person" within the meaning of 1445(f)(3) of the Internal Revenue Code of 1986,
as amended and the related Treasury Department regulations, including temporary
regulations.
39. Waiver of Notice. Borrower shall not be entitled to any notices of
any nature whatsoever from Lender and Trustee except with respect to matters for
which this Security Instrument specifically and expressly provides for the
giving of notice by Lender or Trustee to Borrower and except with respect to
matters for which Lender or Trustee is required by applicable law to give
notice, and Borrower hereby expressly waives the right to receive any notice
from Lender or Trustee with respect to any matter for which this Security
Instrument does not specifically and expressly provide for the giving of notice
by Lender or Trustee to Borrower.
40. Remedies of Borrower. In the event that a claim or adjudication is
made that Lender has acted unreasonably or unreasonably delayed acting in any
case where by law or under the Note, this Security Instrument or the Other
Security Documents, it has an obligation to act reasonably or promptly, Lender
shall not be liable for any monetary damages, and Borrower's remedies shall be
limited to injunctive relief or declaratory judgment.
41. Sole Discretion of Lender. Wherever pursuant to this Security
Instrument, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide that arrangements or terms are satis-
factory or not satisfactory shall be in the sole discretion of Lender, except as
may be otherwise expressly and specifically provided herein.
42. Non-Waiver. The failure of Lender or Trustee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Security Instrument. Borrower shall not be relieved of Borrower's
obligations hereunder by reason of (a) the failure of Lender or Trustee to
comply with any request of Borrower or Guarantors to take any action to
foreclose this Security Instrument or otherwise enforce any of the provisions
hereof or of the Note or the Other Security Documents, (b) the release,
regardless of consideration, of the whole or any part of the Property, or of any
person liable for the Debt or any portion thereof, or (c) any agreement or
stipulation by Lender extending the time of payment or otherwise modifying or
supplementing the terms of the Note, this Security Instrument or the Other
Security Documents. Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect. Lender or Trustee may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to the
right of Lender or Trustee thereafter to foreclose this Security Instrument.
The rights and remedies of Lender and Trustee under this Security Instrument
shall be separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Lender or Trustee shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender and Trustee shall not be limited exclusively to the rights
and remedies herein stated but shall be entitled to every right and remedy now
or hereafter afforded at law or in equity.
43. No Oral Change. This Security Instrument, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
44. Liability. If Borrower consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. The foregoing sentence, however, is not intended to affect the limited
liability of any limited partner or stockholder or member of Borrower afforded
by applicable partnership, corporate or limited liability company law. This
Security Instrument shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns forever.
45. Inapplicable Provisions. If any term, covenant or condition of the
Note or this Security Instrument is held to be invalid, illegal or unenforceable
in any respect, the Note and this Security Instrument shall be construed without
such provision.
46. Headings, etc. The headings and captions of various paragraphs of
this Security Instrument are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
47. Duplicate Originals. This Security Instrument may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
48. Definitions. Unless the context clearly indicates a contrary intent
or unless otherwise specifically provided herein, words used in this Security
Instrument may be used interchangeably in singular or plural form and the word
"Borrower" shall mean "each Borrower and any subsequent owner or owners of the
Property or any part thereof or any interest therein," the word "Lender" shall
mean "Lender and any subsequent holder of the Note," the word "Trustee" shall
mean "Trustee and any subsequent holder of this Security Instrument, "the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, and the words "Property" shall
include any portion of the Property and any interest therein. Whenever the
context may require, any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.
49. CHOICE OF LAW. THIS SECURITY INSTRUMENT SHALL BE DEEMED TO BE A
CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND SHALL IN
ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, PROVIDED HOWEVER, THAT WITH RESPECT TO THE
CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIEN OF THIS SECURITY
INSTRUMENT, THE LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED SHALL APPLY.
50. Exculpation. Lender shall not enforce the liability and obligation of
Borrower to perform and observe the obligations contained in the Note or this
Security Instrument by any action or proceeding wherein a money judgment shall
be sought against Borrower or any general or limited partner or member of
Borrower (hereafter collectively referred to as the "Exculpated Parties"),
except that Lender may bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable Lender to
enforce and realize upon this Security Instrument, the Other Security Documents,
and the interest in the Property, the Rents and any other collateral given to
Lender created by this Security Instrument and the Other Security Documents;
provided, however, that any judgment in any such action or proceeding shall be
enforceable against the Exculpated Parties only to the extent of Borrower's
interest in the Property, in the Rents and in any other collateral given to
Lender. Lender, by accepting the Note and this Security Instrument, agrees that
it shall not sue for, seek or demand any deficiency judgment against the
Exculpated Parties in any such action or proceeding, under or by reason of or in
connection with the Note, the Other Security Documents or this Security
Instrument. The provisions of this paragraph shall not, however, (i) constitute
a waiver, release or impairment of any obligation evidenced or secured by the
Note, the Other Security Documents or this Security Instrument; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under this Security Instrument; (iii) affect the
validity or enforceability of any guaranty made in connection with the Note,
this Security Instrument, or the Other Security Documents; (iv) impair the right
of Lender to obtain the appointment of a receiver; (v) impair the enforcement of
the Assignment of Leases and Rents executed in connection herewith; (vi) impair
the right of Lender to bring suit with respect to fraud or intentional
misrepresentation by the Exculpated Parties or any other person or entity in
connection with the Note, this Security Instrument or the Other Security
Documents; (vii) impair the right of Lender to obtain the Rents received by any
of the Exculpated Parties after the occurrence of an Event of Default; (viii)
impair the right of Lender to bring suit with respect to the Exculpated Parties'
misappropriation of tenant security deposits or Rents collected in advance; (ix)
impair the right of Lender to obtain insurance proceeds or condemnation awards
due to Lender under this Security Instrument; (x) impair the right of Lender to
enforce the provisions of sub-paragraphs 36(g) through 36(j), inclusive and
paragraphs 34 and 35 of this Security Instrument against the Borrower (excluding
any general or limited partner or member thereof); or (xi) impair the right of
Lender to recover any part of the Debt from the Borrower (excluding the general
and limited partners and members of Borrower) following the breach of any
covenant contained in paragraph 9 or 55 hereof.
51. [INTENTIONALLY OMITTED]
52. Operations and Maintenance Plan. Borrower shall within thirty (30)
days of the date hereof deliver to Lender an operation and maintenance plan (the
"O&M Plan") with respect to the maintenance or removal of any asbestos,
hazardous and toxic wastes and substances, PCB's and storage tanks on the
Property, which O&M Plan shall appoint an "Asbestos Program Manager" in charge
of managing all asbestos-related activities on the Property. Borrower shall (i)
diligently perform and observe all of the terms, covenants and conditions of the
O&M Plan on the part of Borrower to be performed and observed to the end that
all things shall be done which are necessary to keep unimpaired the rights of
Borrower under the O&M Plan and (ii) promptly notify Lender of the giving of any
notice to Borrower of any default by the Asbestos Program Manager in the
performance or observance of any of the terms, covenants or conditions of the
O&M Plan on the part of the Asbestos Program Manager to be performed and
observed and deliver to Lender a true copy of each such notice. Lender shall
have the right to approve any O&M Plan which may affect the Property.
53. Management Agreements. The Improvements have been operated under
the terms and conditions of that certain management agreement entered into
between Borrower and the manager (the "Manager") set forth therein delivered to,
and approved by, Lender (hereinafter, together with any renewals or replacements
thereof, being referred to as the "Management Agreement"). Borrower
acknowledges that Lender has examined and relied on the Manager's experience in
operating properties such as the Property in agreeing to make the loan secured
hereby, and that Lender will continue to rely on the Manager's management of the
Property as a means of maintaining the value of the Property as security for
repayment of the Debt. Borrower shall (i) diligently perform and observe all of
the terms, covenants and conditions of the Management Agreement on the part of
Borrower to be performed and observed to the end that all things shall be done
which are necessary to keep unimpaired the rights of Borrower under the
Management Agreement and (ii) promptly notify Lender of the giving of any notice
to Borrower of any default by Borrower in the performance or observance of any
of the terms, covenants or conditions of the Management Agreement on the part of
Borrower to be performed and observed and deliver to Lender a true copy of each
such notice. Borrower shall not surrender the Management Agreement, consent to
the assignment by the Manager of its rights and obligations under the Management
Agreement, or terminate or cancel the Management Agreement or modify, change,
supplement, alter or amend the Management Agreement, in any respect, either
orally or in writing, and Borrower hereby assigns to Lender as further security
for the payment of the Debt and for the performance and observance of the terms,
covenants and conditions of this Security Instrument, all the rights, privileges
and prerogatives of Borrower to surrender the Management Agreement or to
terminate, cancel, modify, change, supplement, alter or amend the Management
Agreement in any respect, and any such surrender of the Management Agreement or
termination, cancellation, modification, change, supplement, alteration or
amendment of the Management Agreement without the prior consent of Lender shall
be void and of no force and effect, provided, however, that this provision shall
not limit the Manager's right to assign any or the Borrower's right to consent
to any assignment by Manager of any revenues deriving from the Management
Agreement. If Borrower shall default in the performance or observance of any
material term, covenant or condition of the Management Agreement on the part of
Borrower to be performed or observed, then, without limiting the generality of
the other provisions of this Security Instrument, and without waiving or
releasing Borrower from any of its obligations hereunder, Lender shall have the
right, but shall be under no obligation, to pay any sums and to perform any act
or take any action as may be appropriate to cause all the terms, covenants and
conditions of the Management Agreement on the part of Borrower to be performed
or observed to be promptly performed or observed on behalf of Borrower, to the
end that the rights of Borrower in, to and under the Management Agreement shall
be kept unimpaired and free from default. Lender and any person designated by
Lender shall have, and are hereby granted, the right to enter upon the Property
at any time and from time to time for the purpose of taking any such action. If
the Manager under the Management Agreement shall deliver to Lender a copy of any
notice sent to Borrower of default under the Management Agreement, such notice
shall constitute full protection to Lender for any action taken or omitted to be
taken by Lender in good faith, in reliance thereon. Borrower shall, from time
to time, use its best efforts to obtain from the Manager under the Management
Agreement such certificates of estoppel with respect to compliance by Borrower
with the terms of the Management Agreement as may be requested by Lender.
Borrower shall exercise each individual option, if any, to extend or renew the
term of the Management Agreement upon demand by Lender made at any time within
one (1) year of the last day upon which any such option may be exercised, and
Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to
exercise any such option in the name of and upon behalf of Borrower, which power
of attorney shall be irrevocable and shall be deemed to be coupled with an
interest.
Notwithstanding anything to the contrary contained herein, Borrower
may replace the Manager or accept the resignation of the Manager or consent to a
transfer by the Manager, provided:
(1) No Event of Default shall have occurred and be continuing;
(2) the new manager or holder of the stock, partnership or
membership interest shall be a person, firm or corporation whose
character, financial strength, stability and experience shall be
similar to the existing Manager and otherwise have Adequate Real
Estate Experience;
(3) the new manager shall deliver all organizational
documentation and other materials evidencing its Adequate Real Estate
Experience and otherwise be acceptable to Lender;
(4) the Borrower shall pay the reasonable costs and expenses of
Lender and Lender's counsel incurred in connection with the review and
approval of such new manager; and
(5) the terms of any new management agreement affecting the
Property must be acceptable to Lender in all respects, provided,
however, if the terms and conditions of the new management agreement
shall be substantially similar to the Management Agreement and the
management fee due thereunder is no greater than the fee provided in
the Management Agreement, such new management agreement shall be
deemed acceptable to Lender.
54. Rating Agencies. The term "Rating Agencies" shall mean any nationally
recognized rating agency(s) sought by Lender to obtain ratings with respect to
this Security Instrument or the Securitization (hereinafter defined). Lender
intends to, but is not required to, either (i) deposit this Security Instrument,
the Note and the Other Security Documents in a trust in exchange for the
issuance, to or at the direction of the Lender, of multiple classes of mortgage
pass-through certificates evidencing the entire beneficial ownership interest in
such trust or (ii) issue multiple classes of bonds (also, "Securities")
representing non-recourse obligations secured by this Security Instrument, the
Note and the Other Security Documents (the "Securities"). An election will be
made under the federal tax code to treat this Security Instrument, the Note and
the Other Security Documents and the related assets as one or more real estate
mortgage investment conduits. The Securities may be sold either in a public
offering or a private placement. The foregoing events and all matters
incidental thereto are herein referred to as the "Securitization".
55. Single Purpose Entity. Borrower covenants and agrees that it has not
and shall not: (a) engage in any business or activity other than the ownership,
operation and maintenance of the Property and activities incidental thereto; (b)
acquire or own any material assets other than (i) the Property, and (ii) such
incidental Personal Property as may be necessary for the operation of the
Property; (c) merge into or consolidate with any person or entity or dissolve,
terminate or liquidate in whole or in part, transfer or otherwise dispose of all
or substantially all of its assets or change its legal structure, without in
each case Lender's consent; (d) fail to preserve its existence as an entity duly
organized, validly existing and in good standing (if applicable) under the laws
of the jurisdiction of its organization or formation, or without the prior
written consent of Lender, amend, modify, terminate or fail to comply with the
provisions of Borrower's operating agreement, articles of organization or
similar organizational documents, as the case may be, as same may be further
amended or supplemented, if such amendment, modification, termination or failure
to comply would adversely affect the ability of Borrower to perform its
obligations hereunder, under the Note or under the Other Security Documents; (e)
own any subsidiary or make any investment in, any person or entity without the
consent of Lender; (f) commingle its assets with the assets of any of its
general partners, affiliates, members, principals or of any other person or
entity; (g) incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt, except with
respect to trade payables in the ordinary course of its business of owning and
operating the Property, provided that such debt is paid when due; (h) fail to
maintain its records, books of account and bank accounts separate and apart from
those of the general partners, principals, members and affiliates of Borrower,
the affiliates of a general partner or member of Borrower, and any other person
or entity; (i) enter into any contract or agreement with any general partner,
principal, members or affiliate of Borrower, Guarantor or Indemnitor, or any
general partner, principal or affiliate thereof, except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other than any
general partner, principal, member or affiliate of Borrower, Guarantor or
Indemnitor, or any general partner, principal, member or affiliate thereof; (j)
seek the dissolution or winding up in whole, or in part, of Borrower; (k)
maintain its assets in such a manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any general
partner, principal, member or affiliate of Borrower, or any general partner,
principal or affiliate thereof or any other person; (l) hold itself out to be
responsible for the debts of another person; (m) make any loans or advances to
any third party, including any general partner, principal, member or affiliate
of Borrower, or any general partner, principal, member or affiliate thereof; (n)
fail either to hold itself out to the public as a legal entity separate and
distinct from any other entity or person or to conduct its business solely in
its own name in order not (i) to mislead others as to the identity with which
such other party is transacting business, or (ii) to suggest that Borrower is
responsible for the debts of any third party (including any general partner,
principal, member or affiliate of Borrower, or any general partner, principal,
member or affiliate thereof); (o) fail to maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations; or (p) file or
consent to the filing of any petition, either voluntary or involuntary, to take
advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors.
56. Concerning the Trustee. Trustee shall be under no duty to take
any action hereunder except as expressly required hereunder or by law, or to
perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee's reasonable satisfaction. Trustee, by acceptance of this Security
Instrument, covenants to perform and fulfill the trusts herein created, being
liable, however, only for willful negligence or misconduct, and hereby waives
any statutory fee and agrees to accept reasonable compensation, in lieu thereof,
for any services rendered by Trustee in accordance with the terms hereof.
Trustee may resign at any time upon giving thirty (30) days' notice to Borrower
and to Lender. Lender may remove Trustee at any time or from time to time and
select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Lender may, without notice and without specifying any
reason therefor and without applying to any court, select and appoint a
successor trustee, by an instrument recorded wherever this Security Instrument
is recorded and all powers, rights, duties and authority of Trustee, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of the
duties of Trustee hereunder unless required by Lender. The procedure provided
for in this paragraph for substitution of Trustee shall be in addition to and
not in exclusion of any other provisions for substitution, by law or otherwise.
57. Trustee's Fees. Borrower shall pay all costs, fees and expenses
incurred by Trustee and Trustee's agents and counsel in connection with the
performance by Trustee of Trustee's duties hereunder and all such costs, fees
and expenses shall be secured by this Security Instrument.
58. Certain Rights. With the approval of Lender, Trustee shall have
the right to take any and all of the following actions: (i) to select, employ,
and advise with counsel (who may be, but need not be, counsel for Lender) upon
any matters arising hereunder, including the preparation, execution, and
interpretation of the Note, this Security Instrument or the Other Security
Documents, and shall be fully protected in relying as to legal matters on the
advice of counsel, (ii) to execute any of the trusts and powers hereof and to
perform any duty hereunder either directly or through his/her agents or
attorneys, (iii) to select and employ, in and about the execution of his/her
duties hereunder, suitable accountants, engineers and other experts, agents and
attorneys-in-fact, either corporate or individual, not regularly in the employ
of Trustee, and Trustee shall not be answerable for any act, default,
negligence, or misconduct of any such accountant, engineer or other expert,
agent or attorney-in-fact, if selected with reasonable area, or
for any error of judgment or act done by Trustee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for
Trustee's gross negligence or bad faith, and (iv) any and all other lawful
action as Lender may instruct Trustee to take to protect or enforce Lender's
rights hereunder. Trustee shall not be personally liable in case of entry by
Trustee, or anyone entering by virtue of the powers herein granted to Trustee,
upon the Property for debts contracted for or liability or damages incurred in
the management or operation of the Property. Trustee shall have the right to
rely on any instrument, document, or signature authorizing or supporting an
action taken or proposed to be taken by Trustee hereunder, believed by Trustee
in good faith to be genuine. Trustee shall be entitled to reimbursement for
actual expenses incurred by Trustee in the performance of Trustee's duties
hereunder and to reasonable compensation for such of Trustee's services
hereunder as shall be rendered.
59. Retention of Money. All moneys received by Trustee shall, until
used or applied as herein provided, be held in trust for the purposes for which
they were received, but need not be segregated in any manner from any other
moneys (except to the extent required by applicable law) and Trustee shall be
under no liability for interest on any moneys received by Trustee hereunder.
60. Perfection of Appointment. Should any deed, conveyance, or
instrument of any nature be required from Borrower by any Trustee or substitute
trustee to more fully and certainly vest in and confirm to the Trustee or
substitute trustee such estates rights, powers, and duties, then, upon request
by the Trustee or substitute trustee, any and all such deeds, conveyances and
instruments shall be made, executed, acknowledged, and delivered and shall be
caused to be recorded and/or filed by Borrower.
61. Succession Instruments. Any substitute trustee appointed
pursuant to any of the provisions hereof shall, without any further act, deed,
or conveyance, become vested with all the estates, properties, rights, powers,
and trusts of its or his/her predecessor in the rights hereunder with like
effect as if originally named as Trustee herein; but nevertheless, upon the
written request of Lender or of the substitute trustee, the Trustee ceasing to
act shall execute and deliver any instrument transferring to such substitute
trustee, upon the trusts herein expressed, all the estates, properties, rights,
powers, and trusts of the Trustee so ceasing to act, and shall duly assign,
transfer and deliver any of the property and moneys held by such Trustee to the
substitute trustee so appointed in the Trustee's place.
PART II
TEXAS PROVISIONS
ARTICLE 25 - TEXAS PROVISIONS
62. In the event of any inconsistencies between the terms and
conditions of PART I of this Security Instrument and PART II, the terms and
conditions of PART II shall control and be binding.
63. The following words are hereby added after the words "other
mineral royalties and bonuses" in paragraph (d) of the granting clauses of this
Security Instrument commencing with the words "TOGETHER WITH":
and all rents, revenues, bonus money, royalties, rights, and benefits
accruing to Borrower under all present and future oil, gas and mineral
leases on any parts of the Land and the Improvements
64. The following words are hereby added after the words "Borrower
in the Property" at the end of the second sentence in Section 29 of Article 1 of
this Security Instrument entitled "Security Agreement":
including, without limitation, all goods, equipment, furnishings,
fixtures, furniture, chattels and personal property of whatever nature
owned by Borrower now or hereafter attached or affixed to or used in
and about the Improvements on the Land or otherwise located on the
Land, and all fixtures, accessions and appurtenances thereto, and all
renewals or replacements of or substitutions for any of the foregoing,
all building materials and equipment now or hereafter delivered to the
Land and intended to be installed therein and all security deposits
and advance rentals under lease agreements now or at any time
hereafter covering or affecting any of the Property and held by or for
the benefit of Borrower, all monetary deposits which Borrower has been
required to give to any public or private utility with respect to
utility services furnished to the Property, all funds, accounts,
instruments, documents, general intangibles (including trademarks,
trade names and symbols used in connection therewith) and notes or
chattel paper arising from or by virtue of any transactions related to
the Property, all permits, licenses, franchises, certificates and
other rights privileges obtained in connection with the Property, all
oil, gas and other hydrocarbons and other minerals produced from or
allocated to the Property and all products processed or obtained
therefrom, the proceeds thereof, and all accounts and general
intangibles under which such proceeds may arise and all proceeds
thereof.
This Security Instrument shall be effective as a financing
statement filed as a fixture filing with respect to all fixtures
included within the Property and is to be filed for record in the real
estate records in the Office of the County Clerk where the Property
(including said fixtures) is situated. This Security Instrument shall
also be effective as a financing statement covering minerals or the
like (including oil and gas) and accounts subject to Subsection (e) of
Section 9.103 of the Texas Business and Commerce Code, as amended, and
is to be filed for record in the real estate records of the county
where the Property is situated. The mailing address of Borrower and
the address of Lender from which information concerning the security
interest may be obtained are set forth above.
65. The words "Borrower shall not" in subparagraph (a) of Section 9
of this Security Instrument entitled "Transfer or Encumbrance of the Property"
are hereby deleted and the words "it shall constitute an Event of Default
(hereinafter defined) if Borrower shall" are substituted therefor.
66. The word "nonusurious" is hereby added immediately following
the word "maximum" in Section 24 of this Security Instrument entitled "Late
Payment Charge".
67. The language in Section 14 of this Security Instrument
entitled "Usury Laws" is hereby deleted in its entirety and the following
language is substituted therefor:
It is the intention of the parties hereto to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated
hereby would be usurious under any such applicable law, then, and in
that event, notwithstanding anything to the contrary in this Security
Instrument, the Note, and the Other Security Documents and any other
instrument or agreement entered into in connection therewith, whether
now existing or hereafter arising and whether written or oral, it is
agreed as follows:
(i) the aggregate of all interest and any other charges constituting
interest or adjudicated as constituting interest and that is
contracted for, charged or received under the Note, or under any
of the aforesaid instruments or agreements or otherwise in
connection with the Note (whether designated as interest, fees,
late charges, payments or otherwise) shall under no circumstances
exceed the maximum amount of interest permitted by any such
applicable law and any excess shall be cancelled automatically
and, if theretofore paid, shall be credited on the Note by Lender
(or, if the Note has been paid in full, refunded to Borrower);
and
(ii) in the event that the maturity of the Note is accelerated by
reason of an Event of Default under the Note, or otherwise, then
such consideration that constitutes interest may never include
more than the maximum rate of interest permitted by any such
applicable law computed from the dates of each advance of the
loan proceeds outstanding until payment. If from any
circumstance Lender shall ever receive interest or any other
charges constituting interest or adjudicated as constituting
interest, the amount, if any, which would exceed the maximum rate
of interest permitted by such applicable law shall be applied to
the reduction of the principal amount owing on the Note or on
account of any other principal indebtedness of Borrower to
Lender, and not to the payment of interest; or if such excessive
interest exceeds the unpaid balance of the principal and such
other indebtedness, the amount of such excessive interest that
exceeds the unpaid principal and such other indebtedness shall be
refunded to Borrower.
All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness evidenced hereby shall,
to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness so
that the rate or amount of interest on account of any such
indebtedness does not exceed the applicable usury ceiling.
68. POWER OF SALE. (a) Upon the occurrence of an Event of Default,
it shall thereupon be the duty of the above named Trustee, or his successor or
substitute, as hereinafter provided, to enforce this trust at the request of any
Lender (which request shall be presumed) and to sell the Property with or
without first having taken possession of the same and in whole or in part, as
the acting Trustee may elect (all rights to a marshalling of assets of Borrower
being expressly waived hereby), to the highest bidder for cash at public auction
at the county courthouse of any County in which the Property are situated, in
the area of such courthouse designated for real property foreclosure sales in
accordance with applicable law (or in the absence of any such designation, in
the area set forth in the notice of sale hereinafter described) on the first
Tuesday of any month between the hours of 10:00 A.M. and 4:00 P.M. (commencing
no earlier than such time as may be designated in the hereinafter described
notice of sale), after giving notice of the time, place and terms of sale and
the Property to be sold by (i) the acting Trustee or any person chosen by him
filing a copy of the notice thereof in the office of the County Clerk of each
County where the Property are situated and by posting or causing to be posted
written or printed notice thereof at least twenty-one (21) days preceding the
date of said sale at the County Courthouse door of each County, and (ii) the
Lender or any person chosen by it, at least twenty-one (21) days preceding the
date of said sale, serving written notice of such proposed sale by certified
mail on each debtor obligated to pay the Debt evidenced by the Note according to
the records of Lender. Service of such notice to each debtor shall be completed
upon deposit of the notice enclosed in a postpaid wrapper, properly addressed to
each debtor at the most recent address as shown by the records of Lender, in a
post office or official depository under the care and custody of the United
States Postal Service. The affidavit of any person having knowledge of the
facts to the effect that such service was completed shall be prima facie
evidence of the fact of service. After such sale, the acting Trustee shall make
due conveyance with general warranty to the purchaser or purchasers and the
Borrower binds itself, its heirs, assigns, executors, administrators, successors
and legal representatives to warrant and forever defend the title of such
purchaser or purchasers. Any abstract of title to the Property furnished in
connection with the loan secured by this Security Instrument shall be delivered
and become the property of the purchaser at said sale.
(b) Upon the occurrence of an Event of Default, any Lender shall
have the right and option to proceed with foreclosure in satisfaction of such
item or items by directing the Trustee, or his successor or substitute as
hereinafter provided, to proceed as if under a full foreclosure, conducting the
sale as herein provided, and without declaring the whole Debt due, and provided
that if sale is made because of default as hereinabove mentioned, such sale may
be made subject to the unmatured part of the Note and the Debt secured hereby,
and it is agreed that such sale, if so made, shall not in any manner affect any
other obligation or obligations secured hereby, but as to such other obligations
this Security Instrument and the liens created hereby shall remain in full force
and effect just as though no sale had been made under the provisions of this
Article. It is further agreed that several sales may be made hereunder without
exhausting the right of sale for any other breach of any of the obligations
secured hereby, it being the purpose to provide for a foreclosure and sale of
the Property for any matured portion of any of the Debt secured hereby or other
items provided for herein without exhausting the power to foreclose and to sell
the Property for any other part of the Debt secured hereby whether matured at
the time or subsequently maturing.
(c) The proceeds from any such sale shall be applied by the
acting Trustee as follows:
FIRST: To the payment of all expenses of advertising, selling
and conveying the Property, including a reasonable commission to
the acting Trustee.
SECOND: To the payment to the Lender of all unpaid Debt,
including accrued interest to the date of sale, in such priority
and proportions as Lender in its discretion shall deem proper.
THIRD: The balance, if any, shall be paid to Borrower.
(d) The acting Trustee hereunder shall have the right to sell
the Property in whole or in part and in such parcels and order as he may
determine, and the right of sale hereunder shall not be exhausted by one or more
sales, but successive sales may be had until all of the Property have been
legally sold. In the event any sale hereunder is not completed or is defective
in the opinion of Lender or the holder of any part of the Debt, such sale shall
not exhaust the power of sale hereunder, and Lender or such holder shall have
the right to cause a subsequent sale or sales to be made by the Trustee or any
successor or substitute Trustee. Likewise, Lender may become the purchaser at
any such sale if it is the highest bidder, and shall have the right, after
paying or accounting for all costs of said sale or sales, to credit the amount
of the bid upon the amount of the Debt owing, in lieu of cash payment. The
purchaser or purchasers at foreclosure shall have the right to affirm or
disaffirm any lease of the Property.
(e) It shall not be necessary for the acting Trustee to have
constructively in his possession any part of the real or personal property
covered by this Security Instrument, and the title and right of possession of
said property shall pass to the purchaser or purchasers at any sale hereunder as
fully as if the same had been actually present and delivered. Likewise, on
foreclosure of this Security Instrument whether by power of sale herein
contained or otherwise, Borrower or any person claiming any part of the Property
by, through or under Borrower, shall not be entitled to a marshalling of assets
or a sale in inverse order of alienation.
(f) The recitals and statements of fact contained in any notice
or in any conveyance to the purchaser or purchasers at any sale hereunder shall
be prima facie evidence of the truth of such facts, and all prerequisites and
requirements necessary to the validity of any such sale shall be presumed to
have been performed.
(g) Any sale under the powers granted by this Security
Instrument shall be a perpetual bar against Borrower, its heirs, successors,
assigns and legal representatives.
(h) In the event of a foreclosure under the powers granted by
this Security Instrument, Borrower, and all other persons in possession of any
part of the Property shall be deemed tenants at will of the purchaser at such
foreclosure sale and shall be liable for a reasonable rental for the use of the
Property; and if any such tenants refuse to surrender possession of the Property
upon demand, the purchaser shall be entitled to institute and maintain the
statutory action of forcible entry and detainer and procure a writ of possession
thereunder, and Borrower expressly waives all damages sustained by reason
thereof.
(i) To the extent Section 51.003 of the Texas Property Code, or
any amendment thereto or judicial interpretation thereof, requires that the
"fair market value" of the Property shall be determined as of the foreclosure
date in order to enforce a deficiency against Borrower or any other party liable
for the repayment of the Debt, the term "fair market value" shall include those
matters required by law and shall also include the additional factors as
follows:
(i) The Property is to be valued "AS IS, WHERE IS" and
"WITH ALL FAULTS" and there shall be no assumption of restoration
of or refurbishment of the Property after the date of
foreclosure;
(ii) There shall be an assumption of a prompt resale of the
Property for an all cash sales price by the purchaser at the
foreclosure so that no extensive holding period should be
factored into the determination of "fair market value" of the
Property;
(iii) An offset to the fair market value of the
Property, as determined hereunder, shall be made by deducting
from such value the reasonable estimated closing costs relating
to the sale of the Property including but not limited to
brokerage commissions, title policy expenses, tax prorations,
escrow fees, and other common charges which are incurred by a
seller of real property similar to the Property; and
(iv) After consideration of the factors required by law and
those required above (including the addition of any income to be
generated by the Property), an additional discount factor shall
be calculated based upon the estimated time it will take to
effectuate a sale of the Property so that the "fair market value"
as so determined is discounted to be as of the date of the
foreclosure of the Property.
69. HOMESTEAD. The Property forms no part of any property owned,
used or claimed by Borrower as a residence or business homestead and is not
exempt from forced sale under the laws of the State of Texas. Borrower hereby
disclaims and renounces each and every claim to the Property as a homestead.
70. FUTURE ADVANCES. This Security Instrument shall also secure such
future or additional indebtedness of Borrower to Lender or such future or
additional advances for construction, improvements, preservation, maintenance
and operation of the Property and the security for payment of the Debt as may be
made by Lender, whether such future advances are obligatory or are to be made at
Lender's option, to Borrower, for any purpose.
IN WITNESS WHEREOF, this Security Instrument has been executed under
seal by Borrower the day and year first above written.
[BORROWER]
OAK RUN, L.L.C., a South Carolina limited liability
company
By: CENTURY PROPERTIES FUND XVIII, a California
limited partnership, its sole member
By: FOX PARTNERS, a California general
partnership, its general partner
By: FOX CAPITAL MANAGEMENT CORPORATION, a
California corporation, its general
partner
By:/s/ Robert D. Long, Jr.
Name: Robert D. Long, Jr.
Title: Vice President
This instrument prepared by:
Carson M. Leonard, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
STATE OF SOUTH CAROLINA
COUNTY OF GREENVILLE
This instrument was acknowledged before me on the 25th day of
September, 1997, by Robert D. Long, Jr., Vice President of FOX CAPITAL
MANAGEMENT CORPORATION, a California corporation, on behalf of said
corporation, which corporation is a general partner of FOX PARTNERS, a
California general partnership, which partnership is a general partner of
CENTURY PROPERTIES FUND XVIII, a California limited partnership which is the
sole member and acknowledged this instrument on behalf of OAK RUN, L.L.C., a
South Carolina limited liability company.
[SEAL]
/s/ Michael Hester
Notary Public in and for the
State of South Carolina
My Commission Expires: Print name of Notary Public
4/10/2006
Michael Hester
